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2 Biggest Hurdles to Winning the Referral and Retention Race

2 Biggest Hurdles to Winning the Referral and Retention Race
Image credit: Eckhard Pecher
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In No B.S. Guide to Maximum Referrals & Customer Retention, business coach and consultant Dan S. Kennedy and customer retention expert Shaun Buck present a systematic approach to help you keep, cultivate, and multiply customers so you replace income uncertainty with reliable income through retention and referrals. In this edited excerpt, Kennedy explains what you need to do to create evangelical ambassadors for your business.  

A buyer is not yet a customer. A customer is not yet a committed customer. A committed customer is not yet an evangelical ambassador. But only evangelical ambassadors refer new business in any significant numbers, with any significant frequency.

Somebody can buy from your business regularly, yet never really engage with it or they may engage but never refer others to your business. This person can be a satisfied customer or a happy customer or even a committed customer, but never cross the Rubicon to evangelist.

The first Rubicon a person gets across before they become an evangelical ambassador for your business is purchasing. They may have hung around as a prospect for some time, reading your online or offline media, seeing your ads, being aware of and interested in you, receiving offers from you. Or they may have seen your sale of the century ad on Friday, and come in and made a purchase on Saturday. Either way, there’s absolutely no assurance they’ll return again and again. All they did was buy something, and all you did was sell something. A transaction happened. Nothing more happened, and nothing more should be presumed to have happened. But a window of opportunity was created that will close quite quickly.

It’s worth noting that hardly any businesses do anything about this. If I wander into a store at the mall and buy something, at best, I get my email captured and get dumped into a generic email marketing and “constant contact” system. Most of the time, even that minimum isn’t tried. Nobody calls, asks if the thing fits or looked good when I got it home, or if the dog likes her bed, etc. In short, follow-up to insure satisfaction sucks.

But you need to be different: You want to be assertive and proactive in moving a first-time buyer to customer to committed customer. To be a customer, they merely need to return and develop a habituated pattern of patronage. And the best way to create a committed customer is to have them paid forward or on autocharge, especially if there’s pain of disconnect with the autocharge.

In the 1980s, when I was very involved in the “pre-pay revolution” in chiropractic, I discovered two very important truths. Then, and now, most chiropractors charged by the visit, and by the treatment modality, as it was consumed. With pre-pay, the patient was prescribed a treatment plan like “three visits a week for three weeks, then two a week for four weeks, then one a week for five weeks, totaling 22 treatment sessions multiplied by $89 equals $1,958, plus one spinal decompression traction session a week for the 12 weeks multiplied by $240 ($2,880) adds up to a total of $4,838. Customers are then asked to prepay it all and get a 5 percent savings or pay it in two monthly installments, right then, bing, bang, bingo.

Here are the two truths that revealed themselves. First, the pay-as-they-went patients were miserably noncompliant. They skipped prescribed sessions, postponed at the last minute, didn’t do prescribed exercises at home, and more than half never completed their plans. Second, most didn’t refer at all or only offered one or two referrals early, if the office had a very aggressive approach -- like a new patient class requiring them to “bring a buddy.”

In contrast, the pre-pay patients were much more compliant; more than 80% completed their treatment programs on schedule or close to it, 70 percent referred, and about 25 percent referred abundantly, staying on after their primary treatment programs as lifetime ‘maintenance’ patients. That’s the power of pre-pay.

Autocharge has a similar effect. The person getting their credit card charged $125 on the first of every month and getting $200 of vouchers for products and services is far more likely to use at least the $200 (but will probably spend more) than the person paying as they patronize. They’re more likely to be exclusive rather than divide their spending in your category by whim and random convenience. Therefore, you’re more likely to succeed at retention and a habituated pattern of patronage. One way or another, or in multiple ways, the point is to get the customer committed.

Consider a visit to Disney World. We used to go about once a year and sometimes skipped a year and never went more than twice a year until we bought a time-share in the Disney Vacation Club. With that, we own a bank of points applied to lodging at our home-base Disney resort or at all the other Disney resorts. These points are added to our account but also expire year to year. It now feels free to go stay there, but costs out of pocket money to go anywhere else. We now go, on average, three times a year, sometimes four times a year. They smartly seed that spending with discounts and promotions exclusive to Disney Vacation Club owners. To not go and let pre-paid points expire is unimaginable! We’re a thoroughly committed customer.

Business owner Alan Reed has hundreds and hundreds of committed customers for his dairy farm in Utah, hooked up to home delivery -- by real “milkmen” in trucks with routes, with some customers on autodelivery and autocharge. The customers with regularly scheduled deliveries and autocharge buy more, buy more consistently, and remain as customers much longer than those who “just call when they need something” or “swing by the store.”

Many, many, many businesses have opportunities to lock in and automate certain kinds of repeat patronage from at least a segment of their customers, but never bother to figure it out and do it.

The next Rubicon is between (just) committed customers and evangelical ambassadors. This is, by far, the highest level of customer and customer value. I’m a fine ambassador for Disney. Clients who come to my home office encounter a shrine of Disney collectibles, a talking Disney clock, and more, and when they ask me about Disney, they get enthusiastic testimony. I know of more than 30 people who’ve become DVC owners because of me and others who’ve stepped up to using Disney VIP Guides because of me. When I lived in Phoenix, I was an evangelical ambassador for my trusted car salesman, and I brought dozens of family members, friends and peers to him. Same with my chiropractor of that time. I liked telling people my stories about them and, in a sense, spreading their gospel. I believed in them -- I didn’t just buy from them.

You really can judge your efficacy and level of sophistication based on how many evangelical ambassadors you have actively working for you, for free.

It’s easiest if this is personal, but companies and brands do achieve it. These are called “passion brands.” For a time, Cadillac was such a brand. Apple was and is such a brand, and so is Disney. Good evidence of the strength of a passion brand is customers’ cheerful willingness to pay premium prices vs. going to competitors and alternatives, and shareholders’ willingness to overvalue the stock vs. buying stock in competitors and comparable companies. A Rubicon for a lot of these brands is full integration in their customers’ lives and environments, like daily use of products preferably in a ritualistic way, wearing of logo apparel, existence of collectibles, use of its language, and expressed reverence for its philosophy.