In the wake of the COVID-19 pandemic many salon owners will find themselves in a difficult situation and have to find ways to boost business. A referral program is the most effective way that you can boost your business in a short period of time and once you have your referral program running, it will keep on giving high quality clients to your business.
We all have heard that word of mouth is the most effective way you can market your business. But, to be honest, very few have actually experienced it as a sustainable source of clients. The reason is that there is one crucial ingredient most people prefer to ignore. You have to make it happen.
The way you make word-of-mouth marketing work is by running a rewards based referral program. Referrals are the fastest and easiest ways to increase your business, but you have to give your existing clients a reason to talk about you.
Your goal is to get all your ‘A-list’ clients to refer their friends, co-workers, and relatives to you. You want to use your referral program to clone your best clients and for this reason you will not necessarily ask all your clients for referrals. Unless you only have good clients.
Do you think this is difficult?
You may think that this is impossible, because you rarely get a referral now. But believe me, it’s not that difficult. However, you have to make it happen. It won’t happen by itself. You should develop, as part of your marketing plan, a referral program.
Referred clients are better clients:
- They cost less to acquire. This is very important. Anything you can do to get your cost per client acquisition down is great.
- They are the second easiest people to sell. Second only to your existing clients.
- They are less price resistant. Because someone they trust referred them, they rarely question your pricing.
- They are more likely to refer, since someone else referred them.
- They are less likely to complain and are easy to please. Even if something does go wrong, referred clients are more understanding. On a whole they are much easier to deal with.
For all of these reasons, you should make your referral program a high priority.
To maximize your referral, you must have a system in place. The system what works best is the Referral Reward Program.
The Referral Reward Program
The Referral Reward Program is based on compensating a referral source through the giving of gift certificate(s) or gift(s).
The gift certificate program is an easy way to develop a referral program quickly. For every referral that becomes a client, you give the referring client (your existing client) a gift certificate for a certain amount. The amount is usually tied in to a specific purchase value or an item purchase. For example, a €25 gift certificate, if the referred client (new client) spends over €250, is given.
The other type of Referral Reward Program is based on giving away products or treatments instead of gift certificates. You can offer something you sell or treatments you provide, for free. Or it can be a nice gift that you create just for referrals. It can be anything. One advantage of a gift is the fact that the perceived value of the gift might be higher than the spend value of a gift certificate.
A very important point to remember about the Referral Reward Program is that the best time to ask your clients for referrals is just as you have made a sale. At this moment your client feels the most excited about your product or treatment. You might say something like …
“You know, this is how I make my living, and I would sure appreciate your help. If you like the way you have been treated, and if you feel your friends, family, and relatives deserve this type of treatment too, then, I’d like to be the one to help them.
So, if you don’t mind, please take a few minutes and give me the names and contact details of a few of your friends, family members, or co-workers (Do NOT be general here, refer to one specific group that the client can easily think of, else her mind will go blank, and she will not be able to give you any referrals. If she talks about family a lot during treatments, use that as a referral pool. If she talks about her gardening group, use that as a referral pool). And as a way of thanking you, when any of the people you refer to me show up and _________ (spend €, or buy a ____), I will give you ____ (either € or a gift).”
You will need to have referral forms handy (it is best to have a dedicated referral form designed for this) for your clients to fill out or for you to fill out for them (the more of the work you do the bigger the chance that they refer).
One problem with asking your clients for referrals when they are in your salon/spa, is that often they do NOT know the contact details (first name, last name, phone/mobile no., email address, birthday, postal address) of the people they want to refer. One of the ways that we have developed to handle this problem is to create a referral form for them to take with them and return with the completed information.
Below in the example section you will see an example of such a form. You can also consider offering a gift for providing you with the referrals, irrelevant of the referrals buying from you. This will motivate your client to provide you with complete details.
You should take note of the following:
- Since the client is taking the form with her, they can give you multiple referrals.
- You want to make it easy for your clients to return the form.
- If the client returns the form NOT in person, email or other digital way, you best send her a email/postcard that allows her to return to get her free gift. This does two VERY BIG THINGS for you. Firstly, it brings her back into your salon/spa/clinic where she likely to make an additional purchase for herself. Secondly, it gives you an opportunity to give her another referral form to fill out. Once a client begins to refer, she is very likely to continue to refer.
Now that you have a name and contact details, you want to put the prospect into your ‘incubator’ (An incubator is a system designed to take your referral from lead to client). I have found the following system works best.
- Send out letter #1. This will typically be a gift certificate and an explanation of how you got her contact details. IT IS IMPORTANT TO TELL HER THAT SHE HAS BEEN REFERRED BY____. You should take note of the following:
- Send out this letter in a non-standard, non-commercial looking envelope (think of the envelopes you would use for a wedding invitation) with the return address of your salon/spa/clinic (do NOT put your salon/spa/clinic name on, just the address). Handwritten address in blue ink, and a real stamp (not a mass postage stamp).
- The letter needs to be highly personalized. Make sure you insert the following:
- The new referral’s name
- The referring client’s name
- The expiration date of the gift certificate(s) (usually two valid for weeks )
- The sales person’s (your or a staff member’s) name
- A handwritten signature
- Two P.S.’s that restate the biggest benefits
- Along with this letter you can also add some more discount vouchers. (Best to give discount vouchers for treatments that requires a course of treatments. The discount on the first treatment and the following treatments at normal price. For products, choose products with a high likelihood to be purchased again.).
For every new referral that does not respond to letter #1 in two weeks, you should send out letter #2 after the expiration date of the gift certificate, which should be about two weeks. The procedures are about the same as for letter #1. The envelope should be hand addressed and the letter should be highly personalized.
Call every new referral that has not responded to the two mailings. One to two weeks from mailing letter #2. A couple of tips when making the call:
- Use the referring client’s name when presenting your offer. You need to use the prospect’s familiarity with references to establish credibility.
- Tell the referral how much you would really like to introduce her to your spa/salon/clinic and your level of service. Offer the extend the offer to her for another week.
- Do NOT forget to ask for a ‘day and time’ appointment.
- Do NOT push it if the referral is not interested. Just politely thank her for her time and tell her that you will make yourself available whenever she is ready. Add her to your standard ‘keep-in-contact’ mailing list.
Do NOT forget to reward the referring client when her referral used the gift certificate and discount vouchers at your salon.
A couple of other tips to help you have a profitable referral program:
- To encourage your staff to ask their clients for referrals, I suggest you also give them a bonus for each referral that visits your salon and uses the gift certificate towards a minimum acceptable purchase. For example; you can give your staff a €5 bonus for every referral gift certificate that is redeemed with a minimum of a €250 sale.
- Designate one person in your staff to manage the referral program, especially the tracking.
- On a minimum of a weekly basis, post the amount of referrals each of your staff members obtained. Lag of interest from staff is the main reason why referral programs die.
Keep in mind that it’s only a model. Feel free to make minor adjustments.
This system requires more work than it would to just give money to an ad agency. But, it will return many times more, and you only have hot leads to work with. It is also worth noting that this system can also very easily be adapted for email or other electronic delivery. HOWEVER, you will have much better results if you use the good old snail-mail.
There are many reasons why a referral does not make use of your offer immediately. This doesn’t mean that her situation will not change and that she will not be making use of your services in the future. For this reason is important to keep in contact with your referrals.
Three weeks before her birthday is a wonderful time to send out another personalized offer. Your clients and potential clients (the same as every one of us) are much more self-conscious in this period and the chance of her accepting your offer is much higher.