Question:

We have hundreds of satisfied customers. How do we encourage our clients to give us referrals, and should we establish a formal reward system for referrals?

Answer:

You are wise to focus on referrals – they are the life blood of any sales organization.

I am curious – do you need to encourage your clients to give more referrals, or do you need to encourage your salespeople to ask for more referrals?

Let’s start with your sales professionals asking for more referrals. When you think about professional athletes, their organizations keep track of their stats. In fact, you can Google George Brett and see statistics from his entire professional baseball career.

Most sales professionals would be horrified if their stats were on the internet for anyone to see! They would be particularly embarrassed if there was an accurate count of how often they asked for referrals vs. how many referrals they actually received.

Keeping track of referrals asked for, referrals received and closed business from referrals are  key performance indicators (KPIs). Knowing your respective conversion percentages can be extremely powerful when seeking to improve upon them.

Encouraging your salespeople to ask for referrals is important and holding them accountable is more important. This is the only part of the equation they have 100% control over. Once we track asking, receiving and closed business from referrals, we can determine the effectiveness of their referral process. This becomes particularly meaningful when you have multiple salespeople. Comparing these KPIs will allow you to share the best practices among your sales group.

Many sales professionals have significant “head trash” as it relates to asking for referrals. Some believe it is a waste of time, while others believe it jeopardizes the relationship. Still, others don’t give referrals themselves.

Lack of an effective technique when asking for referrals hurts most salespeople. Getting into your clients “mental database” is imperative. Most sales professionals are too vague or ask closed-ended questions when asking for referrals, leading to lackluster results.

As far as rewarding your sale professionals for asking for referrals – one would think additional commissions for additional referral business would be sufficient. However, most salespeople are not motivated by this reward.

Having contests or drawings based on the number of referrals asked, tends to work better. There is competition, recognition, and possibly short-term financial rewards for doing something they have 100% control over. It’s amazing how a $10 gift card, a $20 bill or recognition for winning that month can motivate salespeople.

As it relates to motivating your clients, often being a trusted advisor already motivates them to refer you. In general, 1/3 of clients will refer you without asking. 1/3 will refer if asked and 1/3 will not refer even if asked. The key is to find out what third each clients resides in.

Another novel approach is to attempt to refer business to your clients. This causes the “law of reciprocity” to kick in. Your client will be more mindful to refer business to you.

Lastly, I am a big fan of rewarding clients for just giving the referral before the referral becomes client. It could be a $10 Starbuck’s card along with a nice handwritten note. This rewards your client for something they have 100% control over.

Turning the referral into business is the salesperson’s responsibility. If a referral does become a client, you could possibly take the your client who referred you to lunch or a happy hour to celebrate.

It’s the little things that matter when asking and receiving referrals. Tracking the little things will allow you to improve upon your process.

Dan Stalp is president of Sandler Training, a sales and professional development firm. He works with CEOs, presidents, business owners who sell, and peak performers who are tired of walking by their salespeople’s offices to see them on their computers instead of on their phones — and sick of having a superior product and losing out on price. dstalp@sandler.com • (913) 451-1760 • DanStalp.com