How important are referrals?

I'm pretty new to selling and I hear a lot about "Referrals."

Just how important are referrals really? I've checked around the office and everyone gets them but they don't live on them.

What's a good target to shoot for in terms of X percentage of business coming from referrals? :confused: -Newbie

Your question doesn't take into account a conversion factor for leads referred to leads closed.

With that said, what I think you're asking is how many referrals should you be targetting. For a new agent in the field a referral rate, Solicted and Non-Solicited, of 25% seems like a good target. -SalesCoach

Our company wants us to work by referral as much as possible. In fact, much of our lead generation time is spent visiting current accounts and asking for leads. -Gilbert

IMO, referrals are the target a salesperson should be shooting for. Sure, in the beginning of your career you have to work the trenches but why do that for your entire career? -SEOMyth

I totally agree, good point SEOMyth. -Doc MC

A sales career can be pretty cold, hard, and long without referrals. -WobblyBox

Thanks for the input everyone. :) -Newbie

I'll be watching for those. I recently read that you should ask for a referral from someone who doesn't buy. This never occurred to me because I figured if they didn't buy, they weren't sold on your product, but sometimes just because it is not a good fit for them, does not mean they don't have a friend who could benefit from it. I can't tell you the times I walked away from a presentation thinking.."well no sale, but very nice people." I could kick myself for not asking for referrals. -RainMaker

I think referrals are the lifes blood of any business, it is tough to go out each day are re-create the wheel. You must have someone that likes your product or service enough to recommend you to a friend or you will not be in business very long,
Bob Chapman -Rollix

You could even take it a step further and treat every one you meet as a potential prospect or a source to a potential prospect. ;) -Bulldog

As a Solo Entrepreneur, referrals are our lifeblood.

It's important to understand that the business of getting referrals isn't about asking for them, prying them out of someone's clenched fingers. It's about building a relationship over time, providing excellent customer service, getting your clients to sing your praises naturally so they can't wait to tell others about you!

Here are a couple of techniques I've used that work:

• After the sale, get customer feedback. Ask them how they liked your product/service, and what you could improve. (If they say nothing, ask for a testimonial!) Ask them what specific benefit they received from their purchase. This is important for two reasons: 1) you learn more about your market and why they buy from you, and 2) the customer has now put into words why they love you -- and now that they've articulated that idea once, it will be easier and more natural for them to say it to someone else.
• If you do ongoing business with someone, at the bottom of every invoice, add this line: "The biggest compliment you can pay me the referral of a friend or colleague" (use your own words). If you have a physical location (store, office), put this phrase on a placard on your desk or frame it on your wall. It is a subtle reminder, instead of a tank.

Peace,
Terri Z -Terri Zwierzynski

Great post Terri. I especially like your suggestion about "The biggest compliment you can pay me..." -WobblyBox

It has never been about asking for them. So I never have. Great post, Terri. -Gary Boye

Your approach will depend on the type of product or service you sell. As a sole practitioner I ask for referrals from time to time. My approach is to ask my client to introduce me to another key decision-maker rather than ask for a referral per se. I have found that if I consistently exceed my customers' expectations they will automatically refer me to others.

However, when I conduct workshops for some of my clients, I suggest to their sales staff that asking for referrals can be a great way to increase their qualified leads.

Kelley -Kelley Robertson

I've read about some companies that require their salespeople to bring back at least three referrals from each sales or appointment. :eek: -Bandit

The management of those companies don't understand how referrals happen. When you institutionalize a natural process, you often lose the benefit. -Gary Boye

I agree. Those companies must be run by Natural Born Salesmen. ;)

There are statistics, which I can't recall, about how much it costs to acquire a new customer (a lot) vs keeping one you have (not much).

Along those lines, I think referrals rank up there close to keeping an existing customer in terms of value.

Kathleen -KSA-Mktg

If I recall correctly, it costs 5 times as much to get a new client as to keep a current one. -Terri Zwierzynski

Does this mean that you wouldn't suggest asking for referrals? :confused: -bridger480

In the past and in the present, I have never suggested asking for referrals.

