By Jonathan Farrington, The JF Consultancy

You probably know that I am a vociferous evangelist for referral selling: I have written extensively about it; co-presented with two of the world’s leading authorities on the subject, Joanne Black and Paul McCord, and regularly lecture on it.

Here are some interesting facts that may surprise you:

• 85% of all sales people do not generate enough quality referrals?
• Sales people who actively seek and exploit referrals earn four to five times more than sales people who don’t?
• Referral business closes and converts more than 70 percent of the time?

So, why is referral based selling so powerful?

Quite simply, because a referred customer is already pre-sold on the credibility of the sales person, their company and the relevance of the products/services sold. These types of opportunities are much warmer than a cold-call based opportunity because it maximizes the goodwill, inherent in the relationship between the referred customer and the referring person.

By association, sales people are consequently perceived in a different light compared to those that have made contact ‘out of the blue’. The costs of selling to a referred customer are reduced because they are easier to see, and are likely to be reasonably well qualified so that the probability for converting the business is much higher.

Generally speaking referred prospects will accelerate through the sales pipeline at a much faster rate than other types of opportunities, and they will also be more receptive towards providing future referrals.

What are the biggest barriers to getting referrals?

If asking for referrals has not been included and communicated in the sales process, this will deter sales people’s focus as they will see asking for referrals as a ‘nice to do’ rather than a ‘must do’.

This in turn usually means that there is no rigorous method for measuring and monitoring how many referrals are generated and what the conversion ratios are for closing referred customer business.

Energy goes where attention flows, so without specific attention to this sales people are unlikely to invest their energy in this direction. (Even if they are firm believers in the positive impact that referrals can create!).

For many sales people asking for referrals is uncomfortable because they feel unsure about how to do this effectively, and they aren’t confident they will get their desired response. If people don’t know how to do something and they believe that what they are doing will damage their existing relationships, then it’s better to avoid it all together. Additionally, if sales people make the common mistake of asking for referrals too early on in the relationship this can result in more refusals that further erode sales people’s confidence.

Therefore, to optimise the use of referral-based selling the following components are vital:

1. Asking for referrals and acting on them needs to be incorporated in the overall sales process
2. Metrics around referrals should be sought and evaluated on a regular basis, because this contributes towards furthering the rationale for generating them
3. Development and training needs to be delivered to the sales team so they can maximize the impact of referrals and feel confident with this skill