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Acquiring New Business
The differences between a lead and a referral
I often hear the terms lead and
referral used in the same context when, in fact,
they are two very different things. Both are
used to acquire new business. Yet one far
outweighs the other in its effectiveness in
getting closer to a sale. Entire marketing
campaigns are built around finding new business
using leads. Likewise, sales processes build in
methods for finding new business using
referrals. One method, leads, works off volume
while the other, referrals, works off quality.
So what’s the difference between a lead and a
referral and how should
 a
company and, more importantly, a sales person
take advantage of each? Additionally, why is it
important to distinguish between the two? To
begin with, a lead and a referral should be
treated with different priorities since a
referral is at least one step closer to the
prospect than a lead. In other words, leads are
strangers, referrals could be prospective
customers. If a sales rep receives a lead, he
shouldn’t treat it like a referral. And more
importantly, if he receives a referral, he
shouldn’t treat it like a lead because referrals
have a higher priority than leads. Knowing the
difference between the two is vital to knowing
how each should be handled by a sales person.
One way to look at the difference is this –
leads are cold while referrals are warm. Quite
simply, referrals come from someone you know (a
client, business contact, colleague, friend,
etc.). Hence, you already have a connection with
the referred prospect and maybe even something
or someone in common before you even contact
them. This, combined with a little research on
the referral, will allow you to make a warm call
instead of a cold call. Leads often come from
purchased lists (magazine subscribers,
association members, industry mailing lists,
trade shows, etc) which have no personal
connection with you or your organization. Your
first contact with a lead is truly a cold call.
Leads usually contain less information about the
contact’s requirements and issues than referrals
and, therefore, need to be qualified further. A
lead may contain more detailed information about
the contact; such as age, income, revenue,
number of employees, SIC code, industry, and
more. But it won’t include other important
information about the needs of the contact or
their business, which is harder to obtain. If
you receive a referral, it’s not that difficult
these days to look up their business on the
Internet to find the same or similar information
that you would get from a leads database. You
can dig even deeper by subscribing to an on-line
database service (SalesGenie, The SalesTrack,
Hoovers, JigSaw, etc) and doing more research on
the referral to learn about their specific
details. In doing so, you’ll get as much
detailed information as from a leads database
while already possessing the important
information about the referral’s needs and
issues.
When contacting a referral, the relationship can
begin more quickly than with a lead since you
already have something or someone in common.
It’s much easier to get someone’s attention when
you start by saying, “Hi Art, this is Russ
Lombardo of XYZ Inc. Peter Johnson suggested I
give you a call to discuss your new expansion
into Asia. We helped Peter’s company with their
growth plans in Europe and since he knows you
from your previous work together (or personally
or as a vendor on a previous project or …), he
thought we should speak to see if our services
might be of interest to you.” This introduction
even works when leaving a voice message. Why?
Because of the connections you made between
yourself, Art and Peter.
If Art truly knows and likes Peter (which is the
assumption here), then he usually will honor
that connection and extend the same respect to
you. He also won’t want Peter to find out he
blew you off, acted unprofessionally or was a
jerk to you because, a) it may affect his
relationship with Peter (“Art, how come you
treated my good friend Russ so poorly?”) and, b)
Art really doesn’t know how close you are to
Peter and will err toward caution and take, or
return, your call.
When you reach a gatekeeper, consider the effect
this approach will have in place of a cold call.
Instead of the typical cold call scenario with a
gatekeeper (“Hi. I’m calling to speak to Art
about how we can help with…”), with a referral
you can say, “Hi. Peter Johnson, Art’s
friend/colleague/business associate/etc, asked
me to give Art a call about Art’s new project.”
The personalized connection alone will cause the
gatekeeper to think that this is not a cold
solicitation as much as a personal contact and
will pass you through (“Art, I have a Russ
Lombardo on the line. He said he’s friends with
Peter Johnson.”)
So, when and how should you get referrals? The
best way to get referrals is to ask your
customers. Don’t wait for them to give them to
you. They’re too busy to think that someone they
know might need your services or products. So
ask. A good time to ask for referrals is after
the sale and delivery or implementation of your
product or service. You want to make sure they
are first satisfied with what they bought.
Otherwise, they will be reluctant to refer you
to their colleagues and friends without knowing
for themselves if it was a worthwhile purchase.
When you make your “customer service” call to
check in to see how pleased they are with your
product or service, that’s a great time to ask
for referrals. If they are pleased, they should
be very receptive to giving you referrals.
When you do get a referral, be sure to also ask
your source what sort of issues, challenges and
problems they may be having. Many times your
customer may just say that they think you should
call another company/person they know that might
be interested in your offerings. But try to dig
deeper by asking why they believe they may be
interested. At a minimum they should say it’s
because they know they’ve been struggling with
something or have been growing and could use
help or something generic that you can use when
you make your first contact. You can even ask
for referrals from companies who you did not win
as a customer. “Thanks for considering us.
Perhaps we could do business in the future. In
the meantime, who else do you know that might be
interested in our offerings?”
Be sure to follow up with the person who gave
you the referral so they know how you made out.
If they are going out of their way to help you
by giving you this important information, then
they deserve to know the outcome, as well as
receive a big fat thank you for helping you out.
A personal phone call works great, but so does a
personal note or even an email thanking them
with an update as to what happened.
Some people like to pay for referrals with
money, discounts or some sort of incentive. This
may work in a B-to-C (Business to Consumer)
environment but I don’t believe it is really
appropriate in a B-to-B (Business to Business)
situation. Consumers like to get discounts or
incentives for doing things and if they provide
referrals to get them, then that’s fine. But I
can’t help but think about the calls I get from
companies selling items such as vacuum cleaners,
real estate services or rug shampooing who got
my name from my friend or neighbor. I know my
friend forked over my name, along with several
other unsuspecting victims, just so they could
get a 10% discount. The quality of these
referrals is typically poor.
In a B-to-B environment, you are faced with
other challenges. One is that many companies are
not allowed to take payment for things like
referrals. For instance, do you pay their
company the fee (how would THAT work?) or the
individual, who probably is not permitted to
receive personal payments from vendors (graft
and all that messy stuff.) You could make the
payment to their favorite charity or donate
something to a worthy cause, but this can be an
administrative nightmare and, in the end, have
little or no affect. My thoughts are that if you
are credible and have a good relationship with
your clients, then they should be willing to
provide good referrals to you with no strings
attached.
In the end, leads are easy to get and cost money
but require a lot more work to get into the
sales cycle. Referrals are harder to get but are
free and will yield much more success in your
customer acquisition process. When acquiring new
business, look to referrals as an important part
of your prospecting mix and be sure to treat
them differently than leads.
Good
luck and good selling!
Russ Lombardo
PEAK
Sales Consulting, LLC
russ@peaksalesconsulting.com
(702)
655-5652
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