$100M Leads Audiobook Part 8 – Customer Referrals Ep 593

Summary Notes


In the "100 Million Dollar Leads" podcast episode, Alex Hormozi delves into the power of leverage in business, particularly through referrals and lead getters. Hormozi emphasizes how referrals, when customers advocate for a product or service, can significantly amplify a business's reach without additional advertising costs. He introduces the concept of the "core four," which are strategies one can use to attract leads, but stresses that getting others to become lead getters is even more potent. Hormozi outlines scenarios demonstrating varying levels of work and lead acquisition, ultimately showing that the highest leverage—and thus the most efficient growth—comes from recruiting others who then recruit more lead getters. He also shares personal anecdotes, underscoring the importance of product quality and customer satisfaction in generating organic referrals. Hormozi concludes by offering practical tips for incentivizing referrals and creating a sustainable system for exponential business growth.

Summary Notes

Introduction to the Podcast Episode

  • The episode is a special collaboration by the host with themselves.
  • It is part of a series discussing different aspects of advertising and referrals.
  • The focus is on how to leverage others to advertise on one's behalf, which is crucial for viral marketing.

Today, I've got a special episode for you guys on our 100 million dollar leads podcast collab between myself and myself. This is the high leverage portion of the book. The first four of the core four.

This quote introduces the episode and hints at its focus on leveraging the power of referrals, which is a key strategy discussed in the book.

Importance of Referrals

  • Referrals are a viral method of advertising where others spread the word about one's products or services.
  • Sharing valuable content is encouraged, and the speaker shames the audience for not doing so if they found the content useful.
  • Reviews and personal recommendations are suggested as methods to spread the word.

And so if this stuff has proven valuable for you, and you've already gone through two, three, four, or five episodes of this and you've not chosen to share it, shame on you.

The quote underscores the importance of referrals and sharing valuable content with others as a form of advertising.

Leveraging Advertising

  • The concept of leverage in advertising is compared to Archimedes' principle of using a lever to move heavy objects.
  • Leverage in advertising is about reaching more people with less effort, using tools like the internet.
  • The goal is to use high-leverage activities to obtain more leads with less time invested.

Give me a lever long enough and a fulcrum on which to place it, and I shall move the world.

This quote from Archimedes is used to illustrate the concept of leverage and its application in advertising to amplify effort.

The Core Four and Lead Getters

  • The "core four" refers to foundational advertising activities one can perform.
  • Lead getters are people who help generate leads by advertising on one's behalf, saving time and increasing engagement.
  • There are four scenarios presented, each with varying levels of work, leads, and leverage, demonstrating the power of lead getters.

Only two people can let strangers know about the stuff you sell. You and other people, and there are more of them than you.

This quote emphasizes the significance of lead getters in expanding one's reach beyond personal efforts.

Detailed Outline of Lead Getters

  • Lead getters are differentiated from the "core four" as they are not direct actions but result from them.
  • The process of acquiring lead getters involves warm and cold reachouts, content posting, and paid ads.
  • The core four is used to initially attract lead getters, who then continue to generate leads independently.

The lead getters aren't part of the core four, because they're not things you do.

This quote clarifies that lead getters are not direct actions but outcomes of executing the core four strategies.

The Process of Getting Lead Getters

  • Lead getters can themselves recruit more lead getters, creating a compounding effect.
  • The transition from lead to lead getter involves engagement with the products or services and then promoting them to others.
  • The book details how to leverage customers, employees, agencies, and affiliates as lead getters for scaling a business.

So we do something once, then leadgetters can do it forever.

This quote captures the essence of the compounding leverage that comes from having lead getters who can recruit more lead getters.

Customer Referrals and Word of Mouth

  • The importance of customer referrals and word of mouth is highlighted through a personal anecdote.
  • Despite a temporary setback with advertising, the strong word of mouth from customers sustained the business.
  • An event demonstrated the overwhelming power of referrals, with most attendees having learned about the service through word of mouth.

Our customers were telling their friends.

This quote exemplifies the real-world impact and effectiveness of customer referrals as a form of advertising.

Power of Referrals

  • Referrals are a crucial mechanism for business growth, especially when customers become lead generators.
  • A referral is more valuable and costs less than acquiring customers through other advertising methods.
  • Referrals can exponentially scale a business, unlike linear growth from standard advertising.
  • The power of word-of-mouth advertising can lead to exponential growth, where customers refer more customers.
  • The referral growth equation (referrals in minus churn customers out) determines the compounding monthly growth rate.
  • Companies like PayPal and Dropbox have used referrals to grow into multi-billion-dollar businesses.
  • Referrals can lead to sustainable growth without additional advertising if they outnumber churned customers.

