The Problem of a Great Reputation
This case study illustrates:
• When a company is not growing there is a reason why
• The limitation of growing through referrals
• Using the customer acquisition model as a diagnostic tool

You are the envy of many if your business enjoys a great reputation – but can you ever be too good?

See if you can decipher what is happening in this situation.

Over lunch the President and the Vice President of Sales of a very successful mid-sized company explained to me that the company was nicely profitable, but growth had stagnated. They were baffled by the fact that they have not been growing.

The Details
The company counts several well-respected Fortune 500 companies as long term customers. With a great deal of pride they point out that their new business is almost exclusively from referrals, and that they rarely lose business with existing customers. Proof, they said, that their customers liked them and their products.

They were not sure, but they had no reason to believe that the company was getting fewer referrals than in the past. Both were able to list a couple of recent inquiries that had come from referrals.

"...we have tried increasing our marketing budget with no luck..."

Okay, so they have good products and good customers then assuming they have not saturated the market, they have a marketing problem. “Exactly, but we have tried increasing our marketing budget with no luck. We are stuck, we really don’t know what to do next,” they responded.

When a Company is Not Growing there is a Reason Why
At this point I had an idea why they were not growing, but I needed to ask one more question to confirm my suspicions. Can you guess my question?

I asked how the company communicates differently between referred prospects and non-referred prospects.

After 45 minutes of discussion about literature, web site, sales presentations, and sales training, they finally conceded that there was no difference in the way the company communicates with referred prospects and non-referred prospects. The sales staff were not trained nor prepared to expect different conversations, nor were there any significant differences in any of their support materials.
There I had my answer. I knew why the company was not growing.

Using the Customer Acquisition Model as a Diagnostic Tool
I showed them a diagram of the Universal Buying Process and explained how a referred prospect moves through the process very differently than a prospect who knows little about the company. A referred prospect is favorably inclined toward the company before they begin investigating it. They believe the company is good at what it does, and they know some of the details about the company’s products and services.

It is unlikely the same conversation, presentation, or sequence of sales contacts given to a referred prospect will be effective with a non-referred prospect

On the other hand, prospects that approach a company without the benefit of a referral – from an Internet search – have minimal information about the company and they are inclined to initially distrust what the company says. Consumers are suspicious; we have all been oversold and lied to. Therefore it is unlikely the same conversation, presentation, or sequence of sales contacts given to a referred prospect will be effective with a non-referred prospect.

The Limitation of Growing Through Referrals
This company’s situation is not unusual. It is my experience that a business built on referrals will eventually stagnate for two reasons:

1. The number of referrals is limited by the number of past customers and only a percentage of those customers will advocate for them.

2. Companies with many referrals tend to depend on them and lose the ability to acquire non-referred customers. It is easier and more efficient to spend time with someone who is referred than it is with someone who is not referred, as a result sales activity tends to focus on referred prospects

Companies with many referrals tend to depend on them and lose the ability to acquire non-referred customers

Action
Based on this diagnosis the company retooled their sales conversations to include qualifying of prospects based on their familiarity with the company. Sales materials and presentations were modified or developed to educate and encourage non-referred prospects to move through a buying process with the company.

Initial Results
Within eight weeks the company closed three accounts that had been stuck for months. As the VP of sales said, “It seems so obvious now. We are much more focused on understanding who our prospects are before we assume that they want to buy from us. We just weren’t doing that before. I expect that we are now on the right track to improving our growth curve”

The Moral of this Story
Healthy companies know that they need to have a customer acquisition system for:
1. Repeat customers
2. Referred customers
3. Customers acquired by a targeted process

If your company is not meeting growth expectations there is a reason why. Give me a call I will help you diagnose and solve the problem.

Scott Jacobson
952-896-0062