Is a Referral Program a Bad Idea?

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Hey, Chuck – “Is a referral program a bad idea?”

My response to a client asking this question recently:

Jim,
Here’s my three cents. I believe people refer to me most when 1) they like me, 2) like what I’ve done for them, and most importantly, 3) when I’ve asked them to refer to me (and taught them how).

Why do they refer to me?

  1. Because I’ve served them, and they want their friends to experience the same service. Their reward? Their friends like them better because they got turned on to somebody who would help them.
  2. Because I asked them to. People want to help other people, they just get busy or don’t know how to help us. When we ask, most people are glad to do it. “How has this worked for you?” “Great”. “I thought so…do you know one other person who might benefit from the experience you’ve had with us?” Don’t ask for three, you’ll get none. Ask for one and you might get three. And talk about their experience, not your need for a referral, etc. We’ve worked out the wording of the last sentence pretty carefully over time.
  3. Least motivating – because they get something extra from me. If you can’t develop a relationship with someone directly, then having a standard referral program to incentivize them is a great idea (37signals) has a nice one). But in general, the best referrals don’t come because I paid somebody, they come because I served them, asked and taught them how to refer. In some cases, paying for the referral can actually cheapen the relationship because now you have a monetary relationship instead of a friendship.

My best referrals are from people I’ve served, who like me, and who have benefited from our relationship in a non-monetary way.

I’m not saying you shouldn’t reward people for referring. But with close in connections it’s sometimes better to do it as a “gift”, something they weren’t aware of beforehand even though you may already have planned to do it for anyone who refers to you. A gift says thank you (and still incentivizes them to do it again). A referral fee is a pure business/revenue transaction.

Bottom line – If I don’t have a personal relationship of some sort and don’t see building one, giving a referral fee is a good idea. Buy friends you don’t have time to make. But I would start with the following:

  1. Make a list of your top 10 existing or potential referral partners.
  2. Get a cup of coffee with them and discuss how you can help each other in business by raining on each other and ask them for a referral “one other person you know that might benefit from the experience you’ve had”, or if they are not customers “…an experience with us”, etc. If they refer someone, you might tell them you are developing a referral program that they might see in an email, but don’t tell them the details unless they ask. Most won’t care.
  3. Once you’ve got that list covered, publish your referral program. And in the future, continue to get with those big potential referral partners and develop the relationship (sending them referrals is the best way to reward them!).

I send clients to people mostly because I know they are going to be well served, and it makes me glad to serve people I know. Being someone that others want to refer to is the best referral program possible.

Best!

C

People Buy Consistency, Not Quality

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Okay, you make a great product or provide a very unique service. You’re in love with it and so are your customers. It’s a wonderful product/service. I get it. Now get over it. Because your customers aren’t buying it. They’re buying things you aren’t even selling.

I met with one of the top digital communications companies in the U.S. on Friday to discuss how to improve performance in their many call centers. They were measuring the standard things – call length, one-call resolution %, wait time, abandonment, after-call time, # of transfers, etc. The objective was to get the stats to go down.

The problem was that every call center director had been given the directive to figure it out locally, under the assumption that giving them ownership of the problem would create a better solution (which is like telling 12 different manufacturing facilities to produce their computers any way they want – disastrous idea). I told Corporate that my belief, without even looking at them, was that the call center with the highest quality of customer service was creating as many problems as the call center with the lowest quality of customer service. How could that be?

Because their customers aren’t buying the HIGHEST QUALITY product or service, they are buying the most CONSISTENT EXPERIENCE. We’re all out there trying to sell the best made chair, the greatest insurance, the grandest piano, and the slickest software. But our customers aren’t buying what we’re selling.

Don’t believe me?

What percentage of Americans would you say think McDonalds sells the BEST hamburger? Probably none. Yet they make billions, because we know that every McDonalds window you drive up to will produce the same hamburger coast to coast. It may not be the best, but it’s the same every time – reliable, consistent, and average. We can count on it and McDonalds can take it to the bank. Ray Crock had a motto on the wall in his office “In Pursuit of the Most Efficient Hamburger in the World.” Notice it did not say the BEST hamburger. We don’t buy quality from McDonalds, we buy consistency.

We don’t buy quality from Nordstrom’s either. Surprised? While Nordstrom’s sells higher quality goods, we’re buying the “Nordstrom’s experience”. There are dozens of other retailers selling the same stuff, but every time we go to Nordstrom’s we get that same legendary experience. We’re buying consistency there, too, not quality.

Every wonder how really awful, cheap products, as well as outrageously over-priced products keep being successful? Because we’re buying consistency, not quality. We have a minimum quality level expectation of both Nordstrom’s and McDonalds (at much different levels), but the thing that has created long term success for both is the consistency of the experience.

This is one of the reasons Microsoft is losing market share to Apple. People are buying the consistency of experience they can’t get from Microsoft.

A realtor once gave a weekend away to a friend for having referred a high-end house to them. They told another friend who referred a house, and they were given a large gift certificate to a high-end department store. They were disappointed. Even though both gifts cost the realtor the same amount of money, they second person was expecting the same experience as the first – a weekend away. Consistency is so important.

