Most of us think we know what a referral is since referrals have been around forever as the holy grail of how to grow your business in the easiest way possible. But most don’t understand what makes a referral a referral which leads to lower closing ratios, mislabeled leads, and incorrect assumptions about how your business is growing. All of this leads to missing out on potential new clients and revenue growth. So, let’s set the record straight on what a referral truly is and what it is not.
We’ll start with why you should care about getting the definition right and then define referrals, especially as we unpack other sales terms that are often confused with referrals. Then we’ll dig in to overcoming lower closing ratios.
Why the Why Matters
Let’s start with why we care. We love referrals because how easy they turn from a prospect to a client. When you are referred to a new prospective client, you start with an advantage. That advantage is trust. You’ve probably heard about a continuum that exists in sales called the know, like, and trust factor. While in the process of deciding to hire you, the prospect moves through these three stages… know, like, and trust.
Know, Like, and Trust Factor
First, while the prospect is becoming aware of what you do and what problems you solve, they are getting to know you.
Next, the prospect starts the process of deciding if they can see themselves working with you. Essentially do they like you enough to let you help them.
And finally, they move to the final stage which is where they decide if they can trust you. It’s in this stage where your advantage begins when you have a referred prospect. A referred prospect begins a relationship with you already in this stage, the stage of trust. Now how much trust they have in you really depends on who much trust is transferred to them by the person who recommended you. Which means, the more they trust their friend to recommend and refer someone to them, the more they trust the person who is referred.
It looks something like this. I need an architect for the home renovation I plan to do. I ask my friend Simon if he knows of someone. Simon knows exactly who can help me, an architect named Cheryl. As long as I trust Simon, then the trust Simon has in Cheryl will transfer into me trusting her. I’ll still need to get to know her and decide to work with her, but I already trust her on some level before even meeting her.
This is all set in motion based on the relationship I have with Simon. Because I was referred to Cheryl, she and I will move quicker through the buyer’s journey phase to the new client stage, which saves time. In addition, since I already trust Cheryl, I will typically be less price sensitive since I have already assigned value to Cheryl based on trusting Simon.
Now that we know why referrals are so valuable, let’s focus on getting the definition right.
Defining a Referral
There are two components that make a referral what it is and both have to be present for a referral to be a referral.
Those two components are:
- Connection
- Need Identified
Connection
When a referral source connects you with a prospect – typically done over email but can be in a group text thread or in-person – two things happen. First, you are connected to the prospect which puts you in the driver seat of knowing who the prospect is and being able to follow up. Second, and most important, the trust the prospect has in the referral source is transferred to you when the connection is made.
Need Identified
The prospect needs to know they are the prospect, they’re aware of their problem and they’re willing to take steps to fix it. This need is why they’re willing to be connected to you and learn about how you can help them. More than likely, during a conversation with your referral source, their need or problem was revealed or uncovered and the referral source shared they knew who could help them fix it. Which means, you – as the solution provider – were discussed as the one who could help the prospect.
Referral Example
Here’s an example of a referral that I would receive in my business. An email arrives in my inbox from a referral source with a prospect copied on it. The text of the email will be something like this:
“Stacey, I’ve copied John on this email. He and I were talking the other day about his need for more referrals. Of course, I instantly thought of you and shared with John about the work you do. Please connect to schedule time with him so he can learn more.”
Now that you understand the two components of a referral, I bet you realize it’s been there all along but now you can identify more clearly as to exactly why a referral is a referral. What we need to address now is the other sales terminology that has been diluting the definition of a referral.
Commonly Mis-Labeled Leads
Many sales terms, or sales lingo, generalize different types of lead generation and are often labeled as referrals. Unfortunately, when these sales term are grouped together – because they seem similar – and labeled as a referral, it confuses the definition and dilutes the power of a referral. Common sales terms such as word-of-mouth buzz, introductions and warm leads are often confused and mis-used as referrals all the time. Consider, there’s a difference in being introduced to someone which is not the same as being referred to them. Let’s take a closer look at all three.
