Monday, March 7, 2011

How valuable are referrals?


I had a conversation yesterday with Steve Herzog, owner of the Sandler Sales Institute of Knoxville, TN about the value of referrals vs. traditional marketing methods.  His research is eye-opening to say the least.  

Mr. Herzog said, “the value in having a referral, or better, an introduction to a new client is immeasurable when looking at the percentages of conversion (in parenthesis) from client to customer with respect to each category”.  Herzog classifies four methods of finding new clients:

1. Cold calling (2-3%)
2. Leads (10-12%)
3. Referrals (40-50%)
4. Introductions (80-90%)

It’s not shocking that cold calling is the least effective method of attaining new members and one I wouldn’t recommend because of the time and effort it takes to succeed.  Do so at your own peril!

Leads are the next method of attaining members and one with a relatively low success rate, relatively speaking.  Since the advent of mass email lists vs. the old “snail mail” campaigns, generating leads via slow drip marketing has become easier and less expensive to administer.  I wouldn’t rule it out as a means to picking up new members for your club even though its percentages are relatively low and its success rate is only as good as the people it is sent to.

Referrals are considered the “meat and potatoes” of most club’s long-term member base.  It works on the premise that satisfied people tell other people...and then they become satisfied and tell other people...

Most clubs do a very poor job of getting referrals (ironically) because 1) they aren’t trained to ask for them (more than once, if at all), 2) the reward for a referral is minimal, at best, and 3) they feel that it is too ‘salesy’ and don’t want to appear that they actually need members. 

On top of those reasons lies the predictable way they usually try and solicit new people via Spring membership drives which are as tired as “Golden Girls” re-runs. 

“We had a great summer....but people quit over the winter.   We need YOU to recruit new members.  Here’s two month’s free dues + pro shop credit on our over-priced merchandise, as our special thank you!”

UGH!  People with a strong enough incentive WILL refer new people if the win for them personally is strong enough.  I suggested one struggling club adopt a “$50 off your membership and that of a new members as long as both stay with the club” as a means to picking up new people quickly and two months later they one-upped my idea and implemented a “$75 off your membership and a new members for the life of both”.  Kudos!  They are already picking up new members from this plan and have created excitement for the first time in years as a result. 

The last and most effective means of getting new members (yet least utilized) comes from Introductions.  Introductions are a more specific type of referral.  In clubs fortunate enough to have a trained sales professional who is paid to bring in new people (and penalized when people leave), an introduction might sound like this:

Bob (membership director):  I really look forward to teeing it up with you new next week and introducing you to the guys in our weekly dog fight.  Before you leave John, do you know of anyone that might also want to become a member of XYZ club? 

John (new member):  Actually, I do.  Fred Johnson is a good friend of mine and would probably fit right in.

Bob:  John, would you be comfortable if I called him directly and invited him out for lunch and a round on us?

John:  Sure.  His number is 456-7890.

Bob:  I really appreciate that.  Can you do me a favor and call Fred first before I place a call to him? 

John:  Sure.  What do you want me to say?

Bob:  Just tell him that 1) I will be calling him personally within 24 hours to set up lunch and a round of golf to get to know him, 2) tell him 2-3 reasons why you decided to join, and 3) tell him that we value new people but want to make sure everyone is a good fit for the club.  We take the membership process very seriously and want to ensure the people we bring in understand the importance of community within the club...

Why go to the trouble of an introduction?  The simplest explanation is, 1) it takes all of the pressure off your new member to bring in new people and puts the onus on someone who is trained in presenting the club in its best light and 2) the conversion rate is by far the highest of any method we have looked at previously.

Without a referral or introduction from a happy member, it may take 8-12 exposures before a prospective member becomes a NEW member (and by the way, all of those 8-12 exposures before a prospective member becomes a NEW member (and by the way, all of those 8-12 exposures will have to be positive) via traditional means. 

As we have discussed on previous articles in Pillars of Golf, the first 30 days are usually the most fruitful in getting referrals so make the most of this time!

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