So, what is the difference between referrals and leads? When I attended networking groups many years ago, they encouraged us to pass leads among us. However, in BNI, we believe in the power of referrals. These two words may sound alike as they both seek out new clients for the person you are referring to. However, there is more than semantics in the difference between leads and referrals. It is important to understand those differences so that we give and receive only qualified referrals, rather than leads.
A lead is a contact that may come from any number of sources. This contact is generally not expecting your call. If a Realtor gives an insurance agent their new home buyers’ contact list, they would be considered leads. Unfortunately, the prospects are not expecting a call from the insurance agent. Therefore, it is not much better than a cold-call. The agent will most likely receive a cold response from the phonecall.
A referral is the opportunity to do business with someone who is in the market to buy your product or service and who has been told about you by a mutual friend or associate. In other words, they know who you are and what you do when you contact them. It is stronger than just a “lead”. The prospect has talked to your mutual acquaintance and is generally expecting the call. Hence, they are “referred”.
A common misconception about the difference between leads and referrals is that a referral is guaranteed business. This is not the case – as always, your business is your responsibility. Once a referral source has given you a contact name, it is up to you to do the rest. A qualified referral is an open door to put your best foot forward. A referral is better than a lead. You can use the name of the referral source to open the door.
Are you passing qualified referrals to your networking partners based upon these three criteria?
- When someone expresses that they may be interested in a product or service, have a conversation with them to determine if their needs fit the services offered by the person or organization you have in mind.
- If the needs do fit, share with the potential referral that you know someone who may be a fit to help them and explain how you know your referral partner.
- If the potential referral appears receptive to this connection, ask if you can share their contact information with the person who can provide the product or service.
Qualified referrals have been previously vetted by the person giving the referral. There is reason to believe the product or service is desired by the potential customer. The effectiveness of your referral network in providing you with quality referrals depends on the amount of work you do to develop the sources in your network. A referral is almost always better than a lead. But don’t forget that there are many levels of a referral which depends on the development of the relationships that you nurture.
Different Levels of Referrals
The levels of referrals vary in quality according to how much involvement your referral source has invested in preparing the referral for you. The more time and effort your referral source puts into qualifying, educating, and encouraging the prospect before you become involved, the higher the quality the referral should be. Conversely, if your referral source only passes a prospect’s name to you, most of the work of developing that prospect into a customer falls on you, and the likelihood of turning that prospect into a customer diminishes significantly.
The best referrals you can give are the referrals where the person is expecting their call. Let them know that this person that you are referring to them is going to be giving them a call. Then when the potential client does call the business you are referring to, they will get a warm reception. That sure beats the heck out of cold calling any day of the week.