Introduction
An introduction is when you are connected to someone by someone else. But even though there is a connection, something is missing. What’s missing is that within the introduction, the connector doesn’t state that you should explore working together with the person they are connecting you with. They typically use statements like “this would be a great connection” or “someone you should get to know” or my least favorite word, synergy, as in “there would be good synergy between you two.” While you have been connected, what’s missing is the need identified. In the case of an introduction, we aren’t sure who is the buyer or prospective client.
Now keep in mind, some introductions are just that, meant to introduce you to someone else. But many times, there’s a hidden referral in them which you might miss if you don’t recognize it for what it is, as an introduction and know how to flip it into a referral.
Word-of-Mouth Buzz
I’m sure you’ve been excited when someone told you there were talking about you to someone else and they told them they had to hire you. It feels awesome to know your work and service has been validated and valued. But you did not receive a referral. What you received was word-of-mouth buzz. When people tell you that they have mentioned you or talked about you, and even passed along your contact information, it is still not a referral. Why? Can you tell what’s missing?
While the need was identified, the connection between you and the prospect wasn’t made by the referral source so you don’t know who they were talking to and you aren’t in the driver’s seat to follow up. Word of mouth buzz is so close to being a referral because there has been a need identified, but no connection has been made. Word-of-mouth buzz is the easiest of all three to flip into a referral.
Warm Lead
A warm lead is when someone tells you that they know a company who needs to hire you but then do nothing further. They don’t make a connection between you and someone at the company and you aren’t sure if the company knows they need to hire you or anybody.
Here’s an example of a warm lead.
“I know that XYZ company could really use your help (or product or service). The contact is Tom. Give a call.”
What makes a warm lead not a referral – and can sometimes be questioned as a lead – is that both components are missing, no connection and no proof a real need has been identified.
The importance of knowing the correct definition of a referral and how it is different from the other three similar, but different sales terms is two-fold. One, it helps you realize what you did receive so you are better equipped to guide a prospect to a yes. And two, it allows you to try to flip the non-referral into a referral with the referral source. Both of these allow you to close more prospects into paying clients.
Overcoming Lower Closing Ratios
The clarity you have when you know exactly the type of lead you have received is empowering because it gives you clarity of direction. And the steps you take impacts the success of your client generation.
Guiding the Prospect to a Yes
When you know what type of prospect you are dealing with, you have a better chance of guiding them from where they are in the buyer’s journey to becoming a paying client. When you know the type of lead they are, then you know the mindset they show up with, if you are starting the conversation from a position of trust, if they even know if they have a problem you can solve or not and any possible objections. With this knowledge, you can do a better job of guiding the conversation and helping them determine if they have a problem you can solve and if you are the fit right to serve them.
You would do yourself a disservice if you showed up to a first meeting with someone introduced to you and you used language meant for a referred prospect. Or even worse, if you’re meeting with someone referred to you and you treat the meeting like they were just introduced, you’d not use the right process which allows you to start from a position of trust (as you do with referred prospects). How you approach the meeting and the language you use matters in terms of guiding that prospect – whether introduced, a warm lead or referred – to becoming your next client.
Flipping Non-Referrals into Referrals
The other reason to be clear on the type of prospect you have received is to use the correct language with your referral source so you can flip the warm lead, introduction or word-of-mouth buzz into a referral. We refer to it as “saving lost referrals” when you know how to flip an almost referral into a referral.
In the moment of being told by your referral source that they mentioned you to a friend of theirs who needs to hire an architect, I want you to know what to say to your referral source so you can turn that word-of-mouth buzz into an actual referral.
It starts with being able to spot what you are in fact receiving, then knowing the language to use to fill in the gap of what’s missing. If you’d like to learn more about the flip scripts, then check out our Saving Lost Referrals resource at www.staceybrownrandall.com/saving-lost-referrals.
Stacey Brown Randall is the multiple award-winning author of Generating Business Referrals Without Asking, host of the Roadmap to Grow Your Business podcast and national speaker.
She has had the privilege of helping well-known corporations and franchises, but her focus is on small business owners, solopreneurs and sales professionals.
Stacey’s programs are uniquely tailored to help you take control of your referrals, your client experience and crush your goals.
Stacey has been featured in national publications like Entrepreneur magazine, Investor Business Daily, Forbes, CEO World, Fox News and more.
She received her Master’s in Organizational Communication and is married with three kids.
You can find her at www.StaceyBrownRandall.com.
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