I have mentioned that I get an inordinate amount of referrals. I also mentioned that I never ask for referrals. So why would I suggest that somebody do something that I don't do? That wouldn't make any sense.

Forgive me if I'm wrong, but I don't think that the question you asked is the real question that prompted you to insert the little blue confused gargoyle.

So what are you really confused about? -Gary Boye

You mentioned that you don't but does that mean we shouldn't? -bridger480

I don't know if you should. That's a business decision you have to make for yourself.

If, for instance, your employer has said that you must do that, then, in my opinion, you certainly should. I never suggest insubordination to anyone, and, I never tolerated it from people who worked for me.

However, I never encouraged the practice of asking for referrals among people I managed. So it wasn't an issue.

What are your beliefs on referrals--and--where did those beliefs come from? If you are presently asking for referrals and you are truly getting measureable, favorable, results from that practice, then why change?

But keep in mind the original question on this thread: How Important Are Referrals?

They are vitally important to me. So--it's not a question I would have asked. -Gary Boye

I'm not sure I really understand but that's okay. I appreciate your help. Thank you. :) -bridger480

It's nobody's fault. It has taken me years to realize that we cannot provide answers from a particular paradigm for questions that are from another paradigm. It think this has been an example. -Gary Boye

Isn't business all about networking? Wouldn't that include referrals then? How are multimillion dollar deals completed every year without the use of networking?

I know it's cliche, but doesn't the old adage apply here, "It's not what you know, but who you know" can make the big difference.

Doesn't it make sounds to leverage other people's contact if a business associate freely gives it to you? It never hurts to ask, if done so in the correct and appropriate manner... -msanti85

There is a Zen parable where a group of students ask the teacher to explain the moon. The teacher turns, looks up, and points to the moon.

One student says, "Oh, the moon is a finger."

Although I'm a proponent of certain forms of direct response marketing, my success from referrals has been gratifying and literally inordinate over a period of many years. As I've mentioned, I don't ask for referrals.

You are right--who you know can make a big difference. But if it was a hard fast principle in selling, we would have to ignore men and women in direct sales that have made mid-six figures working territories and environments of complete strangers.

You ask rhetorically: "Isn't business all about networking?"

Your point is well taken, but, NO, business is not all about networking. Selling is the most important skill in business. Networking is a form of marketing that might be described as active, but in real life experience can be quite passive.

Active or passive--is it an important aspect of business? It certainly can be.

I can't crawl into another person's mind. I can only intelligently speculate. If we had the ability to examine the paradigm of networking for a person with a new startup printing business who joins the local Chamber of Commerce to network--and--a high roller who is an instrumental player in one of those multimillion dollar deals, we might find vastly different mindsets. I believe the more we become something, the harder it is to actually describe what it is that we do that makes us what we are. Not impossible--but hard. -Gary Boye

It isn't "all" about networking but I get your drift and can say that some of the most successful real estate agents I know rely "heavily" on networking and referrals.

True. IMO, relying on a client to generate a referral is not a good idea. -AZBroker

I respectfully disagree!

If you do great work for your clients, they won't be able to wait to tell others about you. The key is to really nurture your client relationships. Follow up with the ones that are your best clients. Send them a note, take them to lunch, do something extra for them. Ask them why they like you so much...you might learn something, and, by saying out loud why they like you, it makes it easier for them to say those same words to someone else--a potential referral.

That said, referrals don't work for all kinds of business. And not everyone has that knack of being able to really connect with their clients. However, it can and is a great strategy for many small and solo business owners.

Peace,
Terri Z -Terri Zwierzynski

I should have been more specific. IMO, there are sales positions where relying on a client to generate a referral is not a good idea. These would be those positions where the type of relationship you detailed are not typical.

