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The Importance of Knowing Your Products and Services

When your referral marketing plan is working well, prospective customers buy from you the first time because they have been referred by your sources. They may continue to buy from you because they trust you and develop a good relationship with you.  But whatever the reasons they come and whatever the reasons they stay, they are your customers primarily because they need your products and services.

A clear idea of your range of products and services is something your sources need to communicate to prospects. For each product or service you plan to market during your referral marketing campaign, you must be able to articulate for your sources the answers to the following questions:

  • What is the purpose of your product or service?–What needs does it satisfy?
  • How would you describe it?–What are its shape, size, functions, key features, principal activities, benefits?
  • How is your product or service delivered to the customer?
  • How much does it cost and under what conditions?

There are other questions concerning your products or services that you should answer for your own strategic purposes. Is your product becoming obsolete?  Is there a newer or better way to provide the same service?  What are the social and environmental effects of your product or service?  Will economic or regulatory trends force you to change your products or services or the conditions under which you provide them?  In the long term, will you be satisfied to continue to offer these products or services?

Knowing the answers to the questions above will help you clearly communicate your products and/or services to your referral sources.  This is extremely important because only when you’re able to do this will your referral sources be able to effectively refer business to you.

What Is Your Company’s Competitive Position?

To find out how you stack up against your competition, take a little time to analyze your competitive status. This exercise will help you understand and emphasize your unique selling position.  How do you differ, and how can you position yourself for the best competitive advantage?

There’s no single formula for conducting a competitive analysis; it’s mostly just good business sense.  Try to stay aware of what your competition is doing and how your business stacks up against it.  For example:

  • Are your prices and costs competitive? — Do customers who compare costs come back to you?
  • Do you compete effectively in terms of product or service quality?
  • Are you seen as the vendor of choice? — Why do people seek you out?
  • Are you growing, losing ground or just holding onto your market share? — Are you waiting to see what will happen and hoping to react in time?

Staying competitive also implies being aware of trends and reacting to changes faster than your competitors. How will changes in technology and society affect the competition? Are your products or services more advanced than those of your competition? Do your competitors have the jump on you with online marketing/social media?

Understanding the driving forces in your industry — growth rates, shifts in buyer demographics, product and marketing innovations, the entry or exit of other competitors, changes in cost or efficiency and so forth — will make you a top competitor.

I highly encourage you to take some time this week to sit down and ask yourself the questions listed above. Once you’ve done this, come back and leave a comment explaining what you learned about your company’s competitive position.

Finding Your Starting Point

If you have little or no experience with referral marketing, it would be a mistake to jump into action without preparing yourself. Central to the referral-marketing process is getting people to send you referrals. To do so, they must know exactly what you do — what product or service you provide or make, how and under what conditions you provide it, how well you do it and in what ways you are better at what you do than your competitors. You have to communicate this information to your sources. And to communicate effectively, you must know the same things.

It may seem a no-brainer; don’t we all know what we do for a living? Yes, of course, most of us do. But can you communicate it clearly and simply to your potential sources? When you try to do so, you may find that you’re not quite as clear on the facts as you thought. And if you can’t tell your potential sources what you do or what you sell, how can they send you good referrals?

Before you map out where you’re going to take your business with your referral-marketing campaign, pause and get a clear picture of where your business stands today. Try to answer, in simple terms, the following questions:

  • Why are you in business?
  • What do you sell?
  • Who are your customers?
  • How well do you compete?

Answering these questions for yourself will help you tell others what your business is about. This will make you more effective at implementing your comprehensive and systematic referral system.

How Soon Should You Expect Profitability from a Relationship?

Over the past couple of weeks, I’ve written a few blogs on the VCP Process® of networking and, since I’ve already covered visibility and credibility in detail, today I’m going to tell you what you need to know about profitability, the third and final phase of the VCP Process.

The mature relationship, whether business or personal, can be defined in terms of its profitability. Is it mutually rewarding? Do both partners gain satisfaction from it? Does it maintain itself by providing benefits to both? If it doesn’t profit both partners to keep it going, it probably will not endure.

The best piece of advice I can give you in regard to when to expect to get to profitability is to be patient. The time it takes to pass through the phases of a developing relationship is highly variable.  It’s not always easy to determine when profitability has been achieved: A week? A month? A year? In a time of urgent need, you and a client may proceed from visibility to credibility overnight. The same is true of profitability; it may happen quickly or it may take years, but most likely it will be somewhere in between. It will depend on the frequency and quality of the contacts and especially on the desire of both parties to move the relationship forward.

Shortsightedness can impede the full development of the relationship. Perhaps you’re a customer who has done business with a certain vendor off and on for several months, but to save pennies you keep hunting around for the lowest price, ignoring the value this vendor provides in terms of service, hours, goodwill and reliability. Are you really profiting from the relationship, or are you stunting its growth?  Perhaps if you gave this vendor all your business, you could work out terms that would benefit both of you.  Profitability is not found by bargain hunting. It must be cultivated. And, like farming, it takes patience.

Visibility and credibility are important in the relationship-building stages of the referral-marketing process.  But when you have established an effective referral generation system, you will have entered the profitability stage of your relationships with many people–the people who send you referrals and the customers you recruit as a result. It’s an essential part of successful relationship marketing and networking.

The First Phase of the VCP Process–Visibility

Last week I wrote a blog explaining the VCP Process, which is a huge part of the foundation of networking. Because this process is so crucial to effective networking, I promised to write a blog entry for each of the three phases (visibility, credibility and profitability), and today I’m going to talk about why it all starts with visibility.

