Create a Referral Culture

A free marketing strategy that could double your business

The worst number in marketing is one, and that’s because there’s no one single advertising magic bullet that will flood your showroom with red-hot leads ready to buy day after day. Different people have different preferred methods of communication and therefore react differently to the constant influx of varied media coming their way. This is why diversity equals stability in the world of marketing, and you’d better be fishing with multiple poles in the water if you plan to maximize your monthly marketing budget.

There are cost-effective methods for marketing your dealership that are quite kind to your ad budget and get incredible, measurable results.

The quickest way to double your business would be to have every customer in your database refer you one new customer. Although referral systems as a marketing strategy are often overlooked and not taken seriously, they can actually be one of the most powerful new customer acquisition methods in your entire marketing tool box. A recent MIC motorcycle and ATV owner’s survey cited the influence of friends and family to be the third most important factor in a rider’s decision to purchase a specific model behind test rides and visits to the dealership. Considering that the influence of friends and family ranks this high in the buyer’s decision to purchase, it makes sense to take a serious look at how you can create a referral culture in your dealership with a structured program integrated into your marketing mix. Furthermore, most don’t realize that only 3 percent of the American population owns a motorcycle, so taking a targeted approach to find these people can be like trying to find a needle in a haystack. Most riders have friends and family that ride and therefore can be great resources for connecting with more targeted prospects.

Another compelling reason to focus on referrals is that closing ratio and gross margin are proven to be significantly higher than ice cold walk-in visitors. This is because referrals come in the door with an associated level of trust. If my friend trusts this dealer, and I trust my friend, then I too will trust this dealer.

Joe Girard is very familiar with using referrals as his primary marketing method. He became the Guinness Book of World Records world’s greatest salesman, selling 13,001 new vehicles at retail during his 15-year selling career, a record that still stands today. Joe was a true professional at getting referrals from every customer! Joe’s theory is that if the average person knows 52 people who will show up for their wedding or funeral, then they must know at least one in the market for a new car.

So why don’t more dealers have structured referral system? Many dealers have an underlying belief that satisfaction equals referrals. In other words, if I do a good job, my customers will send me business. However, high CSI scores typically aren’t enough to get customers to refer, as it’s natural for people to have a reluctance to refer. Why? The person they refer could have a bad experience, therefore making them look bad. Dealers are skeptical because they have never been exposed to hard data such as the MIC owner’s survey, which validates the need for such a system. And of course, many, if not the majority, of dealers have just never been taught how to create and execute a referral system that gets measurable results and actually works.

The first and perhaps most important referral strategy is to incorporate incentives. No bait, no bite. If your customers are to get over the natural reluctance to refer, they need a little extra enticement like a free t-shirt or $10 gift card to spend as they wish when they refer a friend or family member. Money is the most powerful behavioral modification tool on the planet, and it’s amazing what people will do for something free! The use of premiums and incentives isn’t just for the person providing the referral. It also has to be for the person receiving the referral as well, so they’ll take action and come to the store.

Timing is also critical. The law of reciprocation is simply that natural desire to do things for people that do things for us. The best time to ask for a referral is right after a customer does business with you. This can be done face-to-face, with email, phone or mail.
Another popular strategy is to implement referrals during open house-type events. When marketing your event to your house list, you can offer an incentive such as 10 percent off, and for those who bring a friend, both can get 15 percent off. If you look at the lifetime value of each of your customers, you’ll find that a little extra discount or a free t-shirt is a worthy investment to acquire a new customer.  

While creating a structured referral system isn’t a magic bullet, it is a viable marketing medium that can generate an exponential ROI.

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