How to Generate Your Own Leads.
As I've pointed out here and here and here, most B2B marketing activities waste money. Even when marketing groups are doing what they're supposed to be doing - generating qualified leads - they do it in a way that's inherently wasteful. For example, advertising and direct mailing often have response rates in the low single digits, and even then few of those respondents actually turn into paying customers. As any top executive can tell you, it's absurdly easy to spend wads of dough on marketing and still not generate sales.
And that makes the sales group look bad. If you're publicly held, just look at your company's balance sheet. There's an expense line labeled "SGA" ("Selling, General and Administration") which bundles up the cost of both the sales group and the marketing group. Every dollar that the marketing group wastes on activities that don't generate sales makes the company less profitable - with Sales (as in "SGA") taking the brunt of the blame.
But every company needs to generate leads, right? And high-cost, low-impact marketing method is the only way to do it, right? Wrong and wrong. In many companies, the sales team generates the bulk of their sales leads, simply by developing good customer relationships. It's called "referral selling" and it's not the kind of thing that you're likely to hear about from the MBAs at corporate headquarters.
Joanne Black, author of No More Cold Calling, cites research showing that well over half of the sales opportunities generated as the result of referrals end in an actual sale. That's an insanely higher conversion rate than leads generated through traditional demand generation marketing. What's more, sales generated through referrals tend to be larger, on average, than sales resulting from other lead generation methods. In other words, referral selling simultaneously increases revenue (through bigger average sales) and profit (through a lower cost of sales).
Why is referral selling so effective? Simple. When you begin into a customer engagement with a true referral, you've already eliminated most of the objections that the customer might use as an excuse not to buy. Because the prospect's colleague has already recommended you, the prospect doesn't wonder whether you can be trusted or even whether speaking with you might be a waste of time. You hit the ground running with every sale, thereby creating more momentum, with the final result of a much higher close rate.
My next few posts will explain exactly how referral selling works. If you want to quickly and sharply increase your commissions, you're gonna like this stuff. Stay tuned.