The first phase of growing a relationship is visibility: You and another individual become aware of each other.  In business terms, a potential source of referrals or a potential customer becomes aware of the nature of your business–perhaps because of your public relations and advertising efforts, because of your social media presence or perhaps through someone you both know. This person may observe you in the act of conducting business or relating with the people around you. The two of you begin to communicate and establish links–perhaps a question or two over the phone or via e-mail messages about product availability. You may become personally acquainted and work on a first-name basis, but you know little about each other. A combination of many such relationships forms a casual-contact network, a sort of de facto association based on one or more shared interests.

The visibility phase is important because it creates recognition and awareness.  The greater your visibility, the more widely known you will be, the more information you will obtain about others, the more opportunities you will be exposed to, and the greater will be your chances of being accepted by other individuals or groups as someone to whom they can or should refer business.  Visibility must be actively maintained and developed; without it, you cannot move on to the next level, credibility.

I’ll talk more about credibility next week, but it’s important to understand that visibility brings the opportunity to build credibility, and credibility is what will get you to profitability, where you’ll actually benefit from your efforts. So many times people try to jump straight from visibility to profitability, and that’s not real networking; it’s just an obvious ploy to get something from your new contacts. That’s nothing more than a bad attempt at direct selling and a big waste of time.

So, how do you go about creating more visibility for your business? What are some strategies that have really worked out well for you?  I’d love to hear your comments.

What is the VCP Process?

The key concept in referral marketing is relationships. The system of information, support and referrals that you assemble will be based on your relationships with other individuals and businesses. Referral marketing works because these relationships work both ways: They benefit both parties.

A referral marketing plan involves relationships of many different kinds. Among the most important are those with your referral sources, with prospects these referral sources bring you and with customers you recruit from the prospects. These relationships don’t just spring up full-grown; they must be nurtured. As they grow, fed by mutual trust and shared benefits, they evolve through three phases: visibility, credibility and profitability. We call this evolution the VCP Process(R)

Any successful relationship, whether a personal or a business relationship, is unique to every pair of individuals, and it evolves over time. It starts out tentative, fragile, full of unfulfilled possibilities and expectations. It grows stronger with experience and familiarity. It matures into trust and commitment. The VCP Process describes the process of creation, growth and strengthening of business, professional and personal relationships; it is useful for assessing the status of a relationship and where it fits in the process of getting referrals. It can be used to nurture the growth of an effective and rewarding relationship with a prospective friend, client, co-worker, vendor, colleague or family member. When fully realized, such a relationship is mutually rewarding and, thus, self-perpetuating.

This simple concept has made a bigger difference in more people’s networking efforts than any other single idea I’ve discussed. For this reason, I’m going to devote the next few blogs I write to explaining each step of the VCP Process individually. Come back on Monday to learn why it all starts with visibility . . . I guarantee you you’ll want to read this one!

Become a Customer to Become a High Priority

One of the friendliest and most natural ways to make contact with a referral source is to buy her products or services, whether in large or small dollar amounts.  It’s important to note that the purchase doesn’t necessarily have to be from her primary line of business–perhaps a ticket to a fundraiser, a used car, a computer, even a box of Girl Scout cookies from her daughter.

By purchasing something from your network member/referral source, you become one of her customers. As a customer, you are high on her priority list; she will be more inclined to do business with you and give you information, support and referrals.  This approach also increases your source’s interest in getting to know you and staying in touch.

Tips for purchasing from your network:

  • Analyze how you are spending your money now.
  • Decide how much you want to spend.
  • Test your relationship with the people you buy from now. Do they know you? Do you benefit from doing business with them?
  • Identify the products and services your sources offer that you want or need–or the purchase of which might benefit your business in the long run.
  • Are you buying products and services from people and organizations that see you as an individual? Do the people you buy from know your name and think of you as their customer? There’s a big difference between being a customer of Sears and being a customer of Joe’s Shoe Store.
  • Use your purchasing power in a way that gives you more benefits and builds relationships.  Buy at least half of your products and services from people you know; however, don’t do it in a way that makes them feel obligated to buy things from you.

Why Word of Mouth?

One of the most important things I’ve learned over the years is that the secret to success–without a little bit of hard work–is still a secret!  Word of mouth marketing is a solid foundation for building any successful enterprise and, like anything else that brings great rewards, it takes time, effort, and dedication (a.k.a.–a “little bit of hard work” ;-)).

Developing a word-of-mouth marketing program is an effective, potentially lucrative way of generating more business.  The reason I said it takes “a little bit” of hard work is because it’s not even hard work when you consider the alternatives:

1.  Increase your advertising budget

2.  Develop an effective public-relations campaign

3.  Pick up the phone and start cold-calling

The first two alternatives can be ridiculously expensive and the third is time-consuming and frustrating.  However, a structured word-of-mouth marketing program is also personally empowering: it’s one of the few things that you, or someone who works for you, can do (other than cold-calling) that directly affects your success.  Why wait for people to walk in your door?  Why sit idly by, hoping that your existing clients or customers will refer you to others?  With a structured word-of-mouth program you don’t have to wait for the results of your last PR campaign to kick in.

A word-of-mouth program will give you control and allow you to take ownership for the business development of your company.  Such a program has worked for thousands of people in all types of businesses and will work for you as well.

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