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Measuring your Referral Network

Guest post by: Merra Lee Moffitt

Article Overview: First the real question. Do you measure your referrals and where your customers originated? It really isn’t difficult if you just want to get started. A tally sheet kept at the cash register, a customer database, even a 29-cent Palm Pilot (a pocket-sized spiral notebook) will get you an initial measure.

Measuring your Referral Network

First the real question. Do you measure your referrals and where your customers originated? It really isn’t difficult if you just want to get started. A tally sheet kept at the cash register, a customer database, even a 29-cent Palm Pilot (a pocket-sized spiral notebook) will get you an initial measure.

Why track client referrals? If you know how much time, energy and money went into getting your clients, you can see which methods you want to keep when you are looking for expenses to cut. You would cut the one that was least effective, not the one that was most expensive. Alternatively, when looking for more customers, you’d want to expand the programs that are most effective.

Be careful what you track. A common approach is to measure the final trigger that ‘caused’ the prospect to become a customer; for example, being introduced by an existing client. That, however, leads to some inaccurate conclusions. For example, I have 69 clients that have come directly from my networking efforts (PRE, Chamber mixers, Church, Boy Scouts, etc). Those people have introduced me to another 90 clients. It would be easy to say that the 90 came from ‘client introductions’, while only the 69 came from networking. That would lead me to the false conclusion that I should focus primarily on client introductions to build my future business. Especially since those are virtually free; there are no dues or mailing costs and it takes very little time to generate them (except of course for the hard work I do to earn client satisfaction). However, if I had not done the original networking effort to get the first client, they wouldn’t have been able to introduce me to their friends and family. It’s like trying to have grandchildren without first having children!

Measure the lifetime value of a referral source. Instead, I include in my metrics for each networking group, the full count of original clients and the people they introduced to me. Thus, all 159 clients came from networking. That tells me I should keep networking and look for new ways to network. So, the lifetime value of my involvement in PRE, for example, includes all the clients that have been introduced to me by people who first became clients from PRE. That total is 31 with 18 of those being second or third generation.

Oh, and yes I should keep on doing a good job for my clients so they keep introducing me to their friends and family.

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Article Tags: customer database, referral network, referrals, self employed



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