In today’s tough business climate, business owners are realising that it is vital to cultivate new business without spending a lot of money. One of the most effective yet underutilised ways to develop new business is through the power of referrals.

 

Let’s first look at the importance of Referrals and why they are key to driving business:

 

  • The potential customer being referred has essentially already been “pre-sold” on your business. For the most part, this means that your referral source has already educated the prospect on your products, services/solutions and capabilities to do the job.
  • The act of being referred provides instant value and credibility to your organisation.
  • Referrals typically have a high return on investment and are very cost effective. You spend much less money marketing to referrals than you would typically in your other marketing efforts, as your referral source has already done the majority of the initial work for you.
  • Referrals are often more credible right from the start, fit your customer profile and generate strong revenue as well as long-term business.

 

It is important to remember that whether or not you have customers (product sales, one time or ongoing) or clients (more commonly associated with services, rather than products), in the end, what you have is people buying from people. There is no better way to attract new business than to have it referred to you by someone who is already doing business with you.

 

Let’s look at the facts:

  1. A cold lead, or an inbound lead from a random source, has a closing rate of around 25% to 30%.
  2. In contrast, you double your success rate with a referred lead, which traditionally has a closing rate of 50%. In this case, you are not taking any additional time with the business development process and probably less time to prospect, with have much better results.

 

With numbers like these, business owners often wonder why their Team do not ask for more Referrals. These questions are supported by the fact that in general, satisfied customers are more than happy to provide Referrals to their solutions providers. It is interesting to note that a study from Bain & Company a few years ago showed that while 87% of satisfied customers are happy to pass leads to sales representatives, only 7% of sales representatives actually ask.

 

You only have to stop for a moment and think about how often you make a buying decision because a trusted family member, friend or business associate has made a recommendation. This ranges from “How did you like the movie?” to “Who is your Accountant?” If you ask a friend about a new restaurant, the response will go a long way toward determining whether or not you choose to dine there. That same sentiment translates to business decisions as well.

 

The same conversations are happening with regards to your business. You are either being recommended, ignored or, worst possible scenario, dismissed, which leads to the first step in the Referral process.

 

Earn it.

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