Corporate Training Magazine

Putting an End to Cold Calling
By Ken Hilo

We've all received the calls. "Hi, my name is Joe and I'm calling from ABC Company. I'd like to talk to you about our company's products/services and how they can benefit you."

The vast majority of companies employ cold calling as a sales tactic, but is this approach effective? Research has continually shown that cold calling falls far short.

Statistically, if you make 100 cold calls, you might reach 20 people if you're lucky. Of those 20 people, you will actually have a conversation with about 10, and if very lucky, close one. Your ROI then is about 1%. These kinds of sales also tend to be more transactional in nature and do not generate repeat business. Inevitably companies have to ask themselves why they continue to follow this strategy.

"Typically companies have their salespeople make cold calls because they can measure the activity," explained Joan Paul, president of J. Paul Training. "As well, senior management has always done cold calls, so there's a bit of the rite of passage thing going on."

Some salespeople delude themselves into believing that they don't cold call. Instead they make 'warm calls', which they classify as better leads. "The truth is that there is no such thing as a 'warm call'. Calls are either 'cold' or 'hot'. If you're calling someone who doesn't know you and isn't expecting your call, then it's a cold call. And generally it doesn't produce any better results than when you don't get their name from someone," said Paul.

Now think about times when you've been given a referral. Or better yet, when the referrer has called that person to suggest seeing you. How often do you get to meet with that person, and how often does it translate into business? Most people say no less than 50% of the time they get business and most of the time between 70 and 90% if that person is qualified to begin with.

Joanne Black, author of No More Cold Calling, explained, "Referral selling collapses the sales cycle time considerably because you don't have to go through the uncovering the need process and handling objections, and so on. Usually there is a need and an understanding that you can do something about that need prior to meeting. The entire sales process is of a more positive nature as it is assumed coming in that these clients are interested in what you have to offer. As well, when you get qualified referrals, your close ratio improves quite dramatically."

The first step to referral selling is to identify your ideal clients. Developing this vision of who you want to work with allows you to give a clear picture to those people you ask for referrals so that they can direct you to the right people. Without this clear picture, you may end up being directed to and dealing with less qualified and less desirable customers.

Who should you ask for referrals? Black emphasizes that you keep an open mind and not be too hasty in ruling out certain individuals as possible referral sources. "You never know who people know. A good starting point is to choose people you know and clients you've earned the right to ask. This doesn't mean you've known them a long time or even done business with them necessarily, but you have a connection of some sort. Consider this: If you aren't asking your current customers for referrals, you're leaving money on the table," she said.

An important lesson in your shift to referral selling is learning the right way to ask for referrals. One common error is being too passive when you ask. Examples include: 'By the way, if you know someone who might be interested in my services, please let them know about me.' or 'Here are my cards. Pass them on to people who might be interested.'

Black explained, "The right way is to tell people you build your business through referrals. Remind them of the work you do and the value it brings to your customers. Describe your ideal audience and ask them to refer you to one or two qualified contacts. Ask them about the contacts, what issues they re facing and why they would be interested in your services. Ask them to contact the referral and introduce you. Send a 'thank you' note to them after you've made the contact. Follow up with them later and tell them what transpired as a result of the referral."

Joan Paul recounted, "Recently I received a number of referrals from one networking contact that I had coffee with. It resulted from saying that I build my business primarily through referrals, that I provide my clients with sales expertise and training that has a track record of increasing revenue by an average of 30%, that I also am an executive coach who helps people achieve the dreams and goals they have for themselves in their work situations by being a thought partner and challenging them to be get what they really want. I told her I'm interested in meeting with senior HR and/or sales executives, as well as others that I could partner with. I received five referrals and am working with two of these contacts. The other part of the equation is finding a way to help the contact that gave me the referrals. To me, this is an example of the best way to ask for referrals, because it's a two-way street."

When making the transition to referral selling, it always helps to have people around you who can provide support and keep you focused. "A business buddy can keep you accountable and be a great person to share ideas with. Choosing someone outside your own work environment--and even industry--will provide you with alternate perspectives on things that could make a difference in your business development. A business buddy helps to stretch you to be your best and keep from becoming too insular, missing opportunities to grow. I have many business buddies actually. They are my motivators, my thought partners, my referral sources, my teachers. And I believe I do the same for them. I have taken so many gems from each person and applied them in my own work successfully," said Black.

She likens the move to referral selling to being on a sensible diet. "When you start eating properly and painlessly change your diet, the pounds drop off and you feel so much better. The same goes for adopting a sensible strategy to build business. Becoming a referral selling organization and making referral selling a conscious process can help you eliminate non -productive selling activities--and have an enjoyable time doing it."