Why is it that every business owner, sales executive, and salesperson will tell you that referrals are the best way to generate new business, and yet so few people run a one hundred percent referral-based company? This puzzled me, so when I started my company more than ten years ago, I conducted an informal poll of salespeople and business owners across many industries and asked the rather obvious question: Why are referrals so great?
Their answers made it clear they understood the value. A referred client is pre-sold. The referred salesperson or business owner has credibility and trustworthiness.The competition decreases or disappears. They end up with a new client a minimum of fifty percent—but more likely between seventy-five and ninety-five percent—of the time. Not only are referral customers more profit table, they also will be the first to give a referral to others.
It didn’t matter whether the salespeople I asked were women or men, new to their field or had been selling for twenty or thirty years. They all agreed that referral business was the most effective business development strategy, and nothing else comes close. They all had fabulous relationships with their clients, peers, associates, vendors, and friends but they were not leveraging those relationships.
Selling is about building, maintaining, and nurturing relationships, and as women, we have a remarkable advantage. We are great at making connections, asking insightful questions, and finding creative solutions to problems. We do this every day in our personal lives and easily transfer this skill to our business lives. We often get instant feelings about people upon meeting them. Yes, it’s intuition. When we trust it, we soar.
There is an immediate connection when we are referred. We can talk about the person who referred us, thereby eliminating those first uncomfortable and awkward steps of the business meeting—explaining who we are and what we do. We also eliminate the nagging question: “How am I going to begin the conversation?” It’s almost like that dreaded first date. What will the guy look like? Will I be too tall or too short? What will I talk to him about?
Women are also terrific at creating a complete picture of someone. We are just as interested—if not more so—in an individual’s personal story as in her professional story. How did she get to where she is now? Where does she live? Does she have a family? Where do they like to vacation? Put a woman and a man in the same conversation, and they will come up with an entirely different set of facts.
Even though referrals are common sense, they are not typically common practice. Most businesses do not have an intentional strategy to build their business through referrals. They don’t have a plan, goals, and a way to track and measure results. On one hand, referral business is unsurpassed; and on the other, most people are passive about developing their referrals. I eventually discovered that there are four reasons why companies aren’t using the most powerful sales strategy they could ever have:
1. It feels uncomfortable. When we ask for a referral, it feels as if we’re asking someone to help us, and it’s not easy asking for help. If we have to ask, maybe it means our business isn’t doing very well. It feels as if we’re intruding on a relationship, and we’re asking a busy person to do more. The biggest fear of all? Rejection, she might say,“No.”
2. It’s a skill. People don’t know how to ask in a way that will get them demonstrable results. They’ve never learned a reliable process. Typically, a salesperson’s idea of asking for a referral is to say, “By the way, if you know anyone who could benefit from my services, please pass my name along.” That’s too passive an approach, and it gets us nowhere.
3. There haven’t been metrics. Referral selling has always appeared as something nice to do, but historically, there haven’t been any hard numbers on its success rate. There are metrics for cold calling, direct mail, and advertising, but few widely known metrics for referrals. The metrics for referrals should be 1) the number of people asked, 2) the number of referral meetings held, 3) the number of new customers, 4) the amount of increased business with existing customers, and 5) the overall increases in revenue and profitability.
4. It hasn’t been part of our sales process. Referrals need to be the way we work every single day. Asking for referrals must be integrated into all the work we do, rather than an afterthought. It is a proactive strategy and not something we leave to word of mouth. Waiting for the phone to ring is passive; referral selling is active and results-oriented.
The power of referrals is endless. If you want to run a referral-based business, begin by examining your strategy and your process.
• Do you and your salespeople know the importance of referrals?
• What percent of your current customers have come from referrals?
• Where in your sales process will you ask for referrals?
• What metrics can you put in place to reinforce referrals?
• How will you reward yourself and your team for referral business?
It’s now time to move referral selling from common sense to common practice. Determine how the four excuses for not asking for referrals play out in your company. Talk to your salespeople and build a plan to shift the way you work. Your sales life and your business life will never be the same again.
By Joanne Black