Why Bother Asking For Referrals?

When was the last time you asked for a referral? Now, if it's not something that is baked into your business naturally, then you are losing out on a huge, amazing source of income and perfect clients that often are only one step away from you. And it's often all because of the issues upstairs in your head. It's all about ego. If we can take the ego aside for just a moment and talk about the importance of referrals, Your life is going to be changed. Welcome back to the Magnetic Marketing Podcast. Today we get to listen as Dan Kennedy and Dave D talk about why bother asking for referrals. Now, referrals literally are one of the golden gems of your business, and this shouldn't be something that you are doing every once in a while. There should be a business system and there's a way to do it right. So that way it's not bothering your ego or your staff isn't running your business. This is a way to be able to make your best clients bring more of their friends to you in a systematic way that we're going to call a referral machine. Now, what are the goals of this referral machine? What are the laws that restrict rewarding referrals? What is white mail? And what are the specific rewards a company should be giving out for referrals? Those are the conversation points you're about to learn about. Let's go ahead and jump into why bother asking for referrals with Dan Kennedy. And Dave D.

I don't think there's anybody that has had a bigger impact in the field of direct response than Dan Kennedy. The legend of Dan Kennedy should be ignored at your own peril. They're not really lessons, they're kind of laws that you live by. Dan opened my eyes to what small business marketing looks like.

Dan teaches strategic direct response that is timeless. His ripple effect touches people who don't even know his name.

The world as we know it was changed because Dan Kennedy became obsessed with marketing.

Welcome to the Magnetic Marketing Podcast with your host, Dan Kennedy.

Hey, this is Dave D. Welcome to the ultimate no BS referral machine where you're going to discover how to generate a constant flow of new business coming from your own customers, clients, or patients. I have with me marketing legend Dan Kennedy. Dan, here we are again.

Here we are again.

Here we are again with our nice cups. Sure, can you turn that out so the camera can Yeah.

Yeah. There you go.

Okay, fantastic. So we're going to be talking about referrals for the next 4 hours.

It's all the brain building you're going to see. Yes, that's exactly it.

And how you can generate referrals. I want to start off with a fundamental question right away, though, is what are the benefits of having referrals other than the obvious one that, you know, you're bringing in more business?

Yeah, well, so probably equally obvious, most people understand that By and large, the referred customer, client, patient is a quote, quote, better customer, client, or patient than one that has gotten cold off the street. Um, it's obviously not always true, but if you were going to play the odds, they have more knowns coming in, therefore they have less sales resistance. So, you know, it depends on your definition of better, but it starts there for people who are who are not particularly good at selling, who are uncomfortable at selling, who have a staff that's not particularly good at selling. The referred customer, client, patient is definitely better than one that comes in cold because of the amount of pre-selling that occurred.

Let me ask you this really quickly, though, because I think there's a misconception that you don't have to sell at all when a referral comes in.

Well, you know, a prospect is a prospect. A first-time buyer is a first-time buyer, yet unconverted to a true customer or client. And a customer or client is not yet converted to a champion. Doesn't really matter. Where they come from, you may be— again, you may need less skill, okay, in many situations in order to get the same result, okay? Right. If you're dealing with somebody who came by referral, you may be able to take some shortcuts in your selling process. But it is, to your point, it's very dangerous to make assumptions that you get to have unearned success, okay? Um, the second reason that they're so desirable is because of price and price elasticity. And so the referred customer or client or patient is less sales resistant. Therefore, they are automatically less price or fee resistant. So you buy yourself a little room to sell at premium prices. To present at least premium-priced options and have success with them, with the referred person versus the person who comes in cold, for a variety of reasons. The trust issue, the fact that they may shop less before they get to you. So the cold prospect, if we generate a cold prospect online, that person probably does not just see us. Ring. They look at 4 or 5 alternatives of us before they get to us. If you ask me, gee, I got this, whatever problem I got, I got gophers in my backyard. You know, do you know anybody that can make gophers go away? So yeah, my garden guy is the greatest garden guy. You may not go look at any other garden guy sites before my guy comes there. And if he doesn't sell you the $15,000 year-long no-go program immediately, you may still not go shop. Right? So it gives us a certain amount of price elasticity. And the reason that's timing critical now is because in many product and service categories, the pool of available customers is actually shrinking. So as our US, at least domestically, as our US middle class is shrinking, the percentage of people with discretionary spending for broad categories shrinks as well. So your low half of the middle class has basically gone over a 5-year period from spending 50% of their income on core necessities. House payment, utility, car insurance, you know, maybe 10 categories and having 50% left over to either save, invest, or spend, and most spend, to now spending 70% of their income on core necessities with only 30% left over. So as the pool of available customers and their available spend tightens, It is ever more important to maximize referrals to get the best possible customer you can in the door with the least price resistance. Last, there's sort of a hidden benefit to the referred, to the, to the referred customer. It means that your existing customer is referring, which makes it all the more difficult for him to leave you. So if I have convinced 4 buddies to buy season tickets to the Cleveland Browns, which—