Thanks for the input Terri. :) -AZBroker

Right on the money, Terri. Wonderful insight. You speak from experience I'm sure. -Gary Boye

Sanddollar, I took a look at the service you suggested and decided to give it a go. Thanks. -AZBroker

Referrals are like a garden Ikeep in touch with every customer until they are either dead,or ask me not to call or cannot be located through holiday mail,birthday cards and six month anniversary calls. I admit I try not to be annoying but they never forget me and I really am helpful if they have a problem with a car. The point is that the longer you keep your name in front of them the more likely they are to call for a replacement sale or referral of a friend. Just like a garden you have to tend your crops. -Rothgar the Pacifist

That's the way to do it. "Your salesman for life!" :) -SpeedRacer

Referrals are the best source of all of your marketing efforts. Before people will buy from you or your company, you need to build a certain amount of TRUST with that prospect. If they know someone else has bought from you and your company, then the trust factor jumps up considerably.

let me give you an example. How many times have you gone to a store because one of your friends recommneded it? If your friend recommneded it, you TRUST that person's judgement. The same thing applies to any sale, whether it be a B2C sale or a B2B sale, trust is a major factor.

If you can get all of your business from referrals, you will cut down your sales cycle considerably, and you will also stop chasing non-performing leads. So, get as many referrals as you can. -Andian

The comments about referrals being the best way to prospect and the lifeblood of a successful sales career are certainly correct. But let me give some statistics about referral generation:

Less than 15% of all salespeople generate enough referrals to significantly impact their business (significantly defined as at least 25% of their business comes directly from referrals).

Almost all of the top producers in relationship based industries generate at least 50% of their business from referrals, and over half of them generate more than 75% of their business from referrals.

Less than 15% of all business is generated by referrals for the remaining 85% of salespeople.

That indicates that the top producers seem to put much more emphasis on referrals than the typical salesperson, even though everyone touts referrals as being important.

In addition, these top earners don't seek referrals in the same manner as the average salesperson.

They let the prospect know up-front that they are referral-based and consistently and gently remind the prospect of that fact (there is a process for this, so it doesn't come across as "in your face" solicitation). Once the prospect has become a client, they get their client's agreement to give referrals, define for the client exactly what a good referral for them is, and lets the client know exactly how they will earn the referrals and if they don't perform, they don't get them.

They let the prospect and client know that referrals are very important to them and they don't ambush the client after the sale as they're walking out the door with the last second request for referrals. They have a very detailed, professional, organized process that creates a large number of high quality referrals from their clients and their prospects.

There is a difference between word of mouth marketing (having a client tell others about you) and generating referrals (getting direct introductions from clients and prospects to other high quality prospects). One is much easier and the client does the work (if the work is done at all), the other requires a good deal of work and is very much a proactive process. -pmccord

Good distinction, there Paul.
And my target would be 100% of both.. er.. even if that makes 200%! Seriously, though, genuine WOM is so powerful that we sell it - audio testimonials. -Sam Deeks

Repeat and Referral Business is all you need to be successful in sales...

Here's how I think of it. The most enriching part of my job is the people I get to meet & help. This may sound like a silly question but it is how I help new auto salespeople get the big picture:

Here are the facts: Most people will own about 20-30 cars in their life. Most people know about 250 other people that will own cars.
Sometimes, I don't have the right car for somebody; therefore, "How could I expect them to do business with me this time?"

You will always come out ahead if you focus on a relationship instead of a sale. Never compromise a relationship or your reputation for a single sale.

Most sales people do not follow up long-term (or at all, for that matter) they only focus on "the sale of the day". What do you think happens to the person that bought a car down the street, and never hears from their sales person again VS. getting a card from me every month, even though he hasn't done business with me, YET? Who would get the referral... The answer is easy; Who would you refer?

As a salesperson, do you think you'd do a better job with each customer if you viewed them as one sale or if you viewed them as a new friend and 250 sales throughout your career?

Call me when you want to become a FollowUpMaster. It is the easiest way to insure a successful career.

Tobias, at 303-827-4785. -FollowUpMaster