referral selling

Warm sales leads are the best sales leads. And referrals are the warmest of all. So substantially grow your referral business in the year ahead. It is well worth the effort.

 

This is the first in a series of articles by Bill Cates, whose entire business focuses on relationship marketing as a way to build a long-term pipeline of new customers. We encourage you to read this article first in the series, and then continue with them in order. These articles will serve as the blueprint you need to build as big a business as you desire. You’ve just struck gold!

________________________

Why is Referral Selling the Most Powerful Way to Sell?

Without question, selling through referrals is the most powerful way to build your business, not to mention the most enjoyable. There are a few rare birds out there who really love prospecting for business through cold calls. My guess is that if you’re reading SalesDoctors, you’re not one of them. In this age of voice mail, increased competition, and super busy prospects, cold calling has become less effective.

I once heard Robert Kerrigan (a legendary salesperson with Northwestern Mutual Life) say, “The way of the world is meeting people through other people.” And the referral is the warm way we get into their lives.

Think about this for a minute. When you need to find an attorney, an accountant, a car repair shop, or a dentist, do you turn to the Yellow Pages? Probably only as a last resort. Don’t you usually ask a few friends first? Why? Because you’d rather not “buy cold.” You’d rather be referred.

Buyers, too, prefer not to buy cold. There’s more tension. There’s more risk. I’m not saying that cold calls never work. However, it’s getting harder to reach people with them, and cold calling can lead to early burnout if it’s your only prospecting strategy.

Chris Faicco, with Northwestern Mutual Life, conducted the only study I know of that clearly demonstrates the power of referrals. Of 5,640 qualified suspects, 2,240 were turned into prospects by cold calls, and the remaining 3,400 were converted into prospects by referrals. The cold call prospects yielded 56 sales, or an 11 percent closing ratio. The referral prospects yielded 452 sales, or a closing ratio of 40 percent. In this study, the chances of making the sale were almost four times greater when the prospecting was done from referrals.

If you don’t sell life insurance, you may be thinking, “What does this have to do with me?” Everything. Oh, the ratios in your industry may be a little different. But you wouldn’t be reading this article if you didn’t already have a clear sense that building your business from referrals is the best way.

Why Do Referrals Lead to Sales Faster and More Easily?

When you prospect over the telephone via cold calls, you usually get the cold shoulder. The prospects say things like, “Send information.” “I’m already covered in that area.” “We’re happy with our current supplier.”

When you prospect over the telephone via referrals, you usually get a conversation. Two elements make this so. First is commonality. The fact that you and your prospect know someone in common warms up the conversation from the very beginning. Usually, the better the relationship between your referral source and your new referral prospect, the warmer this first interaction will be.

The second factor is endorsement, either implied or explicit. I will talk about prospecting for referral and show you a sure-fire way to get your referral source to call your prospect before you call, to warm him or her up. This is an explicit endorsement. In an implied endorsement, you use the name of your referral source right away and mention that the referral was given because of the great service you provided.

Don’t ever underestimate the power of commonality and endorsement. They are what turn a cold call into a warm call. They are what it takes these days to get past voice mail and all the other obstacles to selling. I’ve found that when I leave a voice-mail message from a cold call, it rarely gets returned. But when I leave a message from a referral, it usually gets returned.

Commonality and endorsement don’t just make the first conversation easier. They also significantly increase the chance of the final sale. You’ll get fewer obstacles and objections, you’ll immediately operate from a higher level of trust, and your new prospect turned customer will have a stronger sense of loyalty right from the start.

Barry Graham Munro, in his book Smart Salespeople Sometimes Wear Plaid (Prima, 1994), says, “To some, a referral is merely a name. However, a referral is actually much more than this! A referral is the authorization to use the influence attached to that name.”

Why Don’t All Business People Build Their Business From Referrals?

Quite frankly, this baffles me. Certainly, when you are first starting out in business, you have to make some cold calls to get the ball rolling. Certainly, some businesses lend themselves to referral selling more than others. But I’ve never run into a salesperson or business owner who can’t use the methods I teach.

I think part of the problem is that, until recently, there has been very little teaching in this area. In 1982, Tom Hopkins came out with How to Master the Art of Selling (Tom Hopkins International, 1982). Tom’s techniques helped millions of salespeople become more effective. In his book, he calls referral prospecting the “backbone of prospecting for champions.” Yet, even he spends only a page and a half on the topic in the entire book.

