TALKING SALES 189: "Does referral selling pay?"

John Smibert

Referal ROI 08       "The referral selling numbers are compelling - it can change your business" - Interview by John Smibert.

After my last discussion with Joanne Black, titled "Implementing referral selling for competitive advantage" , I wanted to know if there really was a competitive advantage. Would an investment in implementing systemising referral selling provide an ROI?

Joanne Black

So I asked Joanne! 

She reminded me that one of the biggest challenges that organisations face is in achieving predictable revenue.  And,  according to Joanne, systemised  referral selling drives predictability.

Joanne explained that based on her research "when you receive an introduction to the person you want to meet", your chances of converting them to a customer is over 50%.  You pipeline becomes predictable.

Joanne showed that 25% of approaches, via properly constructed referrals, will result in one order.  Compare this to what you are achieving through your traditional lead generation or prospecting methods - probably less that 5%.

These numbers are compelling.  And, if as Joanne says, less than 5% of selling organisations have implemented an effective referral program - that provide a great opportunity to drive a competitive advantage.

Read or view the full interview below to learn more

This is one in a series of interviews with Joanne where we will learn more on how to generate referrals more effectively - stay tuned.


Joanne Black, sales author and keynote speaker, is America's leading authority on referral selling. See Joanne's Website and Twitter account.


John: Welcome back Strategic Selling Group and all my other followers out there, I've got Joanne Black with me again - welcome, Joanne!

Joanne: Thank you, John!

John: Hey, we had a great discussion last time about systemising referrals, getting referrals, the whole process of doing that, making sure the priorities are set and that it's part of the culture and setting metrics and so on. It crossed my mind at the time, particularly for those the senior managers and the executives out there that might be thinking about putting a system like this in place, does it pay? Have you got metrics that show that we really do get a return on investment by inveReferral ROI 03 - moneysting in a referral selling programme?

Joanne: I guess I wouldn't be here speaking to you if it didn't? [laughter]

John: Well, I'm looking forward to hearing what they might be!

Joanne: Everybody is concerned about predictable revenue, you hear that term. We may have qualified leads in our pipeline, but how do we know, how can we actually accurately predict referral selling?

John: It's the biggest challenge in a lot of organisations, you hear about organisations missing their forecast and not forecasting well, and that has ramifications right through the organisation in developing their capability to deliver a good customer experience, so fix revenue but also fix customer experience. If referral selling can help us address that, I'd be excited.

Referral ROI 10 - smoke-mirrorsJoanne: Well, it certainly can, and the thing is so many salespeople we know the pipeline is smoke and mirrors as we call it, which as sales leaders we know doesn't pan out. So referrals, we get the meeting in one call, that we differentiate ourselves from the competition, especially today, John, because everybody is typing away and people aren't having the conversations they need to have, and so the competition disappears, and if we have competition we actually have the inside track and our sales process shortens. Now, the conversion rate when we get that referral introduction is well more than 50%, and for years people told me it was 50% when they got the introduction to the person they needed to meet.

John: Right, and 50% is much better than most of the organisations I know out there are achieving.

Joanne: Much more, but here's what's happened in the last couple of years. I do polls all the time when I speak and I work with sales teams and I offer webinars, and I'll ask that question, "When you receive an introduction to the person you want to meet, what percent of the time does that prospect convert to a customer?"

Referral ROI 12 - 70%John: And?

Joanne: Now the needle has moved to 70% plus.

John: Why? What's driven that change?

Joanne: I don't have any research about that except my own "feet on the street" research.

John: The intuition you've got, that I'm sure is very good!

Joanne: I believe it's because everybody is typing away and they're using technology to try to connect. So those of us who are in there having conversations, and our job I believe is to get in there and build the relationship, and then when all these latecomers come... well, they don't have a chance.

John: Technology is important. Even if we've got a referral, we need to research the organisation, research the individual and we use technology for that, we'll source big data and all sorts of stuff to help us get insight and that's how we bring in something of value on a call. So you still need technology for that sort of thing, and then there's a whole world of social selling out there that we talk about. So you're not saying technology is not important.

Joanne: Technology is extremely important, but people don't buy our technology, they buy what technology does for them, and we forget that. If everybody is reaching out through technology, and I'm in there having conversations... well, you can see the difference. But let's just take 50% conversion rate, because that's easy math for me, okay? [laughs]

John: And it's a good result anyway!

Joanne: I'm not even playing with 70% but 50% conversion rate. Let's take an example, say that, and this is very conservative, say that you reach out to 20 people and ask them for a referral introduction, because that's the definition of a referral, you get introduced.

Referral ROI 07John: It's not "Here's his name and phone number."

Joanne: No, not at all. So, you've received the introduction and say you asked 20 people, but very conservatively say 10 of those people say, "John, I'd really like to help you, but I don't know anybody right now," but say that 10 of them make the correct introduction. 50% conversion rate means you get 5 new clients.

John: And that's out of 20 phone calls.

Joanne: Or meetings or coffees or having a beer or whatever.

John: 20 meetings, 20 interactions.

Joanne: 20 interactions, that's right. That's what happens, the math is so simple, and it pays. And I didn't make these numbers up, these are everybody I ask, that's what they say.

John: That's incredible, when you look at those numbers. So you're saying with 20 interactions you're getting 5 orders. It's not 12-15 interactions or approaches to get 1 prospect and then take them through the sales process and win 1 in 3 or 1 in 4; you're saying actually 25% of asking for referrals gets an order.

man drawing arrow

Joanne: Absolutely minimum, minimum.

John: Absolutely minimum. Wow, I knew referral selling was very powerful, but those numbers blow me out of the water. When I drive that now through the pipeline and look at the productivity we get out of our sales force and all the supporting staff, that changes the formula right upside down.

Joanne: It does, and the irony and sad part is that so few companies have the referral system in place to make that happen.

John: And they're investing enormously in other technologies and social selling and finding productivity issues with all of those, when they could be doing something... I was going to say as simple as this. I know it's not simple, but it's certainly a highly productive way.

Joanne: Well, predictable revenue.

John: Predictable revenue.

Joanne: Referral selling drives predictable revenue.

John: For all those decision makers out there, Joanne has just raised some really interesting numbers that perhaps you need to research further. Because if you're one of the 95% that doesn't have a referral system in place and a whole methodology in place and have implemented it with high priority and driven a cultural change with the training and metrics around it, you're missing out on an enormous opportunity to change your business, to drive different metrics right through your business, drive profitability, grow your customer base and beat the competition out.

Joanne: You nailed it, John - that's what it's about!

John: I'm looking forward to the rest of our discussion, because I'm going to be learning a lot here too - thank you very much for your time and your insight, Joanne!

Joanne: Thanks, John!


I invite you to view my previous discussions with Joanne Black: 



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Want to touch base? If you have questions please feel free to contact me - email: john.smibert(at), Phone: +61 404857893 or Skype: john.smibert

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