“The Best Sales-People Never Make Cold-Calls – Referral$, Referrals$ & Referral$!”

Advertising giant David Ogilvy made the phrase, “We sell, or else” the mantra for his agency. These words are so simple that they mask the importance of the phrase. But we sell or else represents a powerful and winning mindset that every sales leader and professional must adopt – particularly in our ever changing economy. You’re probably thinking, “Sounds good on paper, Coach, but how do I sell when my clients’ budgets are slashed and prospects won’t return my voicemails?” (You always ask the great question.) Well, here’s the great answer: Referrals! Referrals are how you sell effectively in any economy.

“The Best Sales-People Never Make Cold Calls…They Make Warm Calls”

When I was in college at NYU, I worked as a college agent for the Northwestern Mutual Insurance Company.  Some of the most important sales lessons of my career came from that experience. My mentor in those days was a guy named Frank - a twenty-year sales veteran who ranked at the top of a one-thousand person sales force. It was Frank who taught me that “the best sales people never make cold calls…they make warm calls.” 

Frank pointed to his rolodex on my first day and said, “Kid, service the heck out of those people. Go out of your way to wow them and you will never have to make another cold call again. Your phone will be ringing with referrals.” Ahh…words of wisdom from my ol’ mentor.  So simple, yet so powerful. And so true: although Frank consistently exceeded his quota, ranking at the very top of this huge company, he never called cold.

Frank knew that acquiring new business can be expensive, both financially and emotionally. Studies have shown that, on average, it takes five meetings to close one deal. Each of those five meetings can cost you up to $200 in expenses (your salary, expenses to travel, marketing, etc.), which means that your total investment to close just one sale can be $1,000 or more.  Yikes. I know this reality has you sales managers and business owners out there shaking your heads. Good. But…now what? How do we make the sales cycle more time-effective and less costly? W.W.F.S., my friends! (That’s short for “What would Frank say?”) 

It's been documented that referrals reduce your sales cycle by 50%. Fifty percent. In other words, a referral allows you to close a deal in two to three meetings, not five. Pretty cool, right? It’s also been documented that referral-generated business is on average 25% higher in margin. “Hey Coach, why would you want to charge someone you met through a referral a higher price?”  You’re right to ask. You wouldn’t want to charge that client more. But you won’t have to: your margins are often higher off referrals is because price becomes less important. Here’s why: 1) the timing of the referral is such that the prospective client has an immediate need, and is not shopping around, and 2) since you know the person through a mutual contact, the prospective is more open to discuss the budget with you -- you get a sense of the person's available funds for this project before you offer up any pricing. 

“We get it, Coach: it’s all about the REFERRALS. They are the “Glenn Gary Glenn Ross Leads.” But how do we get them?” Look no further, my friends. Here are Coach Nick’s Eight Steps to Generating an Abundance of Referrals:

1) Before asking a contact for a referral, look for ways to add value by becoming a business resource to him or her – that way you avoid being known as the person who calls only when they need business.

Be proactive in adding value to your clients: introduce them to your contacts, invite them to events, send them interesting articles, write them hand-written notes. Your clients will see you not as an outsider trying to sell them something, but as a partner who is concerned about their overall initiatives. 

Building relationships requires making investments. Like regular deposits in a bank account, staying on the radar of your key people requires creativity that goes way beyond a monthly call to check in.  As you make these “deposits”, the Law of Reciprocity will kick in and these contacts will be calling you with leads.  As Frank used to say, “Wow them and your phone will ring with referrals.”

2) Once again, before you ask for a referral, explain to your client upfront, at your first meeting, that once your services yield satisfactory (or better!) results, you will be following up to obtain introductions to individuals in their network. Why? You can provide your client’s colleagues with the same benefits your client enjoys.  Furthermore, by telling them up front about your process, you have laid out the expectations and now they’ve started thinking about who they will refer to you even before you ever ask.

