HOW I DID IT

  ::..:: ARCHIVES ::..::

A 37-year-old, after failing at 17 different vocations, became the world’s greatest salesman within four years! His magic mantra: referrals. “Six out of every 10 cars I sell, come through positive references of my existing customers,” he says. And mind you, these are the sales that he has been able to track. My guess is that almost 100% of his sales would come through referrals. Else, he wouldn’t have remained the world’s greatest salesman for 13 consecutive years! (You can read the details in his autobiography: How to Sell Anything to Anyone by Joe Girard.)

In my professional experience of 23 years, I have witnessed the power of referrals time and again. I have conceptualised more than a hundred referral programmes; and run 37 of them, measuring and tracking the results with childlike curiosity. I’d like to share with you what I have learnt.

Why do people refer? Three reasons:

We like to talk. We like to talk about our experiences, whether we are drunk, or sober. Many of these experiences are about products and brands we use. Credit card overcharge, taxi service that let us down, best airlines, our bank’s stupidities, good restaurants, great music, delicious food, doctors we trust, etc. There’s no end to our need to talk and share our experiences with friends, family, colleagues, fellow passengers, or just anyone who cares to listen. The joy is pure and universal. The Internet – especially social networking sites – has made that sharing much easier, letting us reach out to more people, sometimes within minutes of experiencing a product or a service!

We can’t resist a great deal. It excites us, instinctively making us reach for our mobile phones. “Hey, there’s a fantastic kurta sale on at Fabindia. Just Rs 250 each!” Or, sometimes, when asked how you managed such a wonderful deal, you say: “I have a friend who deals in so and so. He introduced me to this dealer. Phenomenal deal!” “You must give me the details. I want it too,” pleads your excited friend. And so it goes on. The moment we come across a good deal, we get busy! We want to share it with everyone we care about.

Referrals make us feel important. Have you met someone important through a friend, or been invited to a party because your friend knew the right people at the right places? Don’t you wish you were in your friend’s shoes and could extend such privileges to your own friends and family? The truth is we like to be instrumental in helping our friends get special privileges, discount or deals. It simply makes us feel important.

Being the social animals that we are, we like to share information – good or bad. Unfortunately, several marketing people think that referrals are not working their magic as they used to. While it is true that the use of referral programmes has dwindled in recent times, it is primarily because referral programmes are not being designed properly – and not because they are any less effective in doing the job.

Some people think that “smart” marketing has killed the power of referrals. I beg to differ. There’s a famous dialogue used repeatedly in Bollywood flicks – an economically disadvantaged, but idealistic hero, declares with pride: “Main bikao nahin hoon” (I cannot be bought over at any price). I wish marketers would pay heed to the truth hidden behind this wonderful line. They believe all referrals can be bought. The result is campaigns that follow a script like this: "Send your friend to our resort. For every one of your friends who actually books, we’ll credit Rs xx into your account. If five of them book, we’ll give a free night." Clever!

Clever?

Such campaigns are recipes for disaster. Worse, they create a negative impact. They don’t work because people recommend only that which they truly like. And they don’t refer for a personal reward.

You may argue that without any personal reward, customers will never really make an effort to refer. Absolutely right! But linking it to the value of sale accomplished is not the answer. It changes your customer from a person who would genuinely like his friend to enjoy special benefits or deals, to a person who is being bribed to sell a product.

The difference is very subtle: you may reward your client for the referral, but the reward cannot be linked to the value of sale. It has to be more understated and should make the person feel valued.

There is another school of thought that belives most referral programmes lack a unique benefit. With discounts galore, there’s little in the form of uniqueness that marketers are able to offer when it comes to referral. Successful referral programmes play on the “feeling of importance” factor, taking the customer’s help to reach out to others, and in return, extending special benefits to him and his references.

Let me share three instances of how referrals have been used successfully.

In 1995, Air India and Indian Airlines ran a joint frequent-flier programme that had about 20,000 members. They launched a referral campaign to increase membership, offering members 500 bonus points for referring five friends. “We’ll contact your friends directly, offering them membership for Rs 895 instead of regular Rs 1,000, and we’ll award you 150 bonus points for each enrollment,” continued their offer. Remember this was before frequent-flier programmes were a dime-a-doze. The response was stupendous – the campaign got 28,000 referrals. Of these, 35% enrolled, adding nearly 10,000 new members within three months. True referral was at action here: members had discussed the campaign with their referred friends, so when the offer arrived, the referrals had been expecting it.

In 2004, Flextronics, (formerly Hughes Software, and now Aricent), needed to hire 800 fresh graduates. The only problem was it was February, and campus recruitments had ended in August, the previous year. Flextronics decided to use referrals. The software company wrote to the 500 fresh graduates they had already recruited. These recruits were scheduled to join in May. Flextronics told them of the 800 openings in an exciting new project. (The students translated this as “exciting career opportunities”). Within a week, the company received more than 1,500 resumes, nearly twice the number generated by expensive recruitment advertising launched the previous week. The only reward offered was – “Win an iPod for sending 10 names”.

In 2006-07, Bausch & Lomb built new patient traffic at eye clinics for lasik/zyoptic – a high-tech, but expensive, permanent vision correction procedure – through referrals of patients who’d undergone such a procedure. It used CRM instead of rewards. The strategy worked bringing one new patient for every five existing ones.

Whether we like it or not, customers will refer – positively or negatively. Keeping that in mind, we must learn to use referrals to our advantage. You may, of course, choose to ignore the power of referrals, but remember, your competitors might just be paying attention to it.

Raj Bhatia is founder and MD of Up Close & Personal (www.ucpdirect.com), a loyalty marketing and CRM consultancy firm.