No B.S. Guide to Maximum Referrals and Customer Retention. Dan S. Kennedy

that will produce BIG Growth, preferably overnight. This is the same sort of pack thinking that keeps hordes of overweight people trying one new pill or one new “trick” diet after another after another after another, in place of organizing a sensible eating plan and a basic exercise regimen and sticking to it.

      Of course, there’s nothing wrong with a single, big, epic, magically transformative breakthrough, if you can find or invent one. But most success and wealth in business, especially in established businesses, doesn’t happen that way. Profit growth tends to come from small things combined or multiplied. What McDonalds’ founder Ray Kroc called “grinding it out.”

      Here, I’m going to demonstrate how an apparently small number—5%—can have a big impact.

      My first customer ever at The Newsletter Pro is still with me today. I want to use him as a case study. He is a dentist in a suburb of Boise, Idaho. Don’t allow his profession or location to send you down the path of thinking “my business is different” and this case study doesn’t apply to you. That’s how broke business owners think. Those specifics do not matter. What I want you to focus on are the numbers.

      Dr. Taylor opened his practice two years before he and I met. His practice was located in the southern section of a small but very affluent part of town. Less than a mile away was West Boise, and directly across from his office was the northernmost town of Meridian, Idaho, one of the fastest-growing cities in America. To say his location was prime real estate for the area is a bit of an understatement.

      Dr. Taylor’s office building was massive. It had room for at least a dozen operatories where they could clean patients’ teeth and provide other services. Only six operatories had been equipped at the time; three were ones Dr. Taylor rented to another dentist whose primary location was on the opposite side of the county. In other words, he had enormous unused capacity. Or less optimistically said, he had a vastly overbuilt facility. I’ll credit him with vision and ambition.

      When I met Dr. Taylor, it was obvious he was a highly skilled dentist with a good chairside manner and no ego, which is not always the case when you are dealing with doctors of any kind. His practice was very small personnel-wise. At the time, he was employing one full-time front desk person and one part-time hygienist. He was his own assistant, and when the hygienist was not at the practice, Dr. Taylor did all the hygiene work himself.

      As I previously mentioned, Dr. Taylor had a good location and wanted to grow, so we started working with him and put two campaigns into place simultaneously. The first was a multistep direct-mail campaign designed to get new patients in the front door. The second was a monthly print newsletter meant to decrease the number of patients Dr. Taylor was losing annually as well as to increase referrals. Regarding the first campaign, hey, more new patients were needed and would be exciting. But I knew that there was more opportunity than met the eye from growth by retention and referrals, rather than by costlier and more difficult new patient marketing to strangers. This is the opposite way from the pack. Most people assume they’ll keep customers just by providing good products and services, and get their share of referrals automatically, so they hunt for new customers in the wild.

       RESOURCE

       If you want to check to get examples of the multistep direct-mail campaigns and newsletters used by Dr. Taylor, just head to www.nobsreferralbook.com. This is a free website I have set up to provide you with additional free resources.

      At the time, Dr. Taylor was losing about 17% of his patients per year. That number is very average. Most businesses we work with, prior to starting with us, tend lose between 15% and 33% of their customers annually. For Dr. Taylor, our goal was to simply decrease his 17% loss to 12%. In a professional practice, 12% is about as low as you can get because regardless of how great your service or how strong your relationship with patients, people still move away and still die.

      Considering how small Dr. Taylor’s practice was at first, it may surprise you that he invested any money in patient retention at all. To be honest, many less sophisticated dentists skip patient retention and end up dumping 100% of their marketing money into new patients, but Dr. Taylor knew that his current patients were the ones keeping the lights on and were the ones feeding his kids. They were the lifeblood of his business and were therefore not to be treated as second priority.

      So, we began with the 17% fact—we developed the 5% solution (see Figure 3.1).

FIGURE 3.1

5% Matters—More Than Most Think

      In this chapter I want to take you through a case study of Dr. Taylor’s business’s numbers (see Figure 3.2). This chapter is filled with math and numbers, which I know is not a strong area for everyone, but stick with me here, these numbers can literally change your life.

      Let’s look at Dr. Taylor’s numbers today:

       • Dr. Taylor has 3,800 active patients.

       • The average cost to acquire a new patient is $213.00.

       • The revenue for each new patient is broken down over the first three years they do business with the practice. Most patients stay much longer than three years, but for this case study, we stopped at year three for average patient revenue.

       • Average first-year revenue: $893.00

       • Average second-year revenue: $1,215.00

       • Average third-year revenue: $1,596.00

       Now, before I go on, I want to point out that in some dental practices, first-year revenue can be skewed on the high side when compared to similar businesses because of the patient who comes in and needs thousands and thousands of dollars in dentistry to fix years of neglect.

FIGURE 3.2

      As you can see from the numbers, the longer a patient is with this practice, the more money they spend on average. This trend of longevity continues with the average patient at this practice being worth $1,900.00 per year in year five. See Figure 3.3 on page 16.

      At a 17% attrition rate, Dr. Taylor was losing 425 patients per year or 35 patients per month. According to a 2014 Dental Economics survey, the average dental practice adds 26.39 new patients to their practice per month or 317 new patients per year. With a 17% patient loss rate, if Dr. Taylor was simply adding this average number of patients to his practice each year, his total patient revenue and his patient base would be declining year over year. Most try fixing this by substantially outperforming the average for acquiring new patients, as if that were the only fix available. But attracting and seducing strangers is hard work. In business, it tends to be difficult and expensive. Investment in retention, by comparison, can be a bargain. Simply, there is often more profit in retention than in acquisition.

FIGURE 3.3

      Of course, Dr. Taylor did focus on patient retention, but if we spend a minute on this hypothetical example, we would see that he needed to get 108 new patients, on top of the average 317, at a cost of $213.00 per new patient, for a total additional investment of $23,004.00 just to stay even. Of course that $23,004.00 comes straight off the bottom line, and frankly, it is demoralizing to work all year and spend a ton of money on marketing, only to end up in the exact same place you started. You can find yourself a hamster running on a wheel, stuck in place, yet running very hard!

      Let’s get back