Volume 28/Number 3; July 21/28, 2014
(Bonus fourth part)
By Jim Augustus Armstrong
“I did an extra $90,463 last month,” David, a dealer from Texas, told me. He said the results came from a referral marketing strategy he recently implemented.
Several facts make David’s story interesting. First, he spent less than $100 to generate this revenue; second, this was David’s first month using this strategy; third, it happened during a very slow market in his area.
Savvy dealers from every market are getting phenomenal results with referral marketing, generating a tremendous amount of revenue while spending very little money.
Why referrals are the best form of marketing to new consumers:
1. Customers who are referred to you are already pre-sold on your service. They are much easier to sell to than a suspicious, stand-offish, tire-kicking prospect brought in with “traditional” advertising.
2. You get the “halo” effect. Other people saying how great you are always sounds better than you saying how great you are. They are giving you a halo, and making you look good without you saying anything.
3. Skepticism is very low. After all, if her sister-in-law, aunt or best friend bought from you, you must be pretty darned fantastic.
4. Referrals have lower price-resistance than cold prospects. It’s much easier to command margins of 40% to 50% (or more).
5. Referrals have little to no advertising costs.
Most dealers miss the importance of referrals. Think about it: With a referral you are being handed a pre-sold, non-skeptical customer with low price resistance who sees you with a halo, and it costs you nothing.
In spite of this, only a tiny fraction of dealers have a referral marketing system in place. For most dealers, referrals are a “happy accident.” They do a decent job, and eventually they get some referrals. But there is no system in place to generate an ongoing, predictable stream of referrals.
During my webinars I ask dealers if new customers are more distrustful and skeptical than they were 10 years ago. The overwhelming answer is always affirmative.
Why the growing distrust? Because your prospective customers have been lied to and ripped off by flooring companies, or they know someone who has. The financial meltdown and collapse of the housing market in 2008 has left a permanent mindset of caution and fear in their minds.
Is it any wonder cold prospects don’t trust you? Why should they? As far as they know you could easily be another company out to lie to them and rip them off.
This is why having a referral marketing system is no longer a luxury. Traditional advertising is designed to attract strangers who don’t know you, like you or trust you. This makes them much more difficult to sell to than repeat and referred customers. Therefore, having a dependable method to create a predictable stream of referrals is a necessity if you want to prosper. This means having a referral marketing system in place.
The vast majority of dealers spend the lion’s share of their time, energy and money trying to attract strangers while putting little to no effort into a referral marketing system. Big mistake.