Dr. Ivan Misner has written a quality book called The World’s Best Known Marketing Secret: Building Your Business with Word-of-Mouth Marketing (Bard & Stephen, 1994). He says, “Word-of-mouth marketing is a paradox. It is truly the world’s best-known marketing secret.” Practically everyone knows how important word of mouth is, yet very few people know how to develop it effectively.

Writes Misner, “For a phrase that is so universally recognized, it is amazing the concept is so little understood.” Misner goes on to say that in many of the great marketing texts, word of mouth, like its close kin referrals, is barely addressed.

There are many salespeople, sales managers, and entrepreneurs who know how to generate tons of referrals. For the most part, these people have figured it out on their own. But there’s no reason you need to figure it out all by yourself. I’m here to help you shorten your learning curve by years, maybe even decades.

A few books and speakers these days address this topic to some degree, and I will refer to them throughout this series of articles. You should know that, based on my extensive research in this area, this series of articles will represent the most complete book to date on getting and using referrals. They will give you the best of what others have shared, and a whole lot more.

I think it’s time to elevate referral gathering to a whole new level of professionalism. Jay Abraham uses the phrase “ethical opportunism.” Other people call it leverage. As you serve people better, as you create relationships of trust, a little proactivity on your part will yield many opportunities for all parties, opportunities that go beyond the buyer/seller relationship.

Referral Selling As a Growing Trend

The use of referral is growing partly because of the obstacles I’ve already mentioned: voice mail (high-tech, but low-touch), increased competition, and everyone busier than ever before.

However, it goes beyond these factors. You already know that our economy is fast becoming a service economy. Many salespeople are selling services instead of products. Those who are selling products are usually selling service to help distinguish their products from their competitors’. You can sell a product through literature, advertising, and cold calls. But it’s much harder to sell a service that way. Service is a much less tangible sale. Buyers understand what good service is, but they can’t hold it in their hands or watch it work before they buy it.

This is why meeting you through a colleague or friend is their preferred method. Your buyers would rather meet you through a referral. The endorsement and testimony of others make them feel much more comfortable opening their door to you and giving you their business.

This is the first in a series of articles by Bill Cates, whose entire business focuses on relationship marketing as a way to build a long-term pipeline of new customers. We encourage you to read this article first in the series, and then continue with them in order. These articles will serve as the blueprint you need to build as big a business as you desire. You’ve just struck gold!

________________________

Why is Referral Selling the Most Powerful Way to Sell?

Without question, selling through referrals is the most powerful way to build your business, not to mention the most enjoyable. There are a few rare birds out there who really love prospecting for business through cold calls. My guess is that if you’re reading SalesDoctors, you’re not one of them. In this age of voice mail, increased competition, and super busy prospects, cold calling has become less effective.

I once heard Robert Kerrigan (a legendary salesperson with Northwestern Mutual Life) say, “The way of the world is meeting people through other people.” And the referral is the warm way we get into their lives.

Think about this for a minute. When you need to find an attorney, an accountant, a car repair shop, or a dentist, do you turn to the Yellow Pages? Probably only as a last resort. Don’t you usually ask a few friends first? Why? Because you’d rather not “buy cold.” You’d rather be referred.

Buyers, too, prefer not to buy cold. There’s more tension. There’s more risk. I’m not saying that cold calls never work. However, it’s getting harder to reach people with them, and cold calling can lead to early burnout if it’s your only prospecting strategy.

Chris Faicco, with Northwestern Mutual Life, conducted the only study I know of that clearly demonstrates the power of referrals. Of 5,640 qualified suspects, 2,240 were turned into prospects by cold calls, and the remaining 3,400 were converted into prospects by referrals. The cold call prospects yielded 56 sales, or an 11 percent closing ratio. The referral prospects yielded 452 sales, or a closing ratio of 40 percent. In this study, the chances of making the sale were almost four times greater when the prospecting was done from referrals.

If you don’t sell life insurance, you may be thinking, “What does this have to do with me?” Everything. Oh, the ratios in your industry may be a little different. But you wouldn’t be reading this article if you didn’t already have a clear sense that building your business from referrals is the best way.

Why Do Referrals Lead to Sales Faster and More Easily?

