Referral Marketing: the reality check

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I  recall the day I met a life coach called Sarah who came from Southampton. She worked for herself and apparently was a great at enthusing others and getting them to face their problems.

She asked me. “What do you do?”

and I replied, “I help small business owners win more clients.” “What’s the next marketing objective you want to achieve?”

“I don’t do marketing.” ” I have no need.” “. All my business comes from referrals and networking”. She said.

(These sorts of comments, I love.)

So, I politely asked Sarah if she didn’t want to increase her sales, was she happy how much she spent on marketing, or did she want to reduce her marketing costs.

She then looked at me as though I had a bucket on my head and was standing naked infront of her. (I wasn’t)

She apparently didn’t need (or want) to reduce her marketing costs.

She reminded me she wasn’t spending any money on marketing.

OK, fair enough, I then asked how she actually went about marketing herself at the moment.

Interestingly, she finds herself networking in London 3 times a week.

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Referral Marketing and £10m in Opportunity Cost

In a recent coaching session with a client, we were discussing generating referrals, leveraging testimonials, and using case studies in your marketing.

I asked the client if she knew the Life Time Value of one of her clients.

She didnt know.

So I went through the formula of LTV = AOV x AOF x Y

Average order value x average order frequency x No of years a client remains with you

She was pleasantly surprised by the figure.

I then asked her how many referrals she got from clients, or how many referrals she asked for from her clients.

For if you could get 2 referrals per client per year, then it could make a big difference to the Life Time Value of the client.

LTV = AOV x AOF x Y x 2 ?

What became interesting was, the client received leads from head office, and was requested to turn up unannounced at the prospect’s premises.

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