that would be a sales job.

That would be a sales job. So it's unlikely. It's a very poor example. But, you know, will you— well, right now there's insane hysteria about Manziel. So, so let's say I get 4 buddies to buy season tickets. Very difficult for me next year not to renew my season tickets. Right. Right. If it's just me, I get to make that decision in a vacuum. So same thing happens with anything. If I get you to go to my dentist and I get my neighbor to go to my dentist, you have to go to your dentist. I got to keep going to my dentist. Right. So, so there's this hidden kind of closed loop to this.

Yeah. It's a psychology. Cialdini talks about that in Influence.

Yeah. So, so that, that's another reason to focus on it, to concentrate on it, to emphasize it.

So I think most business owners intuitively know that they should be doing this. And you just gave some reasons that they probably didn't, hadn't thought of. Then why don't they do it? Why don't they have a system in place? And as an add-on to that question, a lot of people will say, oh, I get my business through referral when they really don't. They really don't have a system or any way to track it.

No, to your second point, most business owners don't know where their business comes from, by the way. Right. You know, they are, they are, they are running on you know, the Obama hope strategy enunciated in the first campaign, which as we see is really not much of a strategy at all. So they just sort of are coming to work in the morning and hoping that somebody shows up and somebody sends a customer. And when somebody says, we do, we get a lot of referrals, or we do, you know, we're, we're really good at that. If you force them to examine their statistics, So total number of customers active this month, this quarter, this year against total number of referrals who came in this month, this quarter, this year. You know, it's in the single-digit percentages of productivity. I mean, it's pathetic.

Yeah, they're just happy about it. So they remember. Well, yeah, right.

So the reason that they don't— so first is they actually think we're doing great. It's all we could get, right? Secondly, there's a profound sense of entitlement in professionals, business owners, salespeople, et cetera, that— so their thinking loop is, I do a really good job at my core, you know, deliverable. So you come here, you get great dental care. You come here, you get a great meal. You come here, you get your hair cut exactly the way it should be cut every single time. So you get your toupee washed, whatever it is. So I do a really good job with the core deliverable. On top of that, I provide really good service. Therefore, I am entitled to referrals. Therefore, I will get referrals. Because I get what I'm entitled to in a just universe. Some people put in the third thing, which is I'm a really good guy. Or they put in the fourth thing, which is I do a really good job, I give really good service, I'm a really good guy, and I got 5 kids to feed. I have a need. Therefore, I will get referrals. Whereas everything I just described is like sort of the minimum ante to get to the table. It's not, you know, so there's that. There's this entitlement idea. Sometimes there's ego in the way, okay? That the act of asking for, of doing anything overtly to stimulate referrals is a shadow on my ego. So I won't do it. There's that reason. Some people, it's their staff is running their business. And when they go to try and do anything proactive to stimulate referrals or really pretty much proactive to do anything else, the staff now trots out their list, which the top of the list is always blackmail, which is, well, okay, we can do that, but then we're going to have to not do these 3 things we're already doing now, like turn on the lights. And, you know, so, well, okay, I give, right? So there's that. There's—

so that points to even bigger problems.