When you prospect over the telephone via cold calls, you usually get the cold shoulder. The prospects say things like, “Send information.” “I’m already covered in that area.” “We’re happy with our current supplier.”

When you prospect over the telephone via referrals, you usually get a conversation. Two elements make this so. First is commonality. The fact that you and your prospect know someone in common warms up the conversation from the very beginning. Usually, the better the relationship between your referral source and your new referral prospect, the warmer this first interaction will be.

The second factor is endorsement, either implied or explicit. I will talk about prospecting for referral and show you a sure-fire way to get your referral source to call your prospect before you call, to warm him or her up. This is an explicit endorsement. In an implied endorsement, you use the name of your referral source right away and mention that the referral was given because of the great service you provided.

Don’t ever underestimate the power of commonality and endorsement. They are what turn a cold call into a warm call. They are what it takes these days to get past voice mail and all the other obstacles to selling. I’ve found that when I leave a voice-mail message from a cold call, it rarely gets returned. But when I leave a message from a referral, it usually gets returned.

Commonality and endorsement don’t just make the first conversation easier. They also significantly increase the chance of the final sale. You’ll get fewer obstacles and objections, you’ll immediately operate from a higher level of trust, and your new prospect turned customer will have a stronger sense of loyalty right from the start.

Barry Graham Munro, in his book Smart Salespeople Sometimes Wear Plaid (Prima, 1994), says, “To some, a referral is merely a name. However, a referral is actually much more than this! A referral is the authorization to use the influence attached to that name.”

Why Don’t All Business People Build Their Business From Referrals?

Quite frankly, this baffles me. Certainly, when you are first starting out in business, you have to make some cold calls to get the ball rolling. Certainly, some businesses lend themselves to referral selling more than others. But I’ve never run into a salesperson or business owner who can’t use the methods I teach.

I think part of the problem is that, until recently, there has been very little teaching in this area. In 1982, Tom Hopkins came out with How to Master the Art of Selling (Tom Hopkins International, 1982). Tom’s techniques helped millions of salespeople become more effective. In his book, he calls referral prospecting the “backbone of prospecting for champions.” Yet, even he spends only a page and a half on the topic in the entire book.

Dr. Ivan Misner has written a quality book called The World’s Best Known Marketing Secret: Building Your Business with Word-of-Mouth Marketing (Bard & Stephen, 1994). He says, “Word-of-mouth marketing is a paradox. It is truly the world’s best-known marketing secret.” Practically everyone knows how important word of mouth is, yet very few people know how to develop it effectively.

Writes Misner, “For a phrase that is so universally recognized, it is amazing the concept is so little understood.” Misner goes on to say that in many of the great marketing texts, word of mouth, like its close kin referrals, is barely addressed.

There are many salespeople, sales managers, and entrepreneurs who know how to generate tons of referrals. For the most part, these people have figured it out on their own. But there’s no reason you need to figure it out all by yourself. I’m here to help you shorten your learning curve by years, maybe even decades.

A few books and speakers these days address this topic to some degree, and I will refer to them throughout this series of articles. You should know that, based on my extensive research in this area, this series of articles will represent the most complete book to date on getting and using referrals. They will give you the best of what others have shared, and a whole lot more.

I think it’s time to elevate referral gathering to a whole new level of professionalism. Jay Abraham uses the phrase “ethical opportunism.” Other people call it leverage. As you serve people better, as you create relationships of trust, a little proactivity on your part will yield many opportunities for all parties, opportunities that go beyond the buyer/seller relationship.

Referral Selling As a Growing Trend

The use of referral is growing partly because of the obstacles I’ve already mentioned: voice mail (high-tech, but low-touch), increased competition, and everyone busier than ever before.

However, it goes beyond these factors. You already know that our economy is fast becoming a service economy. Many salespeople are selling services instead of products. Those who are selling products are usually selling service to help distinguish their products from their competitors’. You can sell a product through literature, advertising, and cold calls. But it’s much harder to sell a service that way. Service is a much less tangible sale. Buyers understand what good service is, but they can’t hold it in their hands or watch it work before they buy it.

This is why meeting you through a colleague or friend is their preferred method. Your buyers would rather meet you through a referral. The endorsement and testimony of others make them feel much more comfortable opening their door to you and giving you their business.