Retention and referrals are two of the most important keys to a successful business. However, many companies don’t understand that retention and referrals don’t just happen. They must be earned by providing excellent customer service.
“I’m not going to refer someone to you if you did not provide me with exceptional service and/or meet my needs,” says Ron Utrera, an account executive at Royal Marine Insurance Group (RMIG). “The ability to develop and build a business that has a strong retention and referral base is really a reflection of the experience the original customer has received.”
Smart Business spoke with Utrera about how to improve retention and referral rates.
How do retention and referrals affect each other?
There is a direct connection between the two in that they both are earned and asked for. Obtaining retention and referrals involves a two-step process that must be a part of the sales strategy from the beginning to be effective. For example, after visiting a restaurant and experiencing exceptional food, to then remark ‘This place is great!’ or, ‘Next time I am going to try what you had,’ or, ‘You know who would really like this place?’ Comments like that are one step to retention and referrals.
However, retention and referrals happen if the service is just as good or better than the food; the waiter, hostess, and/or the manager or owner need to be attentive and helpful, making sure everything is to the guest’s liking, including ending the night with: ‘We look forward to seeing you again.’ Hence, asking for the referral and furthering retention.
Another way retention and referrals affect each other is that clients who are obtained by referral have been found to have a higher rate of renewal themselves. As an added bonus, clients obtained by referral tend to refer others to you, as well. After all, they came to you via the loyalty process and are usually open to continuing the process.
Why should executives be concerned about retention and referrals?
These two areas have become increasingly important to the survival of many companies. First, let’s address retention. Many companies have said that loyal clients and customers have helped sustain their business through tough economic times. That is powerful and cannot be overlooked.
When properly measured, retention allows for the forecasting of baseline revenues that a company can expect to generate. In the past, retention was thought to be something simply left to the sales team or cashier. What has been learned, however, is that retention is a vital part of the overall strategy and requires planning.
Recently, I heard retention described as nothing more than the continuation of a relationship. Others will say that it is the key indicator for ROI when developing either a recurring revenue or repeat sales component to your company’ strategy. In either case, it is and will continue to be an area of concern for executives if they wish to grow and add resilience.
Referrals, on the other hand, are also important to executives because they are the generation of sales leads with the endorsement of a satisfied client that the new prospect knows personally. The cost to obtain a client in this manner is minimal, and in many cases, a referral is a better-qualified lead.
How can a company improve retention?
Improve the ‘wow’ factor. It does not matter what industry you are in, if the client says ‘wow’ when comparing you to others, then you are on your way. You will notice companies and individuals that have exceptional retention and renewals never seem to be the ones surprised by that fact. That is because they adopted an attitude and goal of building customer retention and put themselves in the position to ask for renewals by earning it from the beginning.
When this is incorporated as a core belief, sales, customer service and management will continue to enhance the client relationship and further strengthen the opportunity to increase retention and, in turn, referrals. But remember, at the end of the day the expectation needs to be set, and then you must ask.
What are the keys to getting referrals?
First, set the expectation with the client during the sales process that if you earn their business, you will ask for a referral. So the question becomes: ‘Have you earned their trust and loyalty for them to give you referrals?’
Next, when they do provide a referral(s), explain the process of contacting the referral to the client. Let them know that the same steps taken to help them will be taken with their referrals. I always ask: ‘Would you like me to call you back to let you know how things went?’ Then, keep your word.
How can a company do those things?
First, it must be built into the company’s strategy. Then, they must take time to adapt and train those in direct contact with the client on what needs to be done and how. Most sales professionals will tell you asking for referrals is difficult in the beginning. You have to know not only how to ask for referrals, but also why to ask for referrals. The company needs to manage this, not micromanage per se, but at least track the numbers so it can refine it for its specific industry. And then, to properly finish the process, the company should send a letter thanking the company or individual for the referral.
Ron Utrera is an account executive with Royal Marine Insurance Group (RMIG). Reach him at (786) 364-9824 or firstname.lastname@example.org.