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How to Do Referrals the Right Way

By John Graham

If sales people should avoid asking for referrals, then how should they leverage their customer relationships to grow their business?

What sounds good doesn’t always work very well
If referral programs were as successful as their advocates claim, there would be so much new business that the need for prospecting, marketing, advertising or selling would disappear. It’s blatantly obvious, however, that this isn’t the case.

For the most part, “asking for the referral” is a con job on salespeople. Rather than give them the marketing and sales support needed to attract customers, the onus is placed on them to schlep around to find someone who will listen to their story. In other words, most salespeople who say they “work only by referrals” don’t eat too well. Sure, a small percentage may actually achieve this goal, but to suggest that most salespeople should expect to have a high level of referrals is fantasy.

There may have been a time when customers were willing to give salespeople names of friends and associates, but not today. We don’t want to do anything that might disrupt a relationship. What if the salesperson offends our referral, even inadvertently? Will the recommendation come back to haunt us? What if the friend buys and is then disappointed? How will that reflect on us?

Why asking for referrals hurts sales
Is there ever a good time to ask for a referral? To make it as easy as possible to understand, the answer is no. That’s right. Never, ever ask for a referral. Here are the reasons why:

1. Asking for referrals harms the customer-salesperson relationship. More often than not, the salesperson asks for referrals just as the sale is concluded. “There’s just one question I would like to ask you, Ms. Yeager, who of your friends and associates could benefit from my services?” However, the question is phrased, it sends a powerful message: Am I being used?

Worse yet, it places the customer in an uncomfortable position of having to do something more for the salesperson. “I have just given the salesperson the order and now she wants me to do more for her. It should be the other way.” Asking for a referral just after the deal is done is courting disaster. It sends the message that the sale is all about the salesperson, not the customer.

2. Asking for referrals sends the wrong message. A few days after buying a new car––but before I took delivery––a letter arrived from the salesperson congratulating me on my purchase. I appreciated the gesture––until the last paragraph. It was there that the letter lost its effectiveness––the salesperson asked for referrals. I had not even taken delivery on the car and I was being asked to make recommendations. But even if I had been driving the vehicle for a few days, asking me to be a shill for the salesperson is insulting.

How much more effective would it have been if he had sent a letter congratulating me on my purchase, expressing his personal commitment to serving as my liaison and advocate with the dealership. How would you respond if salespeople described how they were going to serve you and then did it? You’d be comfortable recommending them to just about anyone.

3. Asking for referrals can blow the opportunity to write new business. This is, by far, the major reason why referrals fail. The customer gives you a couple of names or even contacts the people on your behalf. While this may seem to give you a proverbial leg up, it doesn’t mean you’re going to get the account or make the sale––or get an appointment.

The referral problem
Just because you receive referrals doesn’t mean they are either interested or ready to buy––even though they are qualified prospects. It’s the process that’s the problem. Here’s what happens: You give me a referral when I place the order, renew the policy or make the purchase. Then, a day or two later, I call the person to get the appointment. In reality, it’s little more than a cold call. I may get a courtesy appointment. The chances of closing the sale are diminished.

What does all this mean? The goal of the astute salesperson is to find ways to create customers––not just to find someone to make a pitch to. It’s to prepare the soil properly so the seed (lead) grows into a customer––someone who places the order.

Turning referrals into customers
It’s absolutely true that customers can be a source of new business. And implementing a process that achieves this goal can maximize their effectiveness.

Here are some suggestions for accomplishing this objective:
1. The post-sale letter. After a sale, write a letter to the customer expressing your personal appreciation for the order and indicate you will be staying in touch regularly. If the customer doesn’t already receive your newsletter or e-bulletin, let them know they will be receiving them.

Then add, “Most salespeople ask for referrals at the time of a sale or in the days that follow. That’s not what I do. I want you to be satisfied with your purchase, with me and with our company. I recognize this takes time. Some months from now, I will ask you for suggestions of those who might benefit from receiving my newsletter and e-bulletin and seminar information. My approach is to give them an opportunity to get acquainted with what I do and how I work before contacting them. I find this is a good way to build my business.”

2. The prospect contact letter. After receiving the names from satisfied customers, the next step is to start the cultivation process. The first contact letter includes who gave you the person’s name, the length of time the individual has been a customer (very important to show satisfaction), and how you are helping the customer. The letter then indicates that you will be staying in contact with the prospect and that they will be receiving information regularly. Finally, invite prospects to contact you if they have a need.

3. The 90-day call. While it might be longer, it should certainly not be sooner than 90-days. The goal is to let the prospect “get acquainted” with you and what you do before making personal contact. The call may result in an appointment; if it doesn’t, let the person know you will continue to stay in touch. If an appointment doesn’t lead to a sale, let the prospect know you will continue to remain in contact.

If it seems as if this process is demanding, requires careful management, good planning and consistent execution, it does. That’s what makes it work. Without it, it’s just business as usual.

It’s so much easier just to ask the customer for names and hope to get one or two. If you luck out, then make the calls and keep your fingers crossed there will be a live one.

Whatever else this is, it’s an inefficient way to prospect. If it were so successful, then why are salespeople always asking for leads? It doesn’t work and that’s a fact every salesperson knows too well.

Sure, there are exceptions. But that’s the point: they are exceptions. Of course, what’s needed is a systematic approach to prospecting, one that operates in the background day-in-and-day out, and, more importantly, one that is successful.

John R. Graham is president of Graham Communications, a marketing services and sales consulting firm. He is the author of The New Magnet Marketing and Break the Rules Selling, writes for a variety of business publications, and speaks on business, marketing and sales topics for company and association meetings. He is the winner of an APEX Grand Award in writing and the only two-time recipient of the Door & Hardware Institute’s Ryan Award in Business Writing. He can be contacted at 40 Oval Road, Quincy, MA 02170 (617-328-0069; fax 617-471-1504); j_graham@grahamcomm.com. The company's web site is grahamcomm.com.