When to Build Relationships with Prospects vs. Referrals
Business owners wear a lot of hats. Depending on your industry and the size of your organization, you may be operating as a de facto salesperson, marketing person, and customer service support all rolled into one. With only a limited amount of time and energy you can spare toward growing a client base, many business owners are forced to decide whether they should commit to strengthening their relationships with new referrals or if they are better off chasing down new prospects.
In this post, I outline the differences between referrals and prospects, as well as break down the pros and cons of building professional relationships with one as opposed to the other.?
1. What is a prospect vs. a referral?
Referrals come to your business via clients, colleagues, friends, and family. Referrals do not require the level of marketing and outreach required to reach attract prospects, who often are not aware of your business in the first place. Referrals may come to your business pre-qualified, but it is still up to you and your team to turn those referrals into paying customers and clients.
2. When should I focus on building relationships with referrals?
Referrals are great when your business is still in the early stages of becoming established. Because referrals do not need to be targeted through traditional marketing efforts, your business can save a lot of money on outreach strategies. Building relationships with these people can be easy when you both share a trusted connection with the person who initially referred the potential client.?
3. When should I focus on building relationships with prospects?
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Building relationships with prospects are great for businesses looking to grow beyond their current market and expand into new industries or regions. Similarly, if you want to grow your business beyond what your referrals are sending you currently. Prospects are also particularly useful for businesses with products and services that can be sold online because marketing teams can help funnel leads into the sales process.?
4.?What are the downsides of choosing one strategy over the other?
Referrals come to your business pre-qualified and therefore require less effort to transform into long-term clients. Although, if a business owner does not make the effort into building new connections with new people, they will likely not have as many opportunities to grow and expand. That said, prospects can be difficult to reach without the capital required to invest in effective marketing strategies. As stated, focusing on referrals while your business is starting or is in a more vulnerable position financially can provide the financial support required to target new prospects down the line. Very few businesses can survive on referrals alone, even if the referrals come directly from your ideal clients. But prospects also need the proper incentive and information about your services to give your business a chance.
5. How can I balance finding new prospects while also serving my referrals?
Many business owners choose to delegate the process of finding new prospects and generating leads to their marketing and sales teams. This delegation provides senior staff members to focus more time on fostering stronger, relationships with essential referrals, particularly those who come from ideal clients and may require a more personal touch.
What’s your perspective on building relationships with prospects vs. referrals? Has your business experienced more success in building relationships with one over the other? I’d love to see your thoughts in the comment
B2B sales specialist. Author. Displaced Canadian. #nohoodwinkeryhere, #integrityisimportant
2 年Great way to break this down Jim! I too, agree, that at some point referrals are not enough to build most businesses. Both need to be cultivated and as you grow your business you'll need to decide how many resources you can dedicate to each. Here's a video I made on this exact topic: https://youtu.be/N4lPneNxmWs And I'm going to share this article too since it's so relevant to my clients!
Finance and Insurance Executive
2 年Good article Jim. I think you lay out some important differences between referral and prospect. However, I tend to treat referrals, prospects and even current customers as “prospects”. Why? As you alluded to referrals even if they are “prequalified” need to be closed, which might not be an easy task. With current customer, they can generate additional revenue by introducing additional services, again treat your customer as if they were still a prospect. Lastly, in our commodity driven market place even your customer if not given love like a prospect can an will take their business down the street.