In our sales demonstration and training, we have our prospects and customers constantly asking us if we sell leads or what is the difference between leads and referrals. The answer is: there is a huge difference between both and deciding about which source your business will work can directly impact the company’s results.
Leads are contacts that, generally, are not expecting to receive a call. They don’t even need the product or service you are about to offer.
A few other characteristics of leads:
- Leads are unqualified, they are not a true opportunity for a sale
- Leads have none personal endorsement
- The time and work you need to put into leads is huge
- Leads don’t come effortlessly, you chase after them
- Close ratio coming from leads are low because of all those factors above
Referral is when someone gives you the name of a friend or family member who needs your product or service. The most important difference is that referrals come with the “stamp of approval”. In fact, a Nielsen study shows that 83% of consumers say they either completely or somewhat trust recommendations from family, colleagues, and friends about products and services, making these recommendations the highest-ranked source for trustworthiness. (Source: Nielsen)
When you call a referral, most of the time they will already know who you are and what you do (through the person who referred them) and in the best cases, may expect your call already.
A few other characteristics of referrals:
- Referrals are qualified, they are a true opportunity for a sale (A Nielsen study shows that people are 4 times more likely to buy when referred by a friend)
- Referrals have a personal endorsement, an element of trust
- The time and work you need to put into referrals is significantly smaller
- Referrals come with much less effort, once you train your team to ask referrals, they can come at anytime
- Close ratio coming from referrals are higher than leads because of all those factors above
- Customers referred by other customers have a 37% higher retention rate (Source: Deloitte)
A common mistake though is to think a referral as a guarantee to do business. This is not always the case. Once your business gets a referral, it’s up to you to do the rest. But the fact is that a referral is an open door to put your feet forward.
If you have a structure referral program, things get easier. With referral software in place, you make sure all referrals are submitted on the same platform, can quickly contact those prospects and communicate with them regularly.
You can also keep transparency with your Advocates by notifying the status of their referrals and rewarding them for their efforts.
Don’t lose more time with worthless leads and invest in building a referral program for your company. If you want to learn more about how GTR referral software can increase your sales, schedule a demo today and we will show you how!