Referrals as a Sales Strategy

Now that you know how to get a truly effective customer referral (see my previous post), here's how to make referrals the core of your sales process, and in the process render your marketing group largely irrelevant:

Step 1. Expand referrals beyond your customers. At the basic level referral selling means getting an existing customer to give you a referral to a prospect. However, you'll note that in my previous post, I gave three ways to establish the trust and credibility that's necessary before you ask for a referral. Only one of those ways depended upon the "referrer" being an existing customer; the others come into play elsewhere. For example, if you're credible and obviously knowledgeable about your industry, your suppliers and vendors will probably be willing to refer you to prospects.

Step 2: Expand referrals beyond your business. The most effective referrals come from people who already know and trust the sales rep, which means that many of your most effective referrals will come from people whom you know from outside the business world, such as relatives, neighbors and friends. I know a guy who built a billion-dollar business - and made himself one of the richest men in sales (and made several dozen of his sales reps into millionaires) -- based upon a chance contact that he made at a neighbor's wedding.

Step 3. Use referrals to get more referrals. Every person to whom you're referred knows somebody else who might be a prospect. Think of it this way, if you have 30 randomly-chosen people in a room, there's a better than 50 percent chance that two of them share the same birthday. (It's true!) Similarly, if you're trying to reach a particular executive, you probably know somebody who knows somebody who plays golf with her.

Step 4. Measure and tune the process. Use your CRM system to track the number of people asked each week, the referrals generated during the sales process and what actions were taken to leverage those referrals, such as e-mail, follow-up calls, etc. Measure the number of new customers, increases in cross-selling, as well as increases in revenue and profits. Trust me, top management will be amazed at the overall impact.

Step 5. Scrap your old selling model. Referral selling involves behaviors (like social networking) that run counter to traditional "turning prospects into customer" sales encounters. Many sales organizations suggest that sales reps gracefully extract themselves from sales calls that aren't likely to result in a sale. In a referral selling environment, the sales rep sees every call - even with people who will never become future customers - as the opportunity to discover new contacts.

Step 6. Downsize your marketing group. You just made them obsolete, just like I promised at the when I first began this series of posts on referral selling. Sure, you may want to keep a few marketing mavens around to do brand development and product packaging, but since referrals are now generating the bulk of your leads, you probably don't need them all that much.

The above (except for Step 6, which is my own soapbox) is based upon a conversation with Joanne Black, author of No More Cold Calling.