Creating an active referral program is vital to small businesses, but few owners understand what drives referrals or how to earn the right to ask for them.
There are two types of leads: Passive Leads and Active Referrals.
Passive Leads
A passive lead is generally not much more than a curated list that a salesperson can use to make cold calls. Some sales experts believe that all passive leads should be handled using a more automated market-led go-to-market strategy; however, many businesses use salespeople to try to close a sale based on passive leads.
When I was an Invisible Fencing dealer, the franchiser would use a blow-in postcard ad in dog-related magazines such as Dog Fancy. Prospects would add their name and address to the postage-paid postcard and mail the card back to the Invisible Fencing headquarters, who would then sort them by geographical area and send them to us dealers for follow-up. While some of the prospects were genuinely interested in learning more about the product to see if it would solve their pet containment needs, most of the time, the prospects who submitted the postcards were just curious about the product and its cost and never really intended to buy it.
Today, many Business to Consumer (B2C) brands use content marketing to provide something of value to a prospect in exchange for an email to enter the company’s value ladder, or market-led sales funnel. As part of my research in writing a post, I often request information from businesses and have no intention to purchase, so purchase intent is therefore not a hallmark of passive leads.
Large companies often use a sales-led go-to-market strategy and sell their products to other businesses in what is known as Business to Business (B2B) sales. However, some of the same sales-led strategies can also be applied to B2C sales.
Typically, a large company has a marketing and a sales department. The marketing department’s job is to create passive leads. These passive leads are then passed along to the sales department for a salesperson to complete the purchasing process. Many professional salespeople learned their craft working for large companies and relied on a flow of passive leads to make calls. Few salespeople know how to do their own prospecting and simply rely on a stream of passive leads provided by marketing efforts.
Active Referrals
Active referrals are very different from passive leads. An active referral is more than just a lead since it comes from a trusted source. An active referral is the direct result of the business or salesperson actively engaging with an existing client who is aware of the business offering and the quality of their deliverable, in order to solicit the client to seek out contacts in their network, who would also be interested in what they offer and to facilitate an introduction.
If you do not ask, you don’t get. People by nature want to help, but they don’t often volunteer, so sometimes you just have to ask for a referral.
If you rely solely on passive leads and see them as an opportunity to close a single sale, you limit your expectations. Relying on passive leads only yields one sale. Instead, great salespeople know that a lead is an opportunity to create a relationship that will, in the end, yield multiple sales through the use of an active referral program.
Salespeople that work with passive leads try to close the deal. Closing a deal is a limiting view. Instead, completing a deal should be the opening of a long-term relationship with a client that will provide multiple referrals through an active referral program.
Nearly every client I work with includes the concept of word-of-mouth referrals in their marketing plan. This is because we all intuitively know that a referral from a trusted source establishes an immediate level of trust, allowing you to win more deals with less effort. Prospects will always validate the claims of a salesperson. When the referral comes from a trusted source like a friend or colleague, the salesperson has an elevated level of credibility.
However, have you ever given much thought to why people give referrals? In large part, referrals result from an exceptional buying experience that often extends beyond the purchase. If the customer felt manipulated by the salesperson, or coerced to make the purchase, and never heard from the salesperson after the sale to verify their satisfaction, it does not matter about the quality of the product or service offered; the customer will never provide a referral since the buying experience was poor.
When to Ask for an Active Referral
Referrals should not be something you do once the sale is complete. In fact, asking for a referral when the client is committed to buying is not the best time to do it. If you simply ask for a referral after a sales cycle, you may, if you are lucky, get a lead that the client has had a recent experience with. But at this point, you have not yet earned the right to ask for a referral.
Instead, an active referral program should be an ongoing part of your lead generation process and not just something you ask for at the end of a sale. If the client meets a person who could benefit from your offering a few months down the line, do you really think the client will make a mental note to contact you to share the referral? No. That’s why you need a process to continue to actively solicit referrals from your current and past clients.
Place a note into your CRM or calendar to reach out to the client approximately every three to six months to check in and see if they are still delighted with your solution. If they have questions or comments about the value of your offering, be sure to be responsive by addressing them quickly. Being proactive about their happiness demonstrates the continued value you have for them and gives you the right to ask for additional referrals.
How to Ask for an Active Referral
There is a right and wrong way when it comes to asking for a referral. Never call and say something like, “Hey, remember me? I sold you [x]. Got any new referrals for me?” You need to prove to the client that your personal value as a salesperson is greater than what your business’s product or service has done for them to earn the right to get a referral from the client. Each contact with the client needs to include some additional value to earn the right to ask them for any additional referrals.
Referral requests should not be phrased in such a way that will allow the client to answer with a simple yes or no. Therefore, you should not ask for a referral by saying, “Do you know anyone that would be interested in what we have to offer?” Such a request will often receive a “No one comes to mind, but I’ll call you if I come across someone” response. Of course, you know that call will never come.
Instead, make the question open-ended and ask it this way. “Given what you know about our offerings, who do you know who would also be interested in what we offer?” The use of “who do you know” implies that they know someone and can’t be answered with a yes or no, while “do you know anyone” makes no assumptions and can be answered with a simple “no.”
Facilitated Introduction
When it comes to referrals, you need to be clear on what kind of referral you want. Do you just want a name, phone number, and email? Or do you want them to facilitate an introduction? Without an introduction, you are just a little better than if you were to get a passive lead. To leverage the power of a referral, you need the client to facilitate an introduction with the prospect they are referring. If you ask for an active referral, and the client shares just a name, ask them to introduce you via email to pave the way for a discussion with the prospect.
If, after two days, the client has yet to send that letter of introduction, send a reminder email to the client or offer to draft the introduction letter. Your client is often very busy, and you need to make it super easy for them to make introductions.
Supercharge a Facilitated Introduction
Many top salespeople use a compensation strategy to incentivize the client to come up with active referrals that generate a sale. Let’s face it, customer acquisition is a real cost to businesses. Since an active referral program should be part of your business’s customer acquisition strategy, why not offer the client some of that budget if it secures a new deal due to their effort?
While it is often inappropriate to offer cash for active referrals when a client helps to facilitate an introduction to a new client, a strategy worth trying is to precede any discussion of your active referral compensation program by getting the client to share the name of their favorite restaurant and charity.
Once they share that information, here is how you can share your active referral program with your client. Say, “We would like to send you to [their favorite restaurant] as our guest. We know that you are familiar with what we do and our quality. I’m sure that you know many people in your network that could benefit from what we offer. For every facilitated introduction that you do, which results in a sale with a minimum value of [x], we will give you a gift certificate in the amount of [y] to your favorite restaurant.”
If they can’t accept direct compensation for a facilitated introduction resulting in a sale, you can offer to donate in their name to their favorite charity.
What makes these techniques so powerful is the fact that it is personal and memorable. Just an email and phone number are not worth compensation. Only active referrals where the client facilitated an introduction should warrant any kind of compensation.
It is recommended that after you share your active referral compensation program, you follow up the discussion by sending the client an email with the details of your program.
This active referral compensation program works well with other industry salespeople who offer related or complementary products or services. It works best when you earn the right to ask for a referral by proving that you are taking an active interest in what they do and the type of clients they have. By investing in their success and cultivating relationships, you will have earned the right to ask for referrals. When they see that you are genuinely interested in them, they are more likely to help you.
Do you have an active referral program and client compensation plan?
