Referral Sales is Dead

in Small-business

Is referral sales really dead? Effective referral sales as we traditionally know it is rapidly changing ...declining to be exact. The reasons are two and simple:

1. Competition is fiercer than ever and

2. People are 'too' busy.

Towards the end I outline a strategy that can kick referral sales into high gear. Let's first examine each of the two reasons a little closer.

Competition is fiercer than ever: because the playing field is more competitive there has been an increase in business networking organizations, with a huge contribution from the internet. The weakness with this set up is that networking mostly happens amongst members, leaving untapped the biggest segment of the market . . . i.e. everyone else! Business is about building relationships first and the only relationships one builds in business networking organizations are those with members, which is severely limited in numbers compared to the market size.

About people being too busy: your clients have the good intention to forward you potential clients, however because most people are in a rush, too busy with work and the family and more, forgetful and distracted you never benefit from those many illusive prospects that never seem to materialize.

The reality is that the need for referrals by potential customers is as big as ever. Why? Because generally life is becoming more expensive and peoples' earning power is becoming less. This phenomenon is often described in the media by the richer getting richer the poor poorer and the middle class slowly disappearing. So what does this mean? It means two things:

1. That when life gets more expensive your money doesn't go as far and you make the extra effort to ensure you get your money's worth. The best way to reassure yourself that you will get what you pay for is to ask for advice from someone you know, like and trust as to who is guaranteed to satisfy your need or make your 'pain' go away.

2. When life is tougher there are more rogues around who disguise themselves well. Somehow we are never street-smart enough and trust referrals sometimes more than our instincts so we always ask for the advice from the selected few who have made it into our circle of trust.

Unfortunately for the average business owner only random and sporadic potential clients walk into his or her business net. Most business owners who are average at most are satisfied with the occasional new customer that keeps them going, and are content with just that i.e. being average at best. Why do only a few potential clients show up? Because the business owner is essentially divorced from most people and thinks that business is good because a few sales are regularly made, keeping the 'ship' afloat. Of course there is the competition as well, taking away the bulk of potential sales.

However the successful business owner who already reigns in his or her domain or the new business owner who goes the extra mile to become truly successful, knows that numerous potential sales can be secured by making the effort to reach unknown potential clients in the market. Because they are unknown the most effective way to find them is through persons who are known to both business owners and potential clients. These intermediaries are called contacts or agents because they are linked to both parties and are the key to bringing them together. Most often contacts are the business owners' existing customers, and to potential clients they are known, liked and trusted. To maximize the number of referral sales there needs to be a reward based referral marketing program in place. This program must include the rigorous application of a methodology and automated process. There is a system to referral marketing; it is not an ad hoc process as many people believe. A diligent approach will maximize your valuable time and lead to many more successful leads. There are many books and articles that address this topic and offer suggestions; however I have not found anywhere a comprehensive a to z referral marketing plan . . . so I have developed a referral sales plan that covers 10 salient tactics in detail. A summary of key tactics is outlined below:

Prerequisites before starting with a Referral Marketing Program: Business Theme, Personal Determination and Early Start

Step 1: Develop your communication content to educate your referral sources how your referral marketing program works and how they will benefit

Step 2: List names of people who know, like and trust you and store their contact details for easy retrieval. These are your most important contacts, sometimes also called agents who will refer you potential clients

Step 3: Ask your best clients for referrals two to three times a year and make this a habit; expect every client to provide you at least one potential client. Persuade and encourage your contacts to refer you potential clients by using communication content in Step 1

Step 4: Before you consider doing business with your prospects, make sure they are MAD; does your prospect have the Money, the Authority and the Desire to buy?

Step 5: Develop a procedure for your Contacts to send you referrals (making it very easy for them will make it much more likely they will forward you potential clients any time in the future)

Step 6: An important incentive: develop a reward strategy; every contact should be rewarded for successful leads. Offering a referral fee (or equivalent) will highly increase the probability that the next potential customer will come your way

Step 7: Track your referral marketing process and record key data

Step 8: Develop a methodology for requesting, collecting and managing your testimonials from satisfied customers. The best time to ask is immediately after the sale

Step 9: Track the results of your referral program. Referrals are real and a referral system is the most effective type of marketing for any business

Step 10: Self awareness as to what works and what doesn't. Believe in your referral program while making improvements and adjustments as you excel

Step Nota Bene: Follow intent with ACTION, always!

You can download a detailed free copy of the plan from Sales1Up (pdf format) at

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Moreno Perazzolo has 1 articles online

Moreno Perazzolo B.Sc MBA
Creator of the online referral sales tracking and management system, designed to harness the referral power of all the people the business owner knows, thereby increasing sales and profits.

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Referral Sales is Dead

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This article was published on 2010/04/04