Referrals or advertising -- or both?

You might think that I would enthusiastically agree with Michael Stone's most recent blog posting. After all, 95 per cent of the business/revenue here is from advertising:

We keep hearing from contractors who say they “Work Only By Referral”. They believe this elevates them and their company above everyone else in this business. They are so good that everyone loves them and wouldn’t consider any other company for the job.

Here is the bottom line. If you can eat your ego, then continue to hold the myth that you can work by referral. On the other hand, if you want to feed your family, then maybe it is time to start advertising and promoting your company the way the guys that are as busy as they want to be are doing.

That’s right, there actually are companies right now who have as much or more work than they want. Every one of them has had a strong advertising program in place for at least a year or longer.

As Zig Ziegler says, “You can feed your ego or you can feed your family. You can’t feed them both.”

Michael Stone's advice is correct, as far as it goes. But he misses a key point: Your energy on focusing for referral based marketing will, in general, pay off far more than any advertising adventure. In other words, strategically developing your referral system, rather than leaving it to chance, should be your first marketing priority -- and only after you have developed that level of sophistication, should you spend resources on advertising.

But, you say, isn't that rather strange advice from someone selling advertising for a living? Not really, because in our case, about 75 per cent of the advertising we sell supports the referral and relationship process rather than leads it. (Of course, the remaining 25 per cent is also important -- advertising to maintain brand position/reputation and establish your business continuity is certainly a valid expense, especially for longer-established and larger businesses.)

Say, for example, you are a residential contractor/sub trade. What is your better investment? A $1,000 'buy' in the phone directory Yellow Pages, or a membership in your local Home Builders' Association, where you could network and build on existing referrals and relationships to expand your community/influence. (Or, even better, perhaps a membership in your local community association, where you can reach retail clients and neighborhood leaders directly.)

Would $1,000 for newspaper fliers do better than a carefully crafted newsletter/e-letter campaign to your satisfied previous clients, coupled with some personal calls and follow-up communications, to encourage referrals?

I don't think contractors who "work only by referral" are in some ego trip. They simply do a great job, have an excellent reputation (brand) and enjoy the satisfaction of winning business from satisfied clients. Your marketing should enhance and expand this capacity -- and you will do fine, if you do, even in the hardest economic conditions. Of course, you need to co-ordinate this process, and plan it, and measure your results -- and here, I'm sure, Michael Stone is right on the mark.