“The secret to real sales success is building strong, respected, relationships that earn you the right to ask for referrals. But less than 5 percent of organizations have a disciplined, measurable, and reliable referral system.” - Joanne Black, Referral Selling Authority & Author 

Say it louder for the people in the back - real sales success comes from a reliable referral system. You may feel that you are doing just fine without a sales referral program, but let’s take a look at some statistics around non-referral vs referral sales methods: 

• Only 2% of cold calls result in an appointment. That’s a 98% failure rate! 
• Connecting with a prospect takes an average of 18 phone calls, callback rates are below 1%, and only 24% of outbound sales emails are ever even opened. 
• 63% of customers need to hear a company or product claim 3 to 5 times before they don’t dismiss it and actually believe it. 

In contrast, referral selling almost seems like a cheat or shortcut: 

• Referrals are 4 times more likely to make a purchase. 
• 84% of B2B decision makers start the buying process with a referral. 
• Referred customers have a 16% higher lifetime value. 
• 69% of companies with referral programs report that referrals take less time to close than other leads. 

Guaranteed to dramatically enhance your sales operations, let’s explore the benefits of sales referrals, how to ask for referrals in sales, and why referral generation strategies are crucial for sustained growth.

Referral sales are sales that come from leads recommended by existing customers. Referral sales leverage the power of satisfied customers recommending your products or services to others. 

A well-designed referral sales program incentivizes your customers to spread the word, effectively turning them into advocates for your brand. 

These programs often include rewards such as gift cards, discounts, points, or other benefits to motivate customers to refer their friends, family, or colleagues. 

While there are similarities, sales referral programs are not the same as affiliate referral programs. Sales referrals focus on current customers while affiliate referrals focus on third-party brands, businesses, and service providers.

Referrals are invaluable in any sales strategy because they come with a built-in level of trust and credibility. 

Recent research shows that more than 88% of consumers trust product recommendations from friends and family more than any other form of advertising. This trust translates into higher conversion rates and more loyal customers.

Let's take a look at some of the benefits of sales referrals that include gaining the trust and credibility of your customers, increased customer loyalty, and also being cost-effective.

Referred leads come with a strong endorsement from someone the prospect trusts, making them more likely to convert. Which do you find more credible - an ad for a broker that uses the language “reliable and caring” or that same language coming from the mouth of a trusted associate or close friend?

Referral programs can be more cost-effective than other sales strategies since they leverage your existing customer base. You will quickly find that you spend less time prospecting and more time actually selling.

Customers who are referred by friends or family often become more loyal and personally invested, leading to repeat business and long-term relationships. Never forget about the power of the network effect!

Leveraging existing customers into referrals is a great “land & expand” strategy, as Badger Maps CEO Steve Benson explains his tactic - “The most important growth strategies are the referral and the ‘land and expand' strategy. The ‘land and expand strategy’ is when one person at a company uses your product, and because you make them successful, their coworkers and management finds out about you and it spreads around the organization. 

Work closely with your customers to make them really successful and happy with your product and because of that they will tell their friends, colleagues, ex-co-workers, new co-workers, etc. about your solution. That is how your current customers become your best salespeople and help you grow your business.

Some of your biggest customers can be acquired this way. Maybe one manager sees the success of your product and wants it for the rest of his or her team, then the regional manager sees that one manager’s team is doing well, so then all the regions get it, then the division, etc.”

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Generating referrals in sales can require a strategic approach. Here are some key steps:

When is the optimal time to ask for a client referral? It’s when your customer is clearly happy with your service, such as after a successful project completion or positive customer feedback. Phrase your referral requests as if you are asking for help or a favor - because you are - and your customers will be more willing to assist.

You are a salesperson - clearly explain the benefits of the referral for both the referrer and the referred. If you are confident in your product or service and polite in your referral approach, there should be no awkwardness or hesitation because you’re offering a win-win situation. The vast majority of clients will give a referral, but only a small minority of salespeople will ask for one. 

People are rarely happy to work for nothing. Incentivize your customers to refer others by offering rewards such as gift cards, discounts, points, or exclusive benefits.

For more in-depth advice and strategy from referral sales experts, check out this pair of episodes from Outside Sales Talk podcast featuring sales coach Tamara Bunte and sales referral expert Joanne Black.

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1. Identify Satisfied Customers: Focus on clients who have expressed satisfaction with your service. 

2. Educate Your Customers: Ensure your clients understand how the referral process works and its benefits. Every program is going to look different, depending on industry, product, and countless other factors. 

3. Follow Up: Periodically remind your clients of the referral program and thank them for their participation. It seems small, but regular acknowledgment and appreciation goes a long way.

Detailing how his simple but effective sales referral program worked for Badger Maps, CEO Steve Benson explained, “Badger Maps is a sales routing app that helps field sales people optimize their routes and schedules to get more meetings and sales. We offer people a $50 Amazon gift card for each successful referral they make. A successful referral means the referred person signs up for an annual plan of Badger or has been on a monthly plan for 3 months. They have to sign up through the personalized link they got from the person referring so we can track it appropriately and send out the gift card to the right person. 

There is no limit on the number of gift cards they can get, so if they make a bunch of referrals, Badger will pay for itself and then some! This has proven to be a very effective and successful strategy in getting valuable referrals.”

Again, every referral program is going to look different and it may take a few attempts to fine tune yours to be as effective as possible. 

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Lastly, a sales referral agreement formalizes the referral process and ensures clarity for both parties. Key elements to include are:

• Referral Incentives: Why should a customer participate in your referral sales program? Clearly outline the rewards for successful referrals.
• Terms and Conditions: How can a customer succeed in your sales referral program? Define the conditions under which referrals are considered successful.
• Responsibilities: Lay out clear expectations = avoid miscommunication and indignation. You must detail the responsibilities of both the referrer and the business.

Tesla’s B2C sales referral program is a particularly interesting example. For years, this program allowed Tesla purchasers to earn points towards large rewards by getting their friends and associates to purchase Tesla products of their own. However, company executives unexpectedly made the decision to stop this referral program due to “cost concerns”. 

One of my best friends was very involved in this referral program, with his first referral being to his spouse. When asked how the removal of Tesla’s referral program would affect his zealous evangelism for Tesla, he replied “I was definitely motivated by referral points - I convinced SIX people to buy a Tesla over the past 10 months. I swear I was one of their best salesmen. I like Tesla but my effort isn’t free; they are on their own now.” 

Tesla must have soon realized their error and that their referral program was driving sales, as CEO Elon Musk later announced that after some retooling the Tesla sales referral program would make a return. Tesla had to learn the hard way - a sales referral program is not a “cost concern” but an undeniable revenue opportunity. 

I’m going to say it again - incorporating a sales referral generation strategy will significantly boost your sales efforts. By understanding when to ask for referrals, offering appropriate incentives, and formalizing the process with a sales referral agreement, you can turn your satisfied customers into powerful advocates for your business. 

Listen to top sales advice, study successful examples from others in your industry, and watch your referral-based sales grow. If you’re doing it correctly, referrals will become a trustworthy stream of leads that allow you to make headway into future customer relationships. Instead of having to slowly prove yourself to your sales prospects, let your previous work and sales clients speak for you. You and your team will be a sales force to be reckoned with! 

“In sales, a referral is the key to the door of resistance.” - Dr. Bo Bennett, Entrepreneur and Author 

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