Oh, yeah. Well, it's symptomatic of it. But a lot of business owners are in perpetual hostage mode to their staff. In our world, there's the business owner goes to the seminar. Business owner comes back from seminar all jazzed up, but he's got 5 pages of ideas. He's got, you know, some CDs under his arm. But I mean, he's ready to go. And the staff has their little meeting. You know, we've seen this before, right? Pretty much if we just go into slow-mo and wait it out, it'll all wear off and things will go back to normal in about 2 weeks. And if it doesn't, then here's our scheme, here's our plan of how we handle this, which one is extortion, right? It's, well, okay, doc, we can start doing these concern calls at the end of every day, but that means we won't be able to bill insurance on time. Oh, you know, which is one step away from, you know, okay, we'll do that, but we're going to have to cut your baby's head off and eat it. And so which— so the staff gets in the way. There's outright laziness. And ultimately, because it's a lot easier just to throw money at advertising.

Sure.

It's a lot easier to do that than it is to think this all the way through and put a referral system in place. So there's a lot of sloth. And last, there's the only legitimate, you know, not really knowing what to do and not knowing how to do it.

Do you think there's some fear involved, though, too? I mean, some folks are just like—

No, I think that's the ego stuff. You think that's—

so you really think it's ego?

Yeah. Okay. I think it's about how I'll be perceived, and I'll be perceived negatively and needy or— well, yeah. So unsuccessful, in need, pushy, salesy. You know, there's a whole range of negative emotions, but they're all, you know, ego-driven. And ironically, if you actually do a good job, you do anything significant in people's lives, you deliver good service, then it's also actually an act of anti-empathy. Absolutely. I mean, it's not, you know, it's not really being helpful. And so you're really letting your ego get in the way, not just of your money, but actually of your service to community, you know, etc. But yeah, I think people are very much inhibited by what they think people will think of what it is that They do.

Now, going back to the first point they made, you often— I've heard you say in the past about marketing that people think, well, because I'm the best at what I do, right, I should just get customers, clients, or patients coming in. It's the entitlement. The same thing with the referrals. Yeah, it's the exact same thing.

Yeah. See, the entitlement list is because I've got a PhD in this and my competitor doesn't, because I've got a cooler office, because I do better work. Because I've been here longer, because there's a long list of reasons for entitlement. Business owners in reality often are not much different than the union mentality of a worker, which is the longer I'm at this, the easier it should get to get customers and the more money I should get. Right.

Right.

Well, I've been in this community for 37 years and he opened his office 3 days ago. And, you know, I'm entitled to— well, you know, you're right. And people don't say— they don't always enunciate it as entitlement. Sure. But that's exactly what it is.

Sure. Well, they're not even consciously aware of it, probably. Probably. So, so now we know why business owners don't ask for referrals. I guess the question is to the entrepreneur and the business owner watching this right now is, well, how come customers just don't automatically refer if I do a good job, if I'm a nice guy, if I have 5 kids? So on and so forth.

Well, so there's two big broad answers. Okay. One is almost nothing happens automatically except bad things. Almost nothing happens automatically except bad things. So a car's life extended to 100,000 miles, or I just saw, and I don't think they've made a commercial out of it like Subway did with Jared the Morons, but some woman was on the news. Her Toyota just turned its millionth mile, right? Millions. Yeah, she's got some kind of route. She drives 800 miles a week or something. Million miles on this, on this Toyota pickup. Well, that didn't happen automatically, right? She got the oil changed. She got the— she took care of this truck. Okay. The trucks collapse at planned obsolescence of 25,000 miles, right after the warranty, and everything starts going bad. That happens automatically. You don't have to do a thing, just drive it. Okay? So bad things happen automatically. Good things never do. Okay? The second big reason is it's not their job. Okay? The customer is not your salesperson. Right. Okay? They, their job is to give you money. Right. Right? They're, and they're fulfilling that. It's not their job. They got other stuff to do. They got, you know, so, so those are the two big reasons. The reason that a lot— that they don't refer automatically, that a lot of business owners don't understand, is that it's a much higher threshold of risk and pain to refer than it is to continue to patronize. People will even continue to patronize businesses that don't do a very good job. Because devil I know is better than the devil I don't. It's inconvenient, it's habit, it's, you know, I stopped to get coffee, just sit at a counter, read the newspaper, have some coffee on my way here this morning. And there's 3 people at the counter next to me and they're all talking about how bad this restaurant is. And it's clear they go there regularly. And it's all I can do not to say, you know, there's another way. But see, but what's their conversation about the place? It's all bad. So the restaurant's a great example because we have all had this experience. And that is there is a restaurant you go to regularly. It's probably a neighborhood place, not a chain. It's maybe not obscure, it's not, you know, and you and your wife love it, right? So you tell a friend about it and they go there and have imagined or actual, it matters not, right? They have a really bad experience. They can move away. You can go 7 years without seeing them, talking to them, having any contact with them except a Christmas card going back at more than once a year. You finally see them somewhere, the first thing out of their mouth will be to tell you about that shitty restaurant that you told them to go to. It was 7 years ago. So everybody's had that, right? It's— we got it, right? So, and that reminds us when we're about to make this mistake again, right? So the threshold for patronage and continued patronage is much lower than the threshold to refer. And then there's different, so there's referrals that only happen by request. So you move into the area and you say, where do you take your cleaning? So I'll answer that question, but I'm not running around telling people. About my dry cleaner.

