In my first book, Prospecting Your Way to Sales Success, I proposed the “Change Principle of List Replacement and Development.” I wrote: “Other things being equal, a person or company in process of change finds additional change easier to make. Therefore, if you are able to extract names of people in process of change from a given list, the change list will produce better results than the list from which the change names were originally drawn.”
My theory of “change lists” was based upon a lot of observation and experience. It was focused, until recently, on developing lists for mass marketing. But I never saw hard evidence until just recently when I read The Power of Habit by Charles Duhigg. As you will see, the implications of the change principle are profound. By the way, I highly recommend Duhigg’s book.
The implications of the “change principle” go deeply into your practice, especially into why you get referrals and why some clients get referred to your competitors. The myths that surround referral marketing are thick and deep. I have dealt with them in previous Research articles, which are available free on my website.
In The Power of Habit, Duhigg describes work done in the 1980s by a visiting professor at UCLA named Alan Andreasen, who published a paper looking into the question of why some people suddenly change their shopping routines.
What Your Peers Are Reading
Duhigg writes: “Andreasen’s team had spent the previous year conducting telephone surveys with consumers around Los Angeles, interrogating them about their recent shopping trips. Whenever someone answered the phone, the scientist would barrage them with questions about which brands of toothpaste and soap they had purchased and if their preferences had shifted. All told, they interviewed almost 300 people. Like other researchers, they found that most people bought the same brands of cereal and deodorant week after week. Habits reigned supreme.”
As Duhigg notes: “Except when they didn’t.” It turned out 10.5% of the people surveyed had switched toothpaste brands in the previous six months. More than 15% had started buying a new type of laundry detergent.
Andreasen found an underlying reason for such deviations in buying patterns. Life changes—such as moving, getting married or divorced, losing a job or finding a new one, having someone enter or leave a household—resulted in consumers being, in Andreasen’s words, “vulnerable to intervention by marketers.”
What does this have to do with you? A lot.
If you are doing any kind of mass marketing, it says you should get bigger bang for your marketing buck if you develop lists of people in a process of change.
But it also explains what triggers most of your referrals, and it explains what triggers loss of clients. But I’m getting ahead of myself.
When do clients refer? Let’s look at two sides of the referral coin—referrals coming in and your client being referred to a competitor. The pathbreaking referral study was conducted by Julie Littlechild. Every FA should make this study required reading. It’s available online.
Julie surveyed investors to discover, among other things, when they referred.
After reading her study, I decided I wanted further insight from advisors. So I collected 26 referral narratives from advisors. I asked them to tell me what triggered the referral.
In the process, I discovered what I consider a more basic reason referrals happen. And it comes back to life change.
Here are some quotes from the narratives, slightly edited for clarity.
“Client is having some health issues. I asked that the family come to next meeting and then the kids became a client as well. Most referrals recently have come from existing clients who have had family members lose their jobs and need someone to handle the 401k rollover. Prospect was just laid off from his employer.”