"I know you weren't there when Leila and I realized we were making 500,000 plus per week from word of mouth." "The first time I realized the power of referrals, it was by accident." "The best advertising is a happy customer." "An amazing product turns every customer into a lead getter." "Referrals are important because they grow your business in two ways. Number one, they're worth more." "LTGP referrals buy more expensive stuff and buy it more times." "Referrals in minus churn customers out."

These quotes highlight the speaker's personal experience with the significant financial success of referrals and reinforce the idea that satisfied customers are the best promoters of a business. Referrals are emphasized as a dual benefit: they increase value and reduce costs.

Referral Growth and Challenges

  • Referrals are more valuable than other leads because they often result in customers who make more expensive purchases and have a higher likelihood of repeat business.
  • Referrals are cheaper to acquire as they come at no cost when one customer refers another.
  • The exponential nature of referrals can lead to sustainable business growth.
  • Many businesses struggle to scale through word of mouth because they lose customers at a rate equal to or faster than they gain them.
  • Referral growth is based on the balance between new referrals and customer churn.
  • The lack of referrals can be attributed to products not meeting customer expectations or businesses failing to ask for referrals.

"But the best advertising is a happy customer." "Nothing scales like word of mouth." "Referrals in minus churn customers out." "So the visual is percentage of clients referred monthly minus percentage of clients churned monthly equals percentage monthly compounding growth." "If your product were exceptional, people would already know about it and you'd have more business than you could handle."

These quotes explain the concept of exponential growth through referrals and the importance of product quality in generating word-of-mouth advertising. The speaker also introduces the referral growth equation and discusses the common reasons why businesses fail to obtain referrals.

Building Goodwill and Value

  • Goodwill is the difference between the price of a product and the perceived value it provides to the customer.
  • To increase referrals, businesses must focus on increasing goodwill by either lowering prices or providing more value.
  • Goodwill leads to word-of-mouth promotion and referrals.
  • The speaker suggests focusing on providing more value rather than lowering prices to build goodwill and generate referrals.

"Price is what you charge. Value is what you get." "The difference between price and value is goodwill." "Lots of goodwill creates word of mouth." "You want lots of goodwill."

These quotes define goodwill and its impact on customer referrals. The speaker emphasizes the importance of providing value over simply lowering prices to create a positive word-of-mouth effect.

Strategies for Increasing Referrals

  • To get more referrals, businesses should target selling to better customers who are more likely to refer others.
  • Setting better expectations for the product can lead to a remarkable customer experience.
  • The speaker outlines six ways to get more referrals by giving more value: callouts, dream outcome, increased likelihood of achievement, decreased time delay, decreased effort and sacrifice, and a clear call to action.
  • Each of these strategies is aimed at enhancing the customer experience and increasing the likelihood of referrals.

"Six ways to get more referrals by giving more value." "Sell better customers." "Dream outcome. Set better expectations." "Increase perceived likelihood of achievement." "Decrease time delay." "Decrease effort and sacrifice." "Call to action."

These quotes summarize the six strategies the speaker recommends for increasing referrals by enhancing the value provided to customers. The strategies range from targeting the right customers to improving the product experience and making it easier for customers to achieve their goals.

Key Theme: Setting and Exceeding Customer Expectations

  • Setting customer expectations is crucial for exceeding them and generating goodwill, leading to referrals.
  • Lowering promises strategically can help maximize customer acquisition and satisfaction.
  • The action step includes gradually reducing the promises made to customers until it negatively impacts close rates.

Referrals customer expectations are fickle. That's why we set expectations for them. And if we set those expectations, we can exceed them.

This quote emphasizes the importance of managing customer expectations to ensure they can be exceeded, which is a strategy for increasing customer satisfaction and referrals.

Action step slowly lower the promises you make when making offers. Keep lowering them until your close rates lower. At that point, stop.

This quote provides a practical action step, suggesting that businesses should carefully manage the promises they make to avoid overpromising and underdelivering, which is key to maintaining customer trust and satisfaction.

Key Theme: Increasing Perceived Likelihood of Achievement

  • Understanding and replicating the behaviors of the most successful customers can lead to improved results for all customers.
  • A detailed process is outlined, involving surveying, interviewing, and enforcing successful actions among new customers.
  • The process is exemplified by the case of gym launch, where customer activities were tracked and analyzed to triple LTGP for those who quickly ran ads and made sales.

Figure out what they do to get the most value, and you can help other customers do the same.

This quote captures the essence of identifying the actions of the most successful customers to help others replicate their success, which can lead to increased customer satisfaction and referrals.

Once we realized this, we focused on getting everyone to launch ads and make sales in the first seven days.

The quote describes a specific strategy that was employed after analyzing customer behavior, which significantly improved outcomes for average customers, demonstrating the effectiveness of the approach.

Key Theme: Decrease Time Delay for Customer Wins

  • Wins are defined as positive customer experiences, and delivering them faster can increase customer satisfaction and trust.
  • Multiple strategies are provided for creating faster wins, including breaking down outcomes, regular updates, and setting realistic timelines.
  • The concept of "BAMFAM" (book a meeting from a meeting) is introduced to ensure customers are never left uncertain about the next steps.

Faster wins increase the perception of speed, increase the likelihood they'll stick, and increase how much they trust you.

This quote highlights the benefits of providing customers with quick wins, which can positively influence their perception, loyalty, and trust in the business.

I add 50% to my timeline, so I always deliver early. That makes on time for me, early for them.

The quote suggests a practical tip for managing customer expectations regarding timelines, where adding a buffer ensures that delivery is perceived as early, enhancing customer satisfaction.

Key Theme: Decrease Effort and Sacrifice for Customers

  • Continually improving the product to reduce customer effort and sacrifice is key to increasing goodwill and referrals.
  • A process for product improvement is outlined, including using customer feedback and iterative testing.
  • The action step suggests making product improvement a recurring monthly process.

If the customer does less stuff they hate to benefit from your product, you've made it better.

This quote underscores the principle that reducing the negative aspects of using a product leads to a better customer experience and increases the likelihood of referrals.

A product that takes less effort and has fewer sacrifices means more goodwill and more goodwill. You guessed it, means more referrals.

The quote connects the dots between product improvement, increased customer goodwill, and the resulting increase in customer referrals.

Key Theme: Call to Action for Repeat Purchases

  • Encouraging customers to make additional purchases is essential for maintaining goodwill and extending customer lifetime value.
  • The importance of a compelling back-end offer is stressed to prevent customer drop-off and lost opportunities for referrals.
  • The action step involves treating every sale as if it were the first and ensuring subsequent offers are even more compelling.

Treat every customer like it's the first time you sold them.

This quote advises businesses to maintain a high level of enthusiasm and value in each interaction with customers to encourage repeat purchases and referrals.

More things to buy means more opportunities to add even more value. More value means more goodwill. And more goodwill, you guessed it. Means more referrals.

The quote explains that a broader range of products offers more opportunities to deliver value, which translates into increased customer goodwill and a higher likelihood of referrals.

Key Theme: The Importance of Asking for Referrals

  • Many businesses miss out on referrals simply because they do not ask for them.
  • Referral programs should be treated like offers, highlighting the value to the customer for referring friends.
  • Two case studies, Dropbox and PayPal, demonstrate the effectiveness of incentivized referral programs.
  • Seven effective strategies for asking for referrals are outlined, emphasizing the importance of incentives and clear communication.

Your customers, like any audience, can only know what to do if you tell them.

This quote emphasizes the necessity of explicitly asking customers for referrals, as they are not likely to take this action on their own without prompt.

The referrals come when you show the value the customer gets when they refer their friends.

The quote highlights that successful referral programs are those that clearly communicate the benefits that the referring customer will receive, incentivizing them to participate.

Customer Acquisition Cost (CAC) and Referral Incentives

  • The cost to acquire a customer, known as CAC, can be paid to an existing customer for referring a new one.
  • Incentives for referrals can be immediate and substantial, such as giving $200 to a customer or a discount to the friend they refer.
  • Referral strategies can be particularly effective with spouses, offering household discounts and mutual benefits.

Pay your average cost to acquire a customer, aka Cac, to the referral or the friend.

This quote emphasizes the strategy of redirecting the CAC to reward existing customers for referrals, which can be more cost-effective than traditional marketing.

Two-Sided Referral Benefits

  • Referral programs can benefit both the referrer and the new customer by splitting the incentive between them.
  • This approach was used by companies like Dropbox and PayPal to encourage customer referrals.
  • Offering a cash reward to the referrer and a discount to the new customer can boost referral rates.

We pay our CAC to both parties. Half goes to the referral in credit or cash, and half goes to the friend in credit.

This quote explains the two-sided referral benefit, where both parties receive a share of the CAC, enhancing the appeal of the referral program.