Right.

You're not at a very close threshold. That threshold's even higher. Right. So the list of why this doesn't happen generally is number one, some customers have no circle of influence. They actually don't have the capability to refer. Right. The few friends they have think of them as an idiot. Okay. If they do refer a place, everybody knows not to go there. Not to go there. Okay. So, so that exists. Right. Right. But that's a very small percentage. Of people in general and of people you would have as a customer. Second, no motivation. They're just, they're not demotivated enough to leave, but they are not motivated in any way, shape, or form to refer. And you think their continued patronage is a sign of enthusiastic zeal for which you are entitled extra reward. So you project onto that something that, you know, really isn't there at all, right? So no motivation, no system, no mechanism, no process for doing it. So even if I am inclined, I really don't have a way, an effective way to tell you about my dentist, dry cleaner, CPA, whatever.

And I'm not going to create it.

That you can act on. And then last, no expressed gratitude. So the person who does actually overcome all those obstacles and actively bring you somebody, send you somebody and is then not recognized and rewarded? So most, nothing. Perhaps a casual, next time I see you, oh, by the way, Dave, thanks for telling so-and-so about me. An email, right? A stock off the shelf, clearly off the shelf, grudging, obligatory, you know, send out card thing, right? So that says to me, well, he really doesn't value this, right? Why should I go to great, you know, effort?

Sure.

You know, There's a story about this guy out fishing and he's in a boat fishing all day long and he hadn't caught anything 'cause he's no good at it. And he's about to give up when all of a sudden this frog jumps up out of the water and it throws a trout right in his boat. He says, well, this is the greatest thing I've ever seen. There's a frog sitting on the edge of the boat now. He says, this is the greatest thing. He looks around, he says, I don't have anything to reel, I'm out of bait. I don't have any way to reward you, Mr. Frog. All I got left is this flask of bourbon I've been drinking out of. Have some bourbon. And the frog glugs down some bourbon, jumps back in the water. He's back in about 3 minutes with 3 trout. So when you recognize and when you reward, you get more of the behavior that you recognized and reward. When you don't recognize and reward, generally, you don't get a repeat of the behavior.

I've had that where I've referred a bunch of people and haven't been— and then I actually stopped patronizing Well, it can go that bad. It can go that bad.

It can go that bad. You can actually, you know, resent it.

Right.

You know, at some point. And I can't think of one that I've actually reacted that way. I'm capable of reacting that way. Really? Yeah.

I think everyone would be shocked.