Do you have a written Customer Satisfaction Process in place that creates a consistent experience for everyone every time? If not, stop working on making your product so great, and start pouring your energies into creating that consistent customer experience. The guy who makes the best chair does not have the loyalist following. It’s the guy who “manufactures” the best, most consistent customer experience.

So you think you’re in charge? Let’s see.

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Your Guiding Principles are more important to your business than anything you sell.

As my great Irish friend John Heenan says: “If you don’t have a vision for your own life, you become part of someone else’s vision for theirs.” Without clarity of purpose, we don’t own our business, it owns us – we’re employees of ourselves.

Everything we do comes from a belief system, whether intentionally or subconsciously. Do you guide your biz or does it rule you? Who’s really in charge?

Some see this as the soft side of business, the part you can ignore because you can’t track how much money you make directly back to it. “Stop playing office and start making the donuts,” would be a typical response. But that response would only come from someone who is willing to become part of someone else’s vision for their life, and doesn’t want to make more money in less time.

Making money is not an empowering vision. Want to make more money? Get a reason to do it, then have some principles on which you run your business. We talked about they “Why?” (vision) in business a couple weeks ago. This is more about the values that lead us to “How” we run our business.

Like rails that guide a train, your business principles are the core strategy to having a business that knows where it is going and how it is going to get there. If you think you can just make donuts and not know why or what your business stands for in the process, you’re going to miss out on building a business that you own vs. a business that owns you.

Here’s our guiding principles:

The 7 Guiding Principles of TeamNimbusWest:

  1. Make more money in less time
    (don’t work harder, not really even smarter, just more effectively)
  2. Focus on our lifetime goals, not just on growing our business
    (a BHAG will keep us going, but “grow the business” is a lifeless idea. So is retirement.)
  3. Work ON your business, not just IN it.
    (The key to growth – perfecting as we go by strategic planning, not just production.)
  4. Get off the treadmill, own the business instead of the business owning us.
    (The purpose of our business is to create a lifestyle for ourselves and our family.)
  5. Highest and best use of your time.
    (Yield per Hour – stop doing things others could do; do what only I can do.)
  6. Make decisions on where you want to be, not where you are.
    (Clarity of Purpose leads to Hope which leads to Risk. Take good risks to grow.)
  7. Bad plans carried out violently many times yield good results. Do something.
    (Stop planning. Implement now and perfect as you go. Speed of Execution rules.)

What are the guiding principles of your business?

You’ve got values and beliefs that are the foundation of everything you do and those values and beliefs are running the show. You might as well write them down and see if you agree with who/what is actually in charge. If not, change them and take control of your vision…

…so you can make more money in less time, get off the treadmill, and get back to the passion that brought you into business in the first place, in order to build a mature business in support of your lifetime goals. (Just had to get my guiding principles in there one more time). ?

Bad Plans Carried Out Violently Many Times Yield Good Results. Do something.

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This was my Marine Corps soccer team’s motto 30 years ago. It has since become a key business practice for me. It’s also the title of a book I’m writing and the basis for Carrie’s great story below.

We plan, research, and think things to death when all the evidence says that the #1 indicator of success in business is not how smart you are, how much research you do, or even how good your product is. The #1 indicator of success is speed of execution. Period. Want to be successful? As Larry the Cable Guy says, “Get ‘er done.”

One of my clients, Carrie Roberts, took this to heart – here’s her story to me in an email yesterday. This one will make the book. FYI – the following blur of activity took place in only two weeks that included Christmas and New Years:

“Holy Sh%#!!! (like I said, excuse my french:)

I hit my goal somehow – actually – even exceeded my goal – and your voice keeps resonating in my head – Bad Plans my friend!!!

I finished writing my product Blueprint last week – cut out some things that I didn’t have finished, changed the price to $47 so that I could get it up through click bank, set up a hosting account, set up a separate email account, set up an auto-responder account, hired a web guy – web guy finished the site yesterday, got final approval from click bank yesterday at 6pm, got everything set up through them and listed on their site, and everything went live by 9pm last night.

Set up a google adwords account and placed an ad, signed up with Tweet Later and set up auto-responder messages for Twitter, chose 20 new people to follow and was in bed by 11.

I made my first sale this morning at 9am

I cried

I don’t know where this is going – it’s a bad plan – but it is a great way to start 2009!

couldn’t wait to share – Happy New Year!!!”

What else is there to say?

Just one thing – the fine-tuning on my “Bad Plans carried out violently” principle is:

“Implement Now, Perfect as You Go.”

I know Carrie well enough that, having worked her rear off to get something up that wasn’t perfect, she will begin immediately to make it better. And having it already up and running will allow her to perfect it much quicker than if she was continuing to perfect a theoretical business plan.

She will definitely perfect her Bad Plan as she goes. This ought to be good. Way to go, Carrie!

What Bad Plan do you need to carry out violently (with total commitment) that you’ve been dinking around with for months? The best way to make it better is to go live and let the world inform you how to perfect it.

Carpe Diem, Just Do It, and all that stuff.

Got a great “Bad Plan carried out violently” story? I’d love to hear it. It could make the book. Tell me AFTER you implement!