During a sales meeting at a big home improvement company, a discouraged rep asked the sales manager: “You say we should go out and get referrals, but how do I do that? You also say that referrals are one of the best, if not the best, leads we can get. But my closing percentage for referrals, even when I get them, is not very good. How can I change that?”

These are two great questions.

Here's an answer: All referrals are not created equal. Some are valuable and some, frankly, are a waste of time. Minor distinctions make one kind of referral great and another more like a blind date than a sales appointment.

A REFERRAL IS A REFERRAL—NOT! There are four kinds of referral:

  • Indirect referral. Your customer says you can use his name, but he doesn't take any overt action to recommend you. This is not a great referral, but it's better than no referral.
  • Direct referral. This happens when the customer introduces you and endorses your company and product. These are much better than indirect referrals, but still are not the best.
  • Unqualified referral. With these referrals, you don't know whether or not the prospect needs your product. The referral could be direct or indirect, but if the prospect has no need, you may be wasting your time.
  • Qualified referral. You know the prospect needs your product.

Clearly, “qualified” should be your first choice when it comes to referrals. Even without the current-customer endorsement, you have a decent shot at making a sale when the referral is qualified.
LEARN TO ASK What you want is a direct qualified referral. The prospect needs the product and can afford it, and your company has come recommended.

How do you get this information? Two ways are effective. Ask for it from a current customer. If he's willing to recommend you, ask him if there's someone in his neighborhood, family, or circle of friends who has a need your company can fill. Or visit your customer's neighborhood during daylight hours and look around. After all, you're a professional. You can spot the homes that need your product, can't you? —Chuck Anton is a sales and marketing consultant who specializes in the home improvement industry. You can reach him at www.chuckanton.com.