By Bill Pirtle
MPCT Publishing Co.
This article completes a three-part series on networking and referral marketing and offers more ideas to help merchant level salespeople (MLSs) use such groups for optimal return on investment (ROI) of time and money. (For the prior installments, please see The Green Sheet issues 11:07:01 and 11:07:02 published July 11 and 18, 2011, respectively.)
Some professionals started their own networking groups by adapting Business Networking International best practices to their specific business needs. BNI is a prominent networking and referral group founded by Dr. Ivan Misner.
For Local Business Network, based in Clarkston, Michigan, founder Chuck Gifford introduced a twice-per-month meeting schedule, and a member can regularly visit any chapter as long as the chapter does not already have one of his or her direct competitors in attendance.
There are nine ways to generate LBN referrals. LBN offers its members an intranet, training and specialty groups. One group is the Blue Marlin chapter, which targets midsize and larger companies. An Entertainment chapter includes a music group, caterer, D.J., limo service representative and photographer, among others.
GS Online's MLS Forum member STEVE NORELL posted his idea of a perfect networking group. It includes: "1. Members need to be [butt] kickers. No wimps allowed.2. Meet only every other week and there is no penalty if you don't show each time. 3. Meet on a Wednesday or Thursday at 5:30 p.m. at a venue where liquor is available, not just food. 4. No mandatory leads need to be supplied." He added that he doesn't need "super-duper" leads. "All I need is information, such as, 'I saw this or I heard that,'" he wrote. "I can take it from there. If you have a good mix of super-pro salespeople, you will get more from that than any BNI meeting."
ION Strategic Partners would be the perfect group for STEVE NORELL. This high-powered group is well-connected among the movers and shakers in the Detroit market and intends to expand to Chicago and other areas soon.
Each chapter is limited to 15 members and meets according to the chapter's own choice. My chapter meets on the first and third Wednesdays of every month at 5 p.m. for a social hour. At 6 p.m. there is a members-only dinner where business owners can discuss specific targets or struggles (every member signs a nondisclosure agreement).
What separates ION Strategic Partners from LBN and BNI is that there are no referral requirements. The founders believe it is not how many people you know, but how well you know them.
When I joined ION, the annual fee was being raised 70 percent, from $500 to $850, with dues of $30 per month (combined, a jump from $860 to $1,210). Guess what happened to the number of members? It doubled within six months and may triple by the end of the year. Prospects told the founders they saw no value at the lower price. At the higher price, they perceive more value (and more serious networking).
Regardless of which group you choose, if you do not try to help others or you do not know how to do so, you will fail. But if you buy into the philosophy and work hard to find the right partners, you will succeed. You also need to train your referral partners properly and list expectations. In the end, as Dr. Misner and Tim Green would both say: if the referral group does not work for you, it is your own fault.
I met Jared Sparr of Java Payment Systems at an ION event in December 2010, along with Andy Patros of Merchant Processing USA. We all do the same thing, but I still introduced them to friends in the group who could help them. As peers, we find value in discussing the things we would like to change in the industry.
Last year, Sparr was producing six applications a month. Now he is averaging about 35 and expects to be at 60 by year's end. In a recent interview, I asked him to give others in the industry some pointers to make referral marketing produce a good ROI.
"You were doing six to 10 applications a month last year," I said. "You now exceed 35 and expect to be at 60 by year end. What is your secret?"
Sparr replied, "I have always felt that I was good at marketing. My background was in marketing from Michigan State University. As a beginner in the credit card processing industry, an agent needs to work on two fronts. First is the one we all hate: cold calling. I did more on-the-phone work to save time and gas. This is the necessary evil until an agent can build relationships with referral partners.
"I started by doing direct mail to web developers and followed up with phone calls. I felt that web developers were a natural fit because they build websites with e-commerce and could refer the credit card processing to me. In return, I would make the web developer a subagent and cut him in for 50 percent of my commission."
After a year, Sparr had partnered with more than a dozen web developers. "I was getting maybe two to three accounts a year from each, and those were small startup businesses. In retrospect, maybe they weren't the best target. Commissions were maybe $6 to $10 a month per customer."