I just can't actually think of one. But you're absolutely right in that the person who does something above and beyond and extra for a business owner who they give money to in exchange for goods and services actually has an expectation, sure, of some sort of expressed gratitude, and they are disappointed when they don't get it. In general, you know, Edward Kramer, who invented the thank you gram, Kramer's line was, the most pitiful, pathetic, useless person on earth gets up every morning thinking that he deserves a thank you note today and a congratulations telegram from somebody for something he did. And he's bitterly disappointed at the end of the day that, you know, that that didn't happen.. So if you really did do something useful and beneficial for somebody, you expect, and you expect it promptly. I have one of the charities, I do some pro bono work, they have 56 excuses for why they do it. But so they send out thank you notes to new donors once a month. And I keep screaming, no, no, no, no, no, no, person gave you a donation on Monday, they're looking for their thank you on Tuesday. Tuesday, right. Right. And they are bitterly disappointed by Thursday. And if it arrives 3 weeks later, it either has no impact at all or it has the impact described. It's like, well, screw you. Right. Right. Yeah.

I know you just did this because, well, I get it.

You're letting them stack up and it's a form letter. Yeah. Right. So yeah.

Well, let's talk about the concept of a referral machine and how do you put a referral— what exactly is a referral machine?

The opposite of what everybody has, right? So if you don't know what I do, uh, so first of all, it is intentional, right? Which means that there's a process that happens the same way every time, like clockwork, that is triggered by the referral or the absence of referrals within a certain period of time. So it is very intentional. It is invested in. Nobody gets a free machine. So it takes some work to put it in place. Actually, I think in England they give poor people air conditioners. I do.

Do they give them air conditioners? So even UK viewers, let them know.

Are there free air conditioners? Or they give them air air conditioning chits or something, but air conditioning what? Chits that you can, you know, like that you can go to the store and use to get an air conditioner. Oh, okay. Or you can pay your pool and bill or something. Okay. All right. So, so anyway, there's investment and most people invest almost without thought in external marketing and are grudging and grumpy about investing anything in internal marketing. So every time this comes up, again, mostly because of the entitlement thinking, everybody thinks they should get their referrals for free. Everybody understands they gotta pay money to go get a new customer off the street, but they think that they ought to get the referrals free, right? Well, it doesn't work that way. So if you actually are gonna build a machine, you're gonna make an investment in building it and you're gonna make an investment in running it every single day, every single week, every single month. And the third is integration, meaning that— see, 3 I's. It's a literature. It's— I love how you said that.

You spent hours.

I love that. It's just— it's all these years. So integration, right? So there's 2. It's integrated into your business process. Okay. So there's a certain point in your new customer intake when there's a referral discussion. There's a certain point where referral tools are dispensed and so forth. It's integrated into your culture, both customer and staff. So everybody gets it. We really are a referral-driven practice. And I get that. I see it, I hear it, I smell it. So there's integration.

Got it. So what are the goals of a referral machine? And by the way, if you have questions, I will be taking some questions as well. So if you've got questions for Dan about referrals, make sure you ask those. So then what is— what, what, what are the goals of a referral to Sheik?

Well, the first is that it brings it to top of consciousness of your customers, clients, or patients, meaning that literally every day of their lives you are present. We're going to be talking about that omnipresence, which now at least gets you the conversationally stimulated referral. So I could easily have entered that conversation at the coffee shop counter. And instead of pointing out the fact that they're morons and your car actually could go to a different restaurant, right? I could more positively have entered the conversation and I could have said, let me tell you about a great restaurant I go to, right? That you'll really love. Okay, I didn't, because I'm not motivated enough about any of the ones I patronize to do that. And even if I was, I don't have a good method of, et cetera, et cetera. But if I did, I could have. So you at least get the conversationally, you know. So vacation comes up in conversation. I tell everybody I go to Disney. Right. Absolutely.

And we're going to be showing some really great Disney stuff.

Automatically, I start advocating Disney. You know, taking my kids to Universal. Oh yeah, let me tell you why you want to go to Disney. So, but Disney's on the top of my consciousness all the time. Second thing is ease of doing. So there has to be, your referral machine has to be built around ways and provide ways that it's very easy for me to refer people to you. Simplest, for example, is you can't have a website that can't be spelled and has 17 numbers in it. Then, right, you know, html dot dot forward slash bingo 6372, because it ain't happening, right?

So that us.

Yeah. So like dave.com, right? I see. I can remember that if I want to. Right. But did I want to refer somebody to you? Oh, thank you. Thanks for adding that little piece in there, by the way. Thanks for the plug. You're welcome.

