August 4/11, 2014; Volume 28/Number 4
(Bonus fifth part)
The second 40% to 50% margin strategy is having a referral marketing system in place to create a predictable, continuous stream of referred customers.
The first step in any referral marketing strategy is making sure customers will actually want to tell people about you and refer you; in other words, you must create a “culture of referrals.” This is accomplished by providing stellar service to your customers; totally wowing them from the time they walk into your store, throughout the installation and in your follow up. Think of Starbucks: It does relatively little advertising, instead choosing to focus on providing a consistently positive customer experience, which, in turn, generates tremendous word-of-mouth (referral) marketing. This also enables it to command prices two- to four-times higher than a traditional coffee shop.
If you want to create a consistent and predictable stream of referrals, you must take it further.
First, do a post-installation, follow-up visit in which you inspect the flooring and make sure everything is just right. I recommend surprising your customer with a gift when you arrive. Both of these things create differentiation from other dealers and wow your customer, making her much more willing to give you referrals.
Next, present your referral program to your customer. I recommend having the details of your program printed onto a form or letter. The form should contain these elements:
•How she will be doing her friends and relatives a big favor by referring you.
•A reward—like movie tickets or dinner for two—for anyone she refers who becomes a customer. (I’ve done referral strategies without a reward, but it helps.)
•A list of people who have referred.
•It should let her know each person she refers will receive a gift certificate or coupon to your store in her name.
•Have blank spaces on the back of the form for her to write in her referrals.
Do not leave the referral form behind and wait for her to mail it to you. Instead, have her fill out the form right then and there. You can provide an incentive for her to do so, like a Starbucks card or a gift certificate to your store.
Done properly, your customers will love doing this, they won’t feel pressured, and you’ll make a ton of money. Garry, a dealer from Illinois, went from nearly closing his doors to opening his second store, all while charging 50% margins. This referral system was one of his main strategies. Jerome, from Texas, went from charging 15% to 30% residential margins to commanding 45% to 50% margins within 90 days. He’s currently booked out for three months. Again, referrals were one of his main marketing strategies.
I could cite example after example of dealers all over the country who are generating hundreds of thousands each year and charging high margins using this strategy. In other words, it’s been proven to work, and proof trumps opinion. Don’t let preconceptions rob you of this incredible money-making opportunity.