The Power of Referrals

At a recent conference, I was presenting at a session with sales managers and business owners, and the topic of referrals came up. The sales leaders in the room expressed frustration that their team wasn’t asking for referrals, despite the fact that everyone on the team knew that the quality of a referred lead is far superior to that of a cold lead.

Let’s look at the facts:

1. A cold lead, or an inbound lead from a random source, has a closing rate of around 25% to 30%.
2. In contrast, you double your success with a referred lead, which traditionally has a closing rate of 50%. In this case, you’re not taking any additional time with the sales process and probably less time to prospect, with results that are leaps and bounds better. Accordingly, by simply switching to a referral-based sales process, your team will see a dramatic increase in their sales numbers.

With numbers like these, sales leaders often wonder why sales reps don’t ask for more referrals. These questions are supported by the fact that in general, satisfied customers are more than happy to provide referrals to their solutions providers. Interesting to note that a study from Bain & Company a few years ago showed that while 87% of satisfied customers are happy to pass leads to sales reps, only 7% of sales reps actually ask.

Why aren’t salespeople more willing to pursue referrals with all the statistics stacking up in their favor? Understanding sales reps’ hesitancy in asking for referrals will go a long way in helping them overcome objections and develop a robust referral-based selling program that will in turn boost sales for the team.

In my experience, two issues keep sales reps from asking for referrals: fear and ego. Sales reps face rejection on an almost daily basis, so it may come as a surprise that fear of rejection would play a role in salespeople’s reluctance to ask for referral. It’s ironic, but in fact, that last thing most reps need is another avenue in which they could be rejected. Asking a customer for a referral opens up potential negative feedback or “no’s,” and as a result, salespeople avoid it in order to keep their relationship with the prospect positive and avoid any sort of rejection in what they may see as an unnecessary step in the sales process.

Salespeople also typically have big, healthy egos. We’re trained to believe that we can sell in the face of adversity—in fact, we have to in order to be successful sales reps. We believe that our method is the best, and we can sell on our own without anyone’s help. The concept of sales reps as lone hunters means that we’re reluctant to ask for a referral, because a referral is asking for help—a potential sign of weakness.

I know this issue well, because as a junior sales rep, I myself fell into the ego trap. I didn’t want to ask for referrals, because I didn’t want customers to think I was desperate for new business. The reality was, I was desperate for new business. It’s a funny catch-22, and it’s important to get past hurdles like these with your sales team in order to get them into the habit of referral selling.

Remember! Selling to referred leads will allow your teams to dramatically increase the number of sales without adding a single minute to your (or their) workday.

In order to help your team get past their fear and ego, I suggest focusing on referrals as a sales strategy. Have a referral blitz, a referral campaign or a referral contest. Motivate your team to get referrals through healthy competition, prizes and financial incentives, or just accolades for having the most referrals in the business. Make referrals an important piece of your sales plan and incentivize and reward your team to get them by ensuring that you’re rewarding them accordingly.