And then thanks for taking the plug pass.

It was nice.

Yeah. He give it and he take it away. So ease of doing, status by doing, that there is some benefit to me. Can I?

Yeah. You use that. You use that one a lot. So your referral machine is subtle. This is not in the questions, but I want to talk about this because this is really cool. You have and you have everybody and their mother talking about you. So I belong to a mastermind group outside of GKIC and they're all talking about Dan Kennedy. Dan Kennedy is a— how the hell do you do that? You go to a seminar, they're talking even when you're not at— they're talking about Dan Kennedy. How does that work? Because that's referral. It's magic.

Thank you.

Well, that's all they did.

That's all I did. Look, to be fair, some of it is cumulative. Okay, so Disney has a multi-generation advantage. I have a multi-generation advantage. Yeah. So some of it is cumulative, but more of it is intent, investment, and integration. So there are a whole host of things that are done and that are invested in time and money in order to facilitate that and to continue that. And the details— I don't think this is the place. No, no, no. But, but it's important to understand that it is not accidental. And your observation is one many make. Brian Kurtz has said to me, you know, because he last few years he's been going to mastermind groups and hanging out with the internet geek squad and, you know, all that. And he says, everywhere I go, everybody's talking about you, right? And it's intentional. That's exactly, you know, what it is. Um, uh, so back to your— back to the question we were doing, status by doing, right? And so part of that sort of closing that loop is they feel, A, that there is, that they get points for being smart by association with me, my ideas, by quoting me. So their status for them in their world, okay, their status for them in my world. So it gets noticed and it gets recognized and it gets rewarded. So one of the places, so you hear it at seminars. The other place you will see it is in people's books. I actually tried to go get them all and make a list. I gave it up for the Wealth Academy, but On my shelves alone, there are at least 300 books by different people in which they have mentioned. Now there's probably 3,000 where they've stolen my stuff, but there's at least 300 that I have where here's Dan Kennedy and here's what Dan says about this, you know, and whatever. And I have them because the author sent it to me with Post-it noted, here you are in my book. Thank you for your influence. Yeah. Right. And so why did he do that? Because he wanted recognition, acknowledgement. He's looking for status in my world, which we then give him. So status by doing it. The last form of status is that you get status status in the eyes of the person you are referring, that you are doing a beneficial favor. When I tell you about somebody, the reaction I want from you is not a negative, oh crap, he's pitching me on his sale. I want, oh, thank you very much. So there's that. Reward and recognition, again, and measurement. So if you really want to be effective at this, you have to measure your effectiveness just like you would do with any— you have to measure your productivity, you have to measure the productivity of each customer, you have to be paying attention to who does it and who doesn't do it, and then do something about it.

Now you mentioned rewarders a number of times. What if I'm in an industry where by law I can reward referrals. How do you handle that?

You're leaping, by the way, but it's okay. So 9 out of 10 times, that's false. So I hear it all the time. And for the most part, it is people expanding the law to industry norms, to peer acceptable behavior. And using it as an excuse. So that's the first thing, right? The narrow definition rarely precludes any and all type of reward. But if it does, you are now narrowed to creating obligation and dispensing recognition. Now those two things are still very, very powerful. But there's a lot of, again, what will people think? You know, my— this is years ago— my chiropractor that I went to in Phoenix had in all the treatment rooms, we had quarterly promotion, referral promotion every quarter with now different prizes, gifts. So stuck up on the walls were the 5 things you could get this quarter for a referral. You know, there's a couple of them relevant. So the big, the pillow thing is stuck up there. The 3 bottles of Gallop, there's a picture of them stuck up there. But you know, there's 6 movie tickets stuck up there and there's an Arizona baseball cap stuck up. So I remember she had a meeting one time, she hosted a meeting for the Arizona chiropractic Association. And most of these guys were struck by her practice, bullied by her, but mostly. So they came to her office, right? And most were appalled, and one was vocally and loudly appalled, of course, at how unprofessional or unseemly. Yeah, I mean, it's the guys. Well, in my treatment briefs, I have reproductions of Monet paintings, gorgeous frames. And the answer to that guy is, yeah, but I had 36 referrals last month. So there's a lot of that that really is not law. So I hear it a lot and it's very rarely true.

