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I am one of the weird individuals that enjoys seminars and webinars. This week I attended one of each. The seminar I attended was on the topic of business networking and was put on by a local business networking organization. I should point out that I am not a member of this organization. In fact, I am a member of another very similar organization.
The last portion of the meeting was fifteen minutes of comparing two prospecting methods – cold calling and referral marketing. While the presentation was a bit of a sales pitch to convince guests to join the group, I thought the presenter did a nice job laying out the case for how referral marketing (more specifically developing relationships with other professionals that are willing to refer business your way) is by far a much more efficient way of prospecting and closing new business.
Let’s take a look at the average statistics:
20 – twenty calls on prospects
10 – to speak to ten people
5 – five of which agree to meet with you
2 – two actually show up for your appointment
1 – close one sale
5 – referrals from complimentary business professionals
2 – two that agree to meet
1 – close one sale
What amount of time do you think it takes to complete the cold calling activities versus the referral process? Without actually calculating it, I think we can agree that leveraging referral relationships much more efficient by a fair margin. I can tell you from personal experience that this is accurate.
So, why do so many professionals continue to make cold calls? A main reason is that they just don’t understand how to build referral relationships in the first place. Certainly doing so can take time. And many professionals are looking for the quick sale that cold calling can yield. But I would hypothesize that the quality of the sales closed through referrals is vastly better.
My question to you is – would you rather have a 20:1 or a 5:1 ratio?
If you see the value in meeting like-minded professionals, in order to build referral relationships check out a new way to network.
Last week I mentioned Entrepreneurs of Knoxville as a great place to brainstorm with like-minded professionals. The founder of the group, Leo Knight, and I have gotten to know each other over the past few years. Sometimes we see things the same, and sometimes we don’t.
At the last meeting I asked how a particular project was going for him. Apparently, it was not going at all. It’s seems that Leo’s client had decided to pursue a particular project with in-house talent, instead of engaging his services.
Your customer can often times be your biggest competition.
I have experienced the same thing with one of my projects. A few months ago, after numerous invested hours of laying out a plan of action, a potential client decided to try and replicate my teams services on their own. According to my contact, their solution “was not near as good or cool”. Apparently, being neither good or cool mattered.
So, how do you protect yourself from external cannabalism? Well, you can’t. If you are merely saving them time or money you risk losing the sale. And even saving them both time and money isn’t enough, because your prospect can choose to do nothing.
Your only play is to provide enough value that your prospect cannot implement the new product or service without you. And only you.