In 2010, Sparr met Tim Green and took his class at the Referral Institute. "It helped me to refine my relationships," Sparr said. "I evaluated each referral partner and changed the way I was spending my time. The first thing I changed was to work with other sales reps who sold business-to-business. I teamed up with an insurance agent, a payroll rep, a phone service salesperson and an alarm company rep.
"I tried to go out with one of them once every two weeks for joint sales calls where I introduced them in person to three of my accounts that could use their service, and they did the same for me. On average, I was able to sign up one new account from every outing ... even if I got a no, it didn't waste a lot of my time getting it. "As I refined my approach, I started to form a 'hub firm,' which is basically a group of vendors who call on the same industry, but who are not in direct competition with one another.
"I chose an industry that was profitable for me (there was no point in wasting my time on small accounts like when I worked with the web developers) and the idea was not to pass referrals within the group but to generate new business through collaboration."
Sparr believes this group generated industry-changing ideas. "One is a new payment software that we can offer clients, which will virtually eliminate [some of] their credit card processing fees," he said. "I am no longer selling; instead, customers are beating down my door to get it.
"In the evolution, it's a much more efficient use of my time. I now have an assistant that does my applications and installs/trains the clients. We are working on duplicating this software for different/similar industries and expect sales to grow exponentially."
I asked, "When referred in, do you negotiate on price, or does the potential customer accept your rate?"
Sparr replied, "With the web developers, I had a flat-rate pricing. Working with partners doing introductions, I was exposed to so many industry types that I did have to work on pricing and reduce my margins. With the new program, I set my pricing at IC [interchange] and 40 BP [basis points]. I have only had one customer question it to date. The benefit the customer gets with the partners I bring in far outweighs his cost."
I then asked what his average profit per sale is.
"With the target I am working on and the services we are offering, the gross profit is over $400 per month," Sparr replied. "Of course, I have a 50/50 split with the processor and split my commission with my partners, so my cut is around $100 per month [per merchant]."
My next question was, What referral partners work best with ISOs and MLSs?
"As a new agent, I would join a BNI or LBN group," he said. "They pre-screen members so you know you have good people to work with, and they offer outstanding training to help you learn how to pass referrals and train your referral partners. In a typical hard-contact networking group, you can meet several business-to-business referral partners and start doing joint sales calls right away.
"In the long term, pick an industry you are familiar with and enjoy pursuing. Focus in on that industry. Learn all you can. Link up with others who serve it, and form a hub firm to provide solutions to their problems so they will come running to your door." In speaking about the best referral partners for him, Sparr said, "One thing I learned from the Referral Institute was that the type of business was a great start, but the type of person was the deal-breaker or -maker.
You can have a perfect profession like a sales rep for salon products who has current relationships with over 200 salon owners and who can pre-qualify them for you and make personal introductions ... but if she is not of the right mindset, it will never work.
"So, what we concentrate on more is the target market and other vendors who specifically serve it. [We] interview them to see if they would make good referral partners. [We] only work with the ones who have the right mindset."
Next, I asked if Sparr had any final tips to give readers. "Once you have a year or two under your belt with a hard contact group and experience with credit card processing sales, you will know the product and have some confidence in yourself," he said. "Then I strongly suggest you take the leap of faith and work with Tim Green and the Referral Institute [of Michigan or Referral Institute in your state]. He can refine your sales process and make you more efficient. You can get more info on the Referral Institute at www.riofmi.com."
I believe Sparr's success with referral marketing speaks for itself. Besides Tim Green's book on referral marketing (mentioned in my prior articles) I highly recommend three additional books on networking and referrals:
I challenge you to apply these ideas. Most MLSs spend hours cold calling with a closing rate of no more than 2 percent; referral marketing done properly closes at 75 to 85 percent. If you want to work 60 hours a week to make a fraction of what successful referral marketers can earn in 30, it's up to you. But don't you owe it to yourself to at least investigate how it can work for you?
What you do today, determines your tomorrow.
Bill Pirtle is the President of MPCT Publishing Co. and author of Navigating Through the Risks of Credit Card Processing. He is also a merchant level salesperson for Clearent LLC, Electronic Payments Inc. and Electronic Merchant Systems Inc. Bill's website is www.creditcardprocessingbook.com, and his email address is email@example.com. He welcomes all connections on Facebook and LinkedIn.
Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.Prev Next