Prospecting can be difficult. Ask any salesperson if they’re getting enough good, high-quality leads, and they are more than likely to say that they could always use more. A recent study on the state of B2B digital marketing reports that nearly half of marketers cite generating high-quality leads as their biggest challenge.
The challenge isn’t getting any easier, either. With the inordinate amount of noise cluttering up our inboxes, voicemails, and overall mindshare, it’s becoming harder and harder for salespeople to break through to new prospects. One report claims that it now takes 18 touches to connect with a single B2B buyer.
When they do get a new lead, too many salespeople overcompensate by employing a strategy of brute force. When leads appear in the top of their sales funnel, they practically pounce. Rather than gently nudging them through the funnel by employing a consultative, needs-based approach, they try too hard to fast-forward to the end goal. They focus on the sale, not the relationship. Maybe that’s why 50 percent of B2B sales prospects say that most sales representatives they deal with are too pushy, don’t listen, and aren’t helpful.
Fortunately, there’s a better way for salespeople to generate high-quality leads and close more deals without resorting to spamming and pushiness: by asking for referrals and personal introductions.
Science backs it up. The concept of social proof dictates that people will look to their friends, family, colleagues, and peers when trying to make decisions about a given situation. As Dr. Robert Cialdini, author of the book Influence: Science and Practice, puts it, “We view a behavior as more correct in a given situation to the degree that we see others performing it.”
There is an emotional reward in both giving and receiving a referral. After all, human beings are inherently social, with a craving for acceptance and validation hardwired into our psychology. When we give a referral, we are acting on our desire for belonging and recognition; accepting it builds confidence in our decision making through conformity. Both parties will feel more a part of their collective tribe after taking part in any kind of referral. As author Seth Godin said, “More than features, more than benefits, we are driven to become a member in good standing of the tribe.”
It is this tendency to look to others for validation that makes personal referrals so valuable. A study by market research firm Nielsen found that word-of-mouth recommendations from friends and family was by far the most trustworthy form of advertising, chosen by 84 percent of respondents. We are simply more apt to believe the people we know than the search engines, websites, and countless other sources telling us what to buy or how to think.
When salespeople employ a strategy based on referrals and personal introductions, their success rate soars, as verified by at least three different measurements:
1. Customer Acquisition
Ninety-two percent of consumers say they trust recommendations from their peers over advertising when it comes to purchasing decisions. As a result, prospects who receive a referral for a certain product or service are more likely to convert to new customers—by nearly four times the rate of non-referred prospects. We trust that our allies and close connections won’t lead us astray, and so when in doubt we choose the purchase that is verified via social proof.
2. Customer Retentions
Personal referrals are, in a way, a form of precision targeting. When one person refers another to a particular company or product, it is most likely because they believe that that person will enjoy or benefit from it. They wouldn’t make the referral—and waste their all-important social capital—if they didn’t. In most cases, it turns out to be true: Referred customers have a 37 percent higher retention rate than non-referred customers.
3. Customer Value
It has also been proven that referred customers contribute more to a company’s bottom line than non-referred customers. Because referred customers are essentially vetted by current customers as a viable match for the company’s offering, they tend to make more valuable purchases and they are more likely to be upsold on additional purchases. The Wharton School of Business found that referred customers have a 16 percent higher lifetime value than non-referred customers. In other words, referrals are a direct route to increased customer value.
Knowing that referred customers close more frequently, remain customers for longer, and deliver greater lifetime value, it would seem like a no-brainer that salespeople seek referrals from their existing customers. And yet, too few of them do. Research by Texas Tech University found that, while 83 percent of satisfied customers are willing to refer people after a positive experience, only 29 percent of them actually do—mostly because they’re not asked to.
The good news for salespeople is that the most effective sales strategy they can employ, based on science and data, is also one of the easiest. Simply ask your existing customers, partners and the rest of your network for referrals, and you’ll be on your way to sales success.
By Anne Gherini