Are service sales really there for the asking? One service shop owner's simple, effective referral program shows they are. Here's how it works and why aggressive tire dealers should consider it. But first, remember that smart business people crave referrals because referrals usually generate the highest-quality customers.
A referral customer is already ``pre-sold'' on your ability, integrity, and the value of your services. Therefore, your actual cost of sales for that customer is minimal compared with the average cost of getting a new face into the shop.
Unfortunately, many owners and managers are far too passive about referral business. When they happen to get a referral, they're thrilled. But they never initiate any ongoing program to actively generate referrals!
A Southern California shop owner I know (I'll call him ``Mr. K'') created a successful referral plan with nothing more than a fresh set of business cards and a smart ``spiff.'' The new cards are just a double-sided variation of the shop's regular business cards.
Mr. K has ``REFERRED BY'' printed on the reverse side of the cards. The person giving the referral signs his or her name there and jots down the date. If the recipient of this referral card purchases service from Mr. K's shop, he or she receives 10 percent off the total bill (up to $50) for the first visit.
Whenever someone purchases service with a signed and dated referral card, the person who generated the referral (and signed the card) gets a referral fee of $20.
Before the program was a month old, it generated six new customers. Mr. K said he couldn't help but contrast these results with his yellow pages advertisement. His records show his phone book ad seldom generates new customers—usually no more than one per month!
Mr. K's yellow pages ad is a typical auto repair shop display ad—and we can debate ad design and placement until the cows come home. But like many other bosses who are tracking phone responses carefully, he finds the phone book ad usually generates calls from people shopping price.
In previous columns, I have urged readers to cull value-conscious instead of price-conscious customers. The referral card approach is doing just that. In my next column, I'll discuss the issue of handling telephone inquiries about auto repair.
The motivational factor
According to Mr. K, one of the most pleasant surprises has been the reaction of his own technicians to the referral plan.
His techs have worked for him an average of eight years each, and overall the crew is happy. But the fellows never seemed that concerned before about steering friends, relatives and neighbors to the shop.
Since implementing the referral program, half of the shop's new customers have been referred by its own workers! And hanging the 20-dollar carrot in front of the horses certainly proved to be ample motivation.
Also, a large number of retirees patronize Mr. K's shop. Because they're on fixed incomes, they lovingly call their 20-dollar spiffs ``found money.''
The plan, Mr. K. reported, is bonding them to his shop stronger than he could have imagined.
Mr. K admits that establishing the 10-percent discount and 20-buck finder's fee were educated guesses on his part.
But he also realized that he might need to revise or update the plan at some point. Or, he might run a special promotion on referrals in the future.
Therefore, requiring people to date the referral card does more than possibly reveal customer buying habits. It's also a helpful housekeeping detail for him and his staff.
After all, any worthwhile promotion must have a cut-off date to prevent confusion and unhappy participants.
Furthermore, Mr. K is curious about the extent to which solid, value-conscious customers can be prompted to purchase legitimate repairs and maintenance they might otherwise have postponed. As the referral plan progresses, he thinks the dated referral cards may shed new light on the subject.
Finally, loyal rank-and-file customers tell Mr. K the referral plan is the sincerest thanks he can give them.
He said people who have spent thousands of dollars with his shop gleefully scoop up referral cards, vowing to ``earn back'' their expenditures 20 bucks at a time!
``The plan helps keep people talking about us and spreading our name,'' he said. ``No matter how I figure it, the math says that's cheap advertising!''