Just simple things too. Like one of the things, and you don't do it, I don't think, maybe you do, directly for referrals, but anyone can do, is the simple thank you note. You say you answer all of your white mail, and I think that helps start referrals too. Absolutely. So tell— first of all, explain what white mail is and why, then what you do. So, because anyone— it doesn't matter what it— you could do this, you could use this.

Oh yeah. So part of a, part of a referral machine is its foundation that it sits on, right? So if you get a generator for your house but you don't put a concrete pad down for it, and you just stick it out there on the hill, it will not function very, very, very well. Right. So the foundation underneath the referral machine is at least as important as the machine. So the minimum parts of the foundation are you got to do good work, right? All that. Right. Then there's a relationship layer on top of that, and there's sort of semi-mechanized parts of that customer newsletter. So there's the responsiveness to people who communicate with you or do things for you. And so, and it feeds upon itself, by the way. So white mail, leaping to that, white mail is a direct marketing term for anything that comes in the mail that doesn't have a customer service issue in it or an order. Right? So these are complaints. These are questions. These are success reports. These are thank-yous. These are, I wanted to let you know, I told Billy Bob about you. You should be hearing from Billy Bob. This is what this stuff is. So depending upon the category of business you're in, you'll get more or less of it. It'll be more personal or less personal. The nature of what I do, a lot of it is lengthy and a lot of it is somewhat personal, but some of it is very, you know, run-of-the-mill stuff. I have always and continue to do so answered all the white mail. Now, that could be as simple as a Attaboy, Dan, fax this back to Bill. All right. Or it could be a 2-page letter answering something Bill has raised. Bill, hey, I wanted to tell you, I told so-and-so about you. You may be called. Now I'm going to reward. I'm going to recognize that whether that guy ever calls me. Sure. Or not. Right. Right. Because He went above and beyond. Sure. And even if he's ineffective at it, if he does it 8, 10, 12 times, one of them's going to come my way. If he only does it once and never does it again, well, the odds aren't in my favor. So I got to reward each step of compliant behavior. And we don't We just don't thank people enough. Sure. For the things they do for us over, above and beyond giving us money in exchange for goods and services. Okay.

So, so far we've learned about how to— the importance of referrals, the hidden benefits of referrals, why the business owner, the entrepreneur doesn't ask for referrals.

We—

you talked about why the customer just doesn't refer. And then even what to do if you're in a business that you can't reward referrals. So what we're going to do is we're going to take the question. You've got some questions for Dan about referrals. Now is the time to ask. All right. Whoa. Okay. So the first question is, what are specific rewards that a company should give customers for referring other customers?

The best you can get, the best that the value of the customer will permit. All right. So this really starts with math, not with creativity. Starts with math, not creativity. So the math questions are, what does it cost you to get a customer call off the street? Right. Again, most people don't know, but they need to know. Right. They need to at least estimate. They need to get to a— yeah, what we call maximum allowable number. What does it cost you to get a customer What will you spend to get a customer off the street? What's the most that you will spend? Right. That now gives us the maximum that you should be cheerfully willing to spend to get a referral.

So the same amount that you would spend.

