Some Background Information:

Did you know that:

• 40% of salespeople are failing in their sales careers?

• 45% of all salespeople earn the average income for their industry?

• A typical salesperson devotes only 10-20% of their time to actual selling because a large proportion of their available time is devoted to cold calling?

• 85% of all salespeople do not generate enough quality referrals?

• Salespeople who actively seek and exploit referrals earn 4 to 5 times more than salespeople who don’t?

•  Referral business closes and converts more than 70 percent of the time?

Why is referral based selling so powerful?

A referred customer is already pre-sold on the credibility of the salesperson, their company and the relevance of the products/services sold. These types of opportunities are much warmer than a cold-call based opportunity because it maximises the goodwill, inherent in the relationship between the referred customer and the referring person.

By association, salespeople are consequently perceived in a different light compared to those that have made contact ‘out of the blue’. The costs of selling to a referred customer are reduced because they are easier to see, and are likely to be reasonably well qualified so that the probability for converting the business is much higher. Generally speaking referred prospects will accelerate through the sales pipeline at a much faster rate than other types of opportunities, and they will also be more receptive towards providing future referrals.

When is the best time to ask for referrals?

People will freely give referrals when they have benefited from your product/service and have an established relationship with you. This rarely occurs during the initial meeting because whilst they may like you, they haven’t yet validated what you can do for them. That’s why asking for referrals should be when the relationship you have established is strong enough to ensure their trust and belief in you.

Assessing the strength of your existing customer relationships can be very subjective unless there is a meaningful set of relationship criteria in place.  Although these will vary from organisation to organisation, they may include factors like:

- Communication frequency with key influencers
- Satisfaction with product/service
- Speed of response to queries/problems
- Length of relationship

The customers with the highest scores (based on the relationship criteria) are those that should be approached for referrals.

What is the best way of generating referrals?

1. Prepare a description in the form of a criteria list that specifies the type of person or organisation that you are looking to approach. This should be based on the profile of your Ideal Customer.

2. Evaluate all your customers using a relationship criteria and identify a list of those with the highest scores. For every customer your aim is to generate a minimum of 5 referrals. Therefore, if you have 25 customers on your list your target number of referrals will be 125.

3. Contact each customer on your list and take the pressure of them by explaining that you don’t want to sell to them, you would like their help.

For example: “Do you know anyone who is (specify your criteria) that would be interested in learning about how our products/services can benefit them?” Preface your question with a softener such as: “I wonder if you can help me” or “I would really appreciate some advice.”

4. When customers give you referrals, ask their permission to use their name when making contact. Alternatively, where your relationship is ‘rock solid’ ask customers to make the initial introduction by letter or email. Often customers will give a glowing testimonial and create a relevant context when introducing people.

5. Thank customers for referrals and keep them appraised of your progress. This creates a positive association towards the giving of more referrals in the future.

So, there we go, my most recent thoughts on the importance of referral selling!