Promises and bird dog fees: Ways to nurture referral business

Promises and bird dog fees: Ways to nurture referral business

Monday, June 16 2014

Ever heard of Joe Girard?

He holds the Guinness World Record as the world’s greatest salesman, selling 13,001 new cars and trucks during his 15-year retail career.

Joe was a true professional at getting referrals from every customer. If the average person knows 52 people who will show up for his or her wedding or funeral, Joe theorized, then that average person must know at least one other person in the market who needs or wants a new car.

Consider this: If every one of your customers were to refer one new customer to your dealership, you would double your business. That’s pretty powerful.

A Motorcycle Industry Council owner’s survey cited ‘the influence of friends and family’ as the third most important factor in a decision to buy a specific model, behind test rides and visits to the dealership. While there aren’t as many motorcycle buyers as car buyers, riders do tend to hang around other riders more.

WHERE ARE THEY?

Even though I write about this often, many in the industry still don’t realize that only 3 percent of the American population owns a motorcycle. Finding powersports enthusiasts in your market can be like trying to find a needle in a haystack -- if you don’t know where to look. Most riders have friends and family that ride, so they can be great resources to connect you with targeted prospects.

Since the influence of friends and family ranks so high in the buyer’s decision to purchase, it makes sense to look seriously at how you can create a referral culture in your dealership.

Another compelling reason to focus on referrals is that the 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 will also trust this dealer. And of course, people buy from people they trust.

It’s not just the motorcycle and automotive business that benefit from the power of referrals. Billion-dollar online shoe and apparel seller Zappos credits word of mouth as its primary form of marketing.

HOW TO FOSTER REFERRALS

Of course, like most business best practices, implementation is the hardest part, so the question becomes how? First, it’s important to understand that just because you have satisfied customers doesn’t mean you’re creating a referral culture. 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, as it’s natural for people to have a reluctance to refer friends. They fear that the person they refer could have a bad experience, making the referrer look bad.

You dealers are skeptical as well, because many of you have never been exposed to hard data that could validate the need for such a system. And of course, many dealers just have never been taught how to create and execute a referral system that works and gets measurable results.

One of the most time-tested and proven referral strategies is to incorporate incentives such as bird dog fees. Your customers need to get over the natural reluctance to refer, and you can help them do that with a little extra enticement, like $50 cash or an in-store gift card when they refer a friend or family member who buys a vehicle. Money is the most powerful behavioral modification tool on the planet.

Other critical elements of your referral system have to do with the timing in which you ask for a referral. There’s a natural desire to do things for people who do things for you, so 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, telephone or even snail mail.

Zappos has taken a slightly different approach to referrals, with a brilliant under-promise and over-deliver process. Here’s how it works: The company automatically upgrades all repeat customers to next-day shipping. The customer receives an email confirmation saying their your order will arrive in three to five days, and then they immediately get another email that says, “Woo-hoo! Because you’re a valued customer, we’ve upgraded your shipping to overnight.”

The leadership team at Zappos decided long ago to book the extra shipping cost to advertising, and their efforts have in turn created a brilliant word-of-mouth referral strategy.

Whether you’re Joe Girard, Zappos or just an ordinary powersports retailer, an effective referral system is a proven winner -- and it fits in everyone’s budget.

Rod Stuckey is a former dealer principal and founder and president of Dealership University and Powersports Marketing. If you have a question about marketing best practices, you can contact him at editors@dealernews.com.

  • 1 of 1