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July 26, 2010 / Tony Arena

How to Win Customer Referrals…in 6 Easy Steps

Few skills are more important to sales success than getting great customer referrals.

Research shows that well over half of the sales opportunities generated as the result of a referrals end in a sale.

And that’s not all.  Sales generated as the result of a customer referral tend to be larger on average than sales resulting from other activities.

That’s right.  Customer referrals mean easier, faster sales with more money per sale. Sound cool?  You bet.

This post explains EXACTLY how to win great customer referrals… in 6 easy steps.

STEP #1: Understand the Referral Concept

If you don’t understand the basic dynamics behind a referral, there’s not a snowball’s chance on the sun’s surface that you’ll get any good ones.

Most salespeople wrongly believe that a referral is when some customer is nice enough to give you the name of another potential customer.  Totally wrong!

A referral is when one person connects a business contact with another business contact, in the hope that they will both benefit.

So referrals have nothing to do with being nice. Referrals are all about risk and trust.

A referral means that your customer is willing to risk his or her friendship or relationship with others in order to give them to you as a business lead.

Therefore, when customers refer friends or business contacts, they trust you to deliver top-notch products and services.

Referrals are more effective than other lead generation methodologies because the referrer, by making the referral, is eliminating the key uncertainties that blocks a sale in the early stages, such as “can this person be trusted?” and “is speaking with this person worth my time?”

Lacking these blockages, the sales process builds momentum more quickly, which results in a higher closure rate.  That’s why it’s so important to your sales success to have plenty of them!

So, now that you understand referrals, let’s get started earning them.

2: Position Yourself For a Referral

How do you get a referral? Put simply, you must ask. However, most sales reps ask the wrong people, at the wrong time and in the wrong way.

Reps typically ask new customers for referrals, when the first sale is closed, and with some stilted inquiry like: “do you know of anyone else who needs our product or service?”  Such requests seldom, if ever, result in sales opportunities because sales rep has not earned the customer’s trust and thus has not earned the right to ask for a referral.

At the point of sale, the customer has shown a willingness to do business with you, but that’s all. The customer is already taking a risk by buying from you. Why would the customer want to compound that risk by recommending you to friends and contacts?

Best case, asking for referral at the point of sale will make the customer feel awkward. Worst case, the customer will think you’re greedy. If you follow up a day or two later with a telephone call saying “hey, how about those referrals I asked you about?”, you’ll ruin what’s left of the relationship.

Rather than ask for a referral at the point of sale, you should use a post-closing conversation describing the actions that you will be taking in order to earn the trust that would naturally result in a referral. Compare the following two conversations.

INEFFECTIVE:

  • Customer: O.K. we’ll buy.
  • Salesperson: Great! Gee, do you know anybody else who might buy?

EFFECTIVE:

  • Customer: O.K. we’ll buy.
  • Salesperson: Great! Thank you so very much for being my customer. We’re going to perform for you so phenomenally that you’re going to be completely amazed and delighted. But here’s what I want you to do for me. I want you to be thinking of a few people who you think should be doing business with us, if we are incredible as we say we are. And after I know that you know that we’re the absolute best, I’m going to remind you of this request, but before you give me any names, I’m going to bring you a new customer for your own business. Is that fair enough?

Of course, the “effective” script only works if you plan to truly delight the customer, so that why we need to proceed to…

3: Earn the Right to ask a Referral

The only way to earn a great referral is to gain the customer’s trust while reducing the customer’s risk. There are five ways to do this.

  1. Provide incredible service. Be certain that you and your company, provides the absolutely highest level of service in your industry. The resulting credibility greatly reduces the risk of doing business with you.
  2. Be proactive about their needs. Anticipate what they’re likely to want and arrange ahead of time to have it taken care of. Example: Lexus will pick up and drop off your car at your office, leaving you a rental in case you need to drive somewhere during the day.
  3. Be a provider of extra value. Find something that you can do for the customer that’s outside of the expected products and services. Example: an e-mail newsletter providing inside information about your customers’ industry.
  4. Give referrals to your customers. Show your customers where they might be able to get new business. But do it in a way that lets them know that you don’t necessarily expect anything in return. If you try to do referrals “tit-for-tat,” you’ll end up looking manipulative.
  5. Become friends with your customers. Meet them socially, at business networking events, on the golf course, at informal lunches, or anything else that’s not strictly business. Customers who are your friends naturally want to put you in touch with their own friends.

