The more I learn about small business, the more I’m surprised about the shaky foundation on which they build their businesses. Owners risk so for their business, yet they often put themselves at greater risk because they choose not to market consistently.
Overwhelmingly, when people discover that I’m a marketing coach they proudly state, “I’ve built my entire business on referrals. I’ve never had to spend a penny on advertising.” And my response is typically, “That’s great, advertising rarely works for service businesses anyway. And I applaud you for providing a service valuable enough to get people talking. So tell me, how do you get referrals on a consistent basis?” That’s when they usually stop dead in their tracks. They realize that referrals are not predictable; they realize that they are not in full control of their own business.
Now let me be clear; referrals are great! They are vital to your firm’s growth. They are the easiest business to close and they are typically less price sensitive than other buyers. You should ALWAYS strive to do your job well enough to get people talking about you and your services to friends and colleagues.
That said, the ideal client mix for a service business is 50% referrals and 50% new business. And by new business, I mean clients that would not have otherwise come to you without stumbling across one (or more) of your marketing tactics. So what’s your percentage? How much of your business do you ultimately control?
Referrals are going to happen (or not) when you provide good service and deliver value. Referrals are next to impossible to control. You can’t magically turn on the referral switch and get new business when you need it. So while they are great business; you shouldn’t let referrals totally control your business. You need to proactively grow your business in addition to working with referrals.
You need a reliable system in place for generating new leads and attracting new clients. By balancing referrals with proven marketing strategies, you can potentially double your business if your current mix is 100% referral-based.
Just for a minute, assume you keep your current level of referrals and you elevate your new business marketing efforts to attain the ideal 50/50 split. What would that mean for your business? What would that mean for your personal goals? Having a marketing engine that consistently creates more opportunity than capacity allows you to choose better clients and better projects.
What I’ve discovered is that most people don’t understand how to market their business. They’ve never had any training or they simply get distracted by the details leaving their big plans to collect dust. In addition to referrals and advertising, there are many more marketing options.
BNI is the world’s largest “lead referral group.” Each week millions of businessmen and women around the world get together to proactively drum up referrals for their business. Earlier this year, they asked their members about their marketing strategies. Here are the results (in order of weight as of March 2008):
Referral Marketing – 41.6%
Direct Marketing – 17.6%
Web Marketing – 9.9%
Direct Mail Marketing – 5.8%
Email Marketing – 5.5%
Print Ads – 4.8%
Other – 4.2%
Public Relations – 3.8%
Telemarketing – 3.1%
TV/Radio – 2.8%
So even in a group that purposefully built to generate referrals, members are still spending over 50% of marketing efforts on other strategies. But here’s the kicker, BNI members are missing out on some of the most effective marketing strategies available for professional service businesses.
Just look at the focus on direct marketing, direct mail, print ads, and tv/radio; those strategies are basically marketing number games. The response rate for those strategies is so low you need tens (if not hundreds) of thousands of contact names on your prospect list to make it worth your time and effort. We’re talking about a ~0.5% response rate on those strategies.
If you’re in a service business, you are selling your knowledge, expertise and ability to solve client problems. Chances are you have hundreds, maybe thousands, of people in your contact list or address book–no where near enough to play marketing number games. Not to mention, it’s very difficult to explain the value of your intangible service offering with traditional advertising. You need a different approach; you need different options.
I help my clients pick between 11 proven marketing strategies. We select the top three to five strategies that are best suited for their unique goals and personality. These are “big bucket” strategies that can have hundreds of different tactical executions apiece. The 11 strategies include (in alphabetical order not effectiveness):
1. Advertising (paid placement of message, incl. sponsorship)
2. Articles & Publishing
3. Direct Outreach (one-to-one direct mail, email, phone calls)
4. Keep in Touch (newsletters, auto-responder email)
5. Networking (events, lunches, committees, Board of Directors
6. Online (SEO, banner ads, webinar, registration forms, blog)
7. PR (earned media/press mention)
8. Referral (Word of mouth, viral marketing)
9. Speaking, Presentations, Workshops
10. Special Events (host seminars, open house, customer events)
11. Strategic Alliance / Joint Venture
For instance, take Networking. As an overarching strategy, you can network at local Chamber events, professional groups, church, alumni clubs, civic organizations, and online networking sites like LinkedIn. You can join boards, country clubs, mastermind groups. In order to take advantage of networking (or any of these strategies), you need a plan.
Each of these marketing strategies has been proven to work. But some are more effective than others. Notice that advertising and referrals are both solid strategies, but they’re not the only options. And I like I said before, advertising only works with businesses with mass market appeal. The very nature of a service business has a targeted audience.
The small business owners I talk to want a tangible return on their investment of time, money and energy into marketing. Everyone has unique goals, but one of the most common goals that I encounter in professional service partners is the desire to be seen as an “expert” in their field. They want to elevate above their competition and be recognized as a leader. If this goal resonates with you, one of the most potent combination of marketing strategies you can employee is Writing, Speaking, and Networking.
Think about who you look to as leaders. How do you tap into their knowledge? Where do you find them? Chances are you buy their books; or read their articles/white papers; or see them talk at a conference. Experts purposefully select marketing strategies that allow them to capitalize on their knowledge and “thought leadership.” Now, this is just one example. You have to pick strategies that excite you and are best suited to reaching your specific goals. If you can’t get excited about speaking, for instance, chances are you won’t actively work your speaking plan.
In closing, I want you to think about your business and your goals. If you have a business built 100% on referrals and you’re completely happy, I congratulate you. But if you have a business dependent on referrals and the stream is dwindling down or you yearn to take the business to the next level, you must become a better marketer. You need to balance your referral stream with new clients. Building action plans around a couple of the marketing strategies listed above is a great way to reach the 50/50 client mix.
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If you’re in the greater Lexington, KY area, mark your calendar. Starting May 15th, I’m leading an 8 week marketing workshop for Independent Professionals and Partners in professional service businesses who want to attract more clients. This program, entitled the Fast Track to More Clients, will be a business “tipping point” for owners who are:
- Tired of struggling with marketing and getting minimal results
- Resistant to engaging in marketing activities
- Committed to growing their business to a whole new level
Learn more at http://www.nick-rice.com/fasttrack