Why not? You're getting a better customer. Right. Well, why don't you? You should actually be willing to spend more technically. Okay. Again, all the reasons we talked about earlier, they have an entitlement attitude. The referral is supposed to be free. The customer from the street is supposed to cost money. I don't have a budget for it. I'm already spending all my money on advertising. I mean, you know, but sensibly, you know, so I helped a client launch a franchise opportunity some years back, several years back, and we launched through a host to his customers via the franchisor going in speaking. And so the question comes up, what are we going to, what are you going to pay the host? Right. And so the cost to sell one cold, run ads, generate traffic, get them to a website, have the salesman talk to them, get them right, is about $6,000. $6,000. Yeah. Okay. So I said, we should, you know, if you want to be cool, offer the guy $5,000. Oh my God. That's a lot. But it's costing you $6,000. You're saving $1,000 in 6 months, right? Over a year, we're going to get a better quality person, right? We're going to get them in a day, right? Right. And you're screaming about $1,000 less. This makes no sense. I got it, right? But people don't think— don't think this through, right? So, so you got to do the math first, okay? Then you're not going to get You're not— that spend shouldn't all go to gifts because we need to run events and we're going to suddenly cost our news and all that other stuff. Right. That we're going to discuss. But so if you cut that number in half, maybe now you have a gift budget if you insist on having such a thing. Got to have a budget. Yeah. Well, that's a whole nother topic of conversation. So now you got to think about How do you apportion that? And then you may have A customers, B customers, C, you may spend differently even though all 3 of them gave you a referral, right? Because the quality of the referrals coming from this A customer may be a lot better than the quality of the customers coming from, say, so you may want to reward differently. There's no law that says you must democratize any of this process. In terms of gifting, the lowest common denominator of that whole activity is standardized stuff that everybody gets the same thing and they know everybody's getting the same thing. Now it's a lot better than nothing, but the logo mug, Everybody knows, everybody knows, you know, everybody knows, right? A lot of people are getting this mug, right? So at the opposite end of that spectrum is the, you know, so if you send, if you send out fruit baskets, everybody knows you got a staff person who is triggered by some event, which was the referral. Right. Who calls up fruitbasket. You know, and sends the same. And so at the opposite end of that spectrum is the referral gift personally picked that has relevance to the person you are giving it to. Now you have enough customer commonality in many cases that you can sort of semi standardize that, right? So if I'm in Barnes Noble and I see a really cool book about magic that I didn't see before, didn't know it exists, right? I immediately think, well, hey, this would be— David would like this. So I'll get that, put it in the closet for the next time I need to send Dave something, right? But there's at least 4 or 5 other clients I got. Right. Who this will work for. Right. But don't give them— but they'll think I picked it, right? Yeah. Yeah. For that. So I can at least do 5. Right. Right. And so you maneuver in between as to the size and the magnitude of the gift. It's like, you know, ball tickets or season tickets. Well, it depends.

Sure.

What's the value of that client and what's the value of 3 or 4? Are you know, referrals from that client.

Okay, good. So we have a question from Courtney Koleski. I, Courtney, I can never pronounce your name. This guy has been with me for ages. Can we get to Corey?

Okay, so this is the campaign.

This is the same thing. Well, this is the same thing. We're getting a ton of questions about people who cannot pay for a referral. So let's go back to that and then maybe we'll get to Courtney's question, or if not, we'll get into the next pile.

Join your teleprompter. Yeah, right. Here we are. Yeah.

So what about a business where there are things like HIPAA?

Does not prevent a patient from referring. No, of course not. HIPAA applies to the practitioner, not to the patient. Right. Okay, so it does not affect patients referring at all, right? Not at all. So again, you're getting in your own way with what you think about this. Exactly.

I mean, I refer my doctor all of the time.

I mean, it doesn't preclude testimonies. The patient is waiving HIPAA at the time that they sign a testimonial release and give you a testimonial to use. Right. If they are willing to give you a list of people to send the implant kit to, uh, with a cover note that Courtney knows you can't chew anything and thought you would really like this information. Right. Hey, Courtney has waived her privacy that she has implants when she gave you the list and okayed the Lyft letter. So people are just constantly— and so you— and I don't want to insult the customer. Okay.

But why not though? You often do during these live ones.

So here's how bad this thinking is. Okay. All right. If ever there should be a minimum wage job, it is coming up with the reasons why we can't do something. That we should pay people more who sweep the floor at McDonald's than we pay anybody who this is their occupation is there constantly coming up with the reasons that we can't do something. Your job as an entrepreneur is to go figure out how you could do it. So registered investment advisors are theoretically prohibited from using referrals. A few good ones and I have found 5 different legal ways that they can use our referrals. And they have passed The regulatory people looking at it and grumbling about it and all that, but it's clean. Now, so those 3 or 4 RIAs said, there's got to be a way, right? There's got to be a loophole. There has to be a circumvention of this barrier. And it exists in just about every business.

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