Does the above sound like maybe I’m asking for more than an “easy” step?   Well, it’s not, because frankly you should be doing all of that stuff anyway… regardless of whether you want a referral.

However, if you are truly creating a delighted customer, you still haven’t QUITE earned the right to ask for a referral.  For that, you need the next step…

4: Confirm that You’ve Earned the Referral

Now that you’ve have a relationship with the customer, and believe that you’ve provided exemplary service, you MAY have earned the right to ask for a referral.

The best way to do this is to contact the customer and ask, not for a referral, but for a simple testimonial. Tell the customer that you’d like to share his or her opinions and perceptions with prospective customers.  If the customer agrees, ask questions like:

  • What could we be doing better?
  • What have we done right for you so far?
  • What would it take for you to refer other people to us?

Needless to say, you should listen very carefully to the responses and write down any comments that might prove valuable in your sales materials. But you are also looking for the series of “green light” answers which indicate that you’ve built up enough trust that it’s fair to expect some referrals.

When this is the case, you can solicit referrals by asking (with a smile). “So, who are you thinking of referring to us?” Chances are that the customer will laugh and then give you a few names.

Of course, if the customer launches into a set of complaints, you know that you’re not in a position to solicit referrals.  In that case, you need to go back to Step #3… and really do it this time.

But let’s suppose that you HAVE earned the right to ask.  You still must ask the right way, and for the right thing.  That’s why you need…

5: Ask for an Action, Not a Contact!

If all you get from your existing customer is some contact information, you’re just setting yourself up for a cold call. While you can always say something like “Joe told me to contact you,” such phrases are used so frequently that they’re meaningless. For all the contact knows, Joe might have given you his or her name just to get rid of you!

A referral is only a GREAT referral when the referrer takes some action to bring you together with the contact. So, rather than asking for a name, you must ask the potential referrer to call or e-mail the contact, and then get back to you to confirm that the action has been taken.

This is important because, without this confirmation, you won’t know whether you actually have a useful referral.

So far, so good, right?  You’ve got your customer making a call, or sending an email.  You’re almost there, but there’s still one more thing, to make sure that the referral moves forward towards a sale…

6: Follow up, Follow up, Follow up

IMPORTANT: You MUST follow up three times with every referral.

First, contact the referrer within one day of the conversation and express gratitude for the referral. This is not only polite and appropriate, it allows you to gracefully remind the referrer of the commitment to make the referral.

Second, after you have contacted the person to whom you were referred, send another thank-you e-mail and give a status report on the relationship. (E.g. “You were right; Fred is a really interesting guy.”)

Finally, if the referral does result in a sale, send another thank-you or even a small gift item. It’s a truism in life as in the movies that people want to know the rest of the story.

That’s it, folks!  How to get a great referral, and send it quickly into your sales cycle.

SUMMARY:

  • STEP #1: Understand the Referral Concept
  • STEP #2: Position Yourself For a Referral
  • STEP #3: Earn the Right to ask a Referral
  • STEP #4: Confirm that You’ve Earned the Referral
  • STEP #5: Ask for an Action, Not a Contact!
  • STEP #6: Follow up, Follow up, Follow up

One final thought.

Think of referrals as your sales “report card.”  The number of referrals that you get — and their quality — tell you how well you are doing at building business relationships and friendships with your customers.

If you aren’t getting any referrals, it means that you’re doing a poor to mediocre job. If you’re getting lots of referrals, you’re doing a great job.

Originally posted on: http://blogs.bnet.com/salesmachine/?p=9979&tag=col1;post-9979

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