3) When a project or an agreement comes to a close, have a meeting to review the results. Kickoff the meeting by getting people in the “Yes” mode.  Ask “Yes” questions: “Are you satisfied with the project? Did we meet your time requirement? Do you fully understand the type of work that I do, and the services that I provide?”

Assuming your client says, “yes,” you have earned the right to move ahead to ask for your referral.  If they say “no”, you want to fix whatever it is that led them to say “no”.  But by asking these questions after a project or agreement expires, you will know exactly where you stand and can take advantage of the momentum you’ve built.

Remember that when you get people in the “yes” mode, they become more open to other suggestions and/or questions you might have in future conversations.

4) Gain permission to explore. This step is important because it allows you to have some influence over the quality of the referrals you receive. Here is a script that you can use:

“As you may recall when we first met, we talked about gaining introductions into your network once I showed you positive results with our service…” (pause, so that your client can throw in another “yes”!)…could we do that for a minute?

“As you know, there are two ways that we grow our business: First, we make certain that we provide you with exemplary quality and service and, based upon your feedback today, it looks as if you are getting the results you expected… (keep your ears open for another “yes”)

“Secondly, we grow through introductions into networks like yours because you want people in your network to receive the same benefits by working with us that you did…”

“During the coming weeks, would you consider introducing us into someone in your network that possesses…?”  (Give them characteristics describing your ideal client)  See below for more on this matter.

Now, move to Step 5

5) Step 5 is the next step in the script we’re in the middle of: What kind of contact are you looking to be introduced to? Don’t make your client work to figure out who’s the ideal person for you. The worst thing you can ask is, “Do you know anyone..?”  Of course they know someone! They know lots of people.  You remember the famous line from Jerry McGuire, “Help Me To Help You.”    This is your opportunity to get them to sharpen their focus.  Help your clients help you by being clear with them about who fits your ideal profile.

Before making your request for a referral, list at least ten characteristics that make up your ideal client; be ready to paint a detailed picture of that person.

6) Ask your contact to make the introduction on your behalf.  Give them the script to use when calling or emailing the person they are going to introduce you to. Frank at Northwestern was the best at this – he would have his contact follow a script. And so Frank got more than a qualified lead -- he got his foot in the door.

When a client of Frank’s went to set up an introduction, it went something like this: “Lucy, I want to introduce you to Frank. He manages my financial planning and since I’ve been working with him, I’ve grown my investment portfolio and started a college fund for my kids.  You should connect with Frank for a conversation about your portfolio.”  Wow! Your contact just pre-sold you to the person that you are going to call – is it any wonder that referral-generated business takes 50% less time to close??

7) Keep your clients in the loop and update them on your progress with the referral introduction they made on your behalf. This helps them continue to be a proactive part of your selling process and an active advocate of your services.  By keeping them in the loop also makes them feel important – it shows them that you really appreciate the endorsement.

8) Write hand-written thank you notes to your clients and to the referral after the introduction. If the introduction leads to a sale, send your customer a gift of appreciation.  There’s a saying, “Catch people doing the right things.”  Catch your clients doing the right things by making the referral they gave you a big deal so they continue to refer you again and again in the future.

Because everything new takes time to perfect, use these Eight Steps for the first time with the client who loves you the most. You can bumble through this process and still get a great referral. You’ll have success, you’ll refine your approach and then you can move on to those clients who only like you a lot.

You’ve heard again and again that you should ask for referrals, but the strategy is even more important during competitive times. Why? Because referrals cost almost nothing in terms of dollars and time, and prospective customers much prefer to meet you – and are more likely to buy from you – through a recommendation from a friend, colleague or family member than through a cold call. So if sales are slow, leverage the hard work you’ve put into your existing happy customers and ask them for some introductions. 

So, there you have it. The Eight Steps. Learn them, live them, love them. My old friend and mentor Frank didn’t become the top person out of a thousand sales people by making cold calls, folks. He didn’t have the time or the money to waste. Frank got to the top making warm calls.

You can, too.

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