Referrals are undoubtedly the most effective way to insure a healthy sales pipeline. They give you quite a head start on achieving more and better deals. A lead as a result of a referral is one that raises the odds of success. Why?
A referred lead has a 50% chance of closure, whereas a cold lead typically has a 20-30% chance of closure.
Why Are Referrals So Successful?
- The referrer is a trusted source, so trust builds quickly. In essence, you are trusted by association.
- Referrals mean a 16% higher lifetime customer value (Wharton School of Business)
- Customers acquired through referral are likely to lead to more word of mouth business — bringing in more new customers. (Villanueva, Yoo, and Hanssens)
How to Set up a Referral Program
Most companies don’t have a codified process in place for handling referrals. It’s something to consider carefully if you are interested in customer and partner growth. For this important tactic, how do you put a specific process in place?
The answer is simple — Make referrals a part of your sales process.
The statistics are noteworthy. A high percentage of clients of clients (83%) are satisfied and prepared to refer, but only a third actually do. With a dedicated system in place — set up and agreed upon during the sale — the referral can become a programmatic part of a sale, assuming that the client is happy. At the early stages of working with a prospect, I bring up referrals. The customer then is prepared for this step, expects to be called upon, and is enthusiastic about recommending my company to others.
Referrals are a good adjunct — even a substitute for — traditional marketing. Zappos leverages the word of mouth from customers as their number one growth driver. There’s no reason why B2B businesses can’t use the same technique to grow.
Four Steps to Success
- Make a list of companies and people you can call upon to refer business to you.
- Make another list of companies and people you could refer your clients to. Keep a small database of those who you think would help your clients grow their business — and give them a reference. Practice what you preach and spread the love.
- Develop specifics about when and how referrals will happen. At what point in the sales steps will they be handled? How will you set reminders or tasks for every closed sale? Will you use email, phone, or even handwritten notes? Make this a routine part of each sale.
- Let everyone on your team know that they will be participating, and impress on them that referrals are critically important. Customer satisfaction is the key factor in the business.
By putting a little time and effort into systematizing a referral process, you are likely to see great results growing your revenue.