Allow me to introduce you to the Perpetual Revenue System -- referral selling.
Satisfied and engaged clients give you referrals (sometimes without even asking). You turn those referrals into introductions so the new prospects will be open to hearing from you. From the introduction, you set an appointment to begin the client-courtship process. From there, you endeavor to win the new clients and make the sale. As you provide great value to the new clients, the process starts all over again.
It’s simple. It’s easy. And you can get this going right now.
One of the beautiful aspects of this dynamic is that it does not result in linear growth -- one new client at a time. This process creates exponential growth, where one client can lead to two, two to four, four to eight, and so on. Your business grows exponentially!
But before we start talking about how to create a referral business, let’s make sure you know the full benefit of working from referrals. Here are 9 reasons referrals beat out almost any other lead generation channel.
1) Low Cost
Referrals cost you nothing to acquire. (Do you know your “cost per lead” with other lead generation methods?) The only cost of a referral might be a small thank you gift.
2) More Trust
You start at a higher point of trust. When you meet a new prospect for the first time, you need to show up “trustworthy.” There is no better way to show up worthy of one’s trust than through an introduction from someone the prospect already trusts. Referrals are “borrowed trust.”
3) Fewer Pricing Objections
Your price is usually less of an issue. While your price, fee, or however you charge for your products or services is never off the table, when you work from referrals, people are almost always willing to pay a little more when you’ve been recommended by someone they trust. (In fact, if a significant component of your client attraction plan is referrals, you can usually charge more for your products and services.
4) Faster Process
Your sales process moves faster. Most sales that start with a referral move through the sales process more quickly. Sales come faster because, again, you start at a higher point of trust. Many prospects come to you predisposed to do business with you.
5) Easier Closes
Your “closing ratio” is higher. Most businesses experience closing ratios of 10 to 30 percent from other lead sources. Referral-based sales usually close at 50 to 70 percent (sometimes even higher).
6) Bigger Sales
Your sales are often larger. Example: In the life insurance industry, a sale (“case size”) resulting from a referral is twice as large as those that come from other sources.
7) Advisor Status
Your new prospects and clients are more likely to follow your suggestions. Prospects and clients you meet through referrals will follow your suggestions because they know their friend or colleague has had a good experience in following your .
8) More Referrals
Referrals beget referrals. A client obtained through a referral is more likely to give referrals. And since many clients will give you multiple referrals over time, your business growth is exponential.
It’s a fun way to do business! You can create a “referral lifestyle” where the prospects you call want to hear from you, want to meet with you, trust you more from the start, and even call you!
Now that you understand the various advantages of a referral selling model, we can explore how to ramp up referral practices. I'll cover this in my next post -- keep an eye out.
Editor's note: This post is an exceprt from Bill Cates’ newest book, Beyond Referrals, and is reprinted here with permission.
Originally published Jan 5, 2015 10:00:00 AM, updated July 28 2017