Here is a great quote from the American politician, Bob Bennet: ‘in sales, referral is the key to the door of resistance’. I could not agree more and nor can most companies we speak to. So much so that it is very common to hear business owners and sales directors say that their conversion goes up to as much as 90% when following up on referrals.
So why are referrals so much better than a lead?
It might be worth understanding the difference first, here is Ivan Misner’s definition:
‘A lead is a contact that may come from any number of sources. The contact is generally not expecting your call. A referral is the opportunity to do business. When you contact them, they already know who you are and what you do. It is stronger than just a lead in that this prospect has talked to your mutual acquaintance and is generally expecting your call.’
For me, it’s not so much about the prospect expecting your call, you can get that through other methods of lead generation, but more about the building of familiarity and trust. This is what happens when someone they trust recommend you and effectively make you an extension of them in the eyes of the prospect. In a competitive market, it can be very hard to decide which supplier to use. The less you know about the topic you are looking to resolve, the harder is it to trust a third party, a good referral is therefore a great way to save time and make a better decision.
How can your business get more referrals then?
You could say that referrals happen over time through the building of your brand and reputation. In a perfect world, if you work hard and do a good job, customers should be coming to you. This is why many established companies see 70% of their business coming from referrals and repeat business which helps them build longevity and success. Whilst it will be great if you could just focus on your work and expect referrals to come to you, there are two key questions you need to consider here:
- How do clients purchase your product and service? Is it a very competitive industry you are in? What is the key deciding factor?
- How well do you stand out against your competition, do you really make a difference to your clients? Will they be happy to sing your praises?
In my experience, if you operate in a niche market and offer a unique service, you will get more referrals as there are not many people who do what you do. However, if like most businesses, you operate in a competitive market, you will need to build referral partner relationships to increase your referral rates. This can be done through a number of channels including formal and informal networking as well as client referral schemes and more.
However you get there, building an effective referral network depends on two key factors:
- Being clear on who you want to work with and why
- Making a real difference to clients through your work
These may sound obvious, but they take some thinking and changing. 68% of customers who stop buying from an organisation do so simply because of a perceived indifference. When it comes to building referral partnerships, this can become even a bigger issue, making it hard for people to refer you effectively.
So, can you build your business on referrals alone?
At YBDT we prefer to have several funnels providing new business leads into our company. This is because whilst referrals are easier to convert, they depend on your networks’ availability and access to prospects who need your services at a given time. Therefore, you will find that referral numbers fluctuate greatly from month to month making them hard to forecast.
So, if you are looking to grow your business you will want to create other options to give you and even flow of new leads. However, referrals are key and learning how to become more effective at generating them is important. Our next sales enablement webinar will be offering tips on how to do just that, click on the link below for more information and registration: https://www.yourbizdevteam.co.uk/ybdt-lunchtime-webinar-20220322.php