Timing of Referral Requests

  • Asking for referrals immediately upon purchase can significantly increase referral rates.
  • Including referral requests on sales contracts or checkout pages can leverage the customer's buying momentum.
  • Directly asking customers for names and contact information of friends can lead to immediate introductions and more effective referrals.

Ask for a referral right when they buy on the sales contracts or checkout page.

The relevance of this quote is in the timing of the referral request, which is critical for capitalizing on the customer's positive purchasing experience.

Referrals as a Negotiation Tool

  • Referrals can be used as leverage in price negotiations, offering discounts in exchange for customer referrals.
  • Different pricing can be justified by varying terms of sale, such as requiring referrals for a discount.
  • This strategy can turn price objections into opportunities for gaining new referrals.

If someone wants to pay $400 and your price is $500, you can give them a discount in exchange for an introduction to three friends.

This quote outlines how referrals can be integrated into the sales process as a negotiation tactic, offering discounts for customer-led introductions.

Referral Events

  • Organizing time-limited referral events can create a sense of urgency and competition among customers.
  • Events can be themed, such as "bring a friend" promotions or "spouse challenges," to encourage participation.
  • The success of referral events can be bolstered by highlighting the benefits of collective participation.

Referral events typically last from one to four weeks.

The quote indicates the typical duration of referral events, which are designed to create a focused period of increased referral activity.

Ongoing Referral Programs

  • Continuously promoting the benefits of referrals can lead to sustained increases in customer signups.
  • Incorporating referral messaging into all forms of communication can normalize the behavior among customers.
  • A consistent referral program can be a key component of a company's marketing strategy.

After a buddy did this, he saw a 33% boost in total signups.

This quote demonstrates the potential impact of an ongoing referral program on overall customer acquisition.

Unlockable Referral Bonuses

  • Offering bonuses for referrals and testimonials can incentivize customers without direct cash payouts.
  • Bonuses can range from VIP access to merchandise or additional services, appealing to customers' desire for exclusivity.
  • Creative and valuable bonuses can drive referrals and enhance customer loyalty.

Unlockable referral bonuses create bonuses for people who one refer and two leave a testimonial.

The quote highlights the strategy of using unlockable bonuses as a non-cash incentive to encourage customer referrals and testimonials.

Referral Promotion Strategies

  • Combining various referral strategies can create compelling promotions that drive customer action.
  • Limited-time offers, such as expiring gift cards, can create urgency and increase the perceived value of the referral.
  • Personalizing incentives, like writing the friend's name on a gift card, can enhance the referral's effectiveness.

Give everyone a gift card for one third the cost of their program. Tell them they can give it to a friend of theirs if they sign up with them.

This quote details a specific referral promotion tactic, using gift cards as an incentive to encourage customers to refer their friends.

Matching Referral Incentives with Products

  • Referral incentives should align with the company's core product or service to attract the right audience.
  • The congruence between the incentive and the product ensures that referrals are likely to convert into paying customers.
  • Creativity in matching incentives can enhance the appeal of the referral program.

Match the thing you give with the thing you sell.

The quote emphasizes the importance of aligning referral incentives with the company's offerings to attract genuine interest from potential customers.

Conclusion: Referral Philosophy

  • Referrals are not just a marketing tactic but a fundamental way of doing business.
  • Customers refer friends when they believe the experience with the product or service will be positive.
  • Building goodwill and delivering on promises lowers the risk for the customer and encourages referrals.

Referrals aren't an advertising method you can do. It's a way of doing business, and it starts with you.

This quote encapsulates the philosophy that referrals are an integral part of a business model, rooted in trust and customer satisfaction.

Action Items and Future Perspectives

  • Businesses should track referral and churn rates to establish baselines for improvement.
  • Implementing strategies to build goodwill should precede asking for referrals.
  • The discussion teases future content on scaling teams and leveraging employees for growth.

Implement the six giving value steps to build goodwill. Then capitalize on that goodwill using one or more of the seven ways to ask for referrals.

This quote advises businesses to focus on value creation before leveraging goodwill to ask for referrals, suggesting a sequential approach to customer relationship management.

Speaker B's Call to Action

  • Speaker B encourages listeners to refer friends to the podcast or book.
  • The goal is to spread the content's value and potentially invest in listener businesses.

I feel like it wouldn't be complete without me asking you to refer a friend to this podcast or the book.

Speaker B's quote is a direct application of the referral strategies discussed, asking listeners to engage in the act of referring, thereby demonstrating the concept in practice.

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