Monday, November 02, 2009

CONNECTING IS NOT ENOUGH: The Anatomy of a Referral (Part One)

This article originally appeared in The National Networker

Growing a business without developing a flow of good quality referrals can be tough. Yet so many companies try to do so.

Last month I was working with a manufacturing company. Owned by a larger US organisation, the chances are that they wouldn’t be in business without external support from the parent company. They have been making a loss for over two years and last year made most of their sales team redundant, losing a number of clients in the process.

Around the same time they brought in a new Managing Director with the remit to turn the fortunes of the business around. That would be a tough enough job for anyone in the circumstances, it’s proven to be even more so in the current economic climate.

The Managing Director asked me to come in and work with his sales team and help them gain an understanding of how networking could help them turn the tide.

Most of their business has come through existing customers re-ordering or purchasing new products. There is very little external business and most of what has come in has been attracted through their website. There has been very little pro-activity from the sales team to bring in new business. Referrals certainly haven’t been on the agenda.

It was very interesting to look at the reports the MD showed me. The company has been meticulous in tracking all sources of business. At a glance you can tell what business came through existing customers, cold calling and from the website. But there was no recognition of referrals in the report. They hadn’t even mentioned them.

I asked the team to share the last time they received a referral. The first person to answer had been with the company for eighteen months. He had received one ‘referral’ in that time, over a year ago. There was a similar story from others in the group.

Clearly, this company needs a change in focus. Referrals quite simply haven’t been on the agenda. In fact, I quickly identified that there is even a lack of understanding of what a referral is. When the sales team talked about ‘referrals’ they had received, they talked about when an existing customer moved companies and invited them to tender in their new role, or when one person told another that they were a company who could help.

Much like people who try to give out two or three business cards to everyone they meet in the hope that they will be passed on, there is a clear misunderstanding of exactly what a referral is. This is a common problem. When I was Managing Director of Business Referral Exchange, I often found myself frustrated with seeing members pass each other phone numbers to cold call under the guise of a ‘referral’.

What is a referral?

If you are going to introduce a strong referrals strategy into your business, take some time to understand exactly what you are looking for. There are various pieces of business information that can help you develop and generate sales, but they are not all referrals.


A Tip is quite simply a piece of information, nothing more than that. No individual names or contact details are passed; you may not even know there is a need for your services. A commercial estate agent might like to know that a company is moving, a speaker that a conference is imminent, a lawyer that a merger is imminent.

We can all be helped by knowing more information about prospective clients. With a tip, we have to do all of the subsequent leg work ourselves.

With a lead you have some more information. A name and phone number perhaps. According to Wikepedia, a lead ‘represents the first stage of a sales process’. There is still a lot of work to do but you are a step further ahead.

When someone in your network gives you a name and a number and says ‘you need to speak to this person’, they are giving you a lead. If they invite you to use their name when approaching the prospect, that is simply a warm lead.

Most commonly mistaken for referrals, a recommendation involves someone telling your prospect that they should consider using your services. Wonderful when it happens… long as your prospect then follows through and contacts you. Until the telephone rings, recommendations hold little value.

Three Steps to Referral Heaven

There are ‘Three Steps to Referral Heaven’.

STEP ONE – The person referring you identified someone who has a problem you may be able to solve.

STEP TWO – They talk to your prospect, who is interested in speaking with you.

STEP THREE – Your prospect is expecting your call.

Referrals are the best form of business information you can receive. Like a recommendation, they are more powerful than tips or leads because your prospect knows about you in advance of your conversation. Unlike a recommendation, you are in control of the conversation; rather than you waiting for the telephone to ring, your prospect is expecting your call.

Where companies go so wrong is for accepting tips, leads and recommendations when they could improve the quality of information they receive. If someone offers you a tip, try to find out more. If they give you a name and a number, ask if they could introduce you. Similarly, if they tell you they have recommended you, ask if you can be introduced.

After all, if someone likes and trusts you enough to share such information or recommend you, would they be willing to take the next step and make it easier for you?

That third step, that your prospect is expecting your call, makes such a difference. However well meaning an introduction where you can use someone’s name to open the conversation, unsolicited calls are very difficult to make. When someone calls you out of the blue, how receptive are you to what they have to say?

Few of us can honestly admit to being completely open when that happens, particularly if we are busy when the phone rings. We like to know in advance why people are calling us and that it is in our interest to have a discussion with them. Otherwise we tend to be, by nature, defensive.

The Difference a referral can make

One of the salesmen in my client’s company currently spends at least one day a week simply making sales calls. I asked him how many meetings he sets up each week on average as a result of this activity. He is getting three meetings.

I then asked how many of those meetings are converting to new business, he couldn’t answer, the number is so low.

While cold calling has a place in lead generation for many companies, I would argue that there is a much more efficient use of his time. He certainly isn’t boasting an impressive return on the time he is currently investing on the phone.

We discussed the alternative of spending a day a week building relationships with potential referral sources, deepening and strengthening the ties within his network. Surely from such activity, and with the focus on asking for the right introductions, he would be able to generate more than three meetings a week. And the chance of converting those meetings into business and, indeed, further referrals would be much greater.

Why am I so confident about this? It’s simple. Referrals introduce you to people who have recognised they have a problem you could possibly solve. Those people have been told about you by a third party who has recommended your services. That gives them greater confidence in using you, they are not entering the unknown.

I’m not, however, telling you anything you don’t already know. Just like my client, however, you may not be focusing enough on it within your business. With the right approach, how much of a difference could you make to your bottom line?

In Part Two of this article next month, we’ll look at who you can ask for referrals, how to make it as easy as possible for people to refer you and the importance of tracking the results.

No comments:

Post a Comment