Ask a salesperson to describe his or her ideal working conditions and you'll probably get a long list of "dreams" - pre-sold leads, higher closing and retention averages, bigger commissions… you get the idea.

Well, these situations aren't just "dreams" - or at least they don't have to be. You can make them a reality by remembering one simple, yet vitally important word: referrals. Yet, inexplicably, too many sales people often fail to take full advantage of this most powerful sales tool.

How can you make sure you're not one of them? Here are seven simple steps to help ensure that you make the most of this valuable source of leads.

1) Know Why People Buy
Prospective clients consider five major factors in making a buying decision:

1. Confidence
2. Quality
3. Selection
4. Service
5. Price

Contrary to what you may think, price consistently represents the lowest priority in buying decisions. In fact, more than half of all Americans place the greatest importance on reputation.

Knowing that, it should come as no surprise that 83 percent of consumers turn for advice to friends who already own the products or services they are considering. That's why it is so important to remember that your goal is not to just make a sale, but to make a customer - for life. Simply stated, if they believe you, they trust you. And if they trust you, they'll buy from you!

2) Manage Your Time by Managing Your Referrals
Referral-based selling is clearly the most profitable and efficient source of leads. In fact, the concept may have originated within the insurance industry with the well-known "center of influence" philosophy. One of my most-repeated sayings is, "Remember, cold calls are God's punishment for not getting referrals!" While there is nothing intrinsically wrong with cold calling, it's not working smart.

Word of mouth is the best form of advertising, and it's the basis for all referral-based selling. Or, to put it another way, "It's not who you know, it's who knows you!"

3) Cultivate a Variety Referral Sources
It should be obvious by now that your pool of existing clients is your first - and best - referral source. They have already demonstrated their confidence by buying from you. But there are other referral sources who can be equally valuable. Examples include insurance agents in non-competing lines, financial planners, lawyers, accountants, bankers - in short, any professional who commands a high degree of confidence and respect from their clients.

4) Not Just Referrals - Repeat Sales
It's a well-known phenomenon: People who buy once tend to buy again and again. And people who don't buy this time are likely not to buy the next time they are approached either. That's why a repeat sale is generally considered to be four times easier than a first-time sale. So don't just ask for referrals - ask for repeat business as well.

5) Service, Service, Service
As is so often the case, small things make all the difference in generating referrals. For example, always strive to deliver the policy, certificates or product personally. And pay special attention to personally acknowledging claims and losses. If you care - and you show it - your clients will recognize it and appreciate the attention. And, in the end, they'll continue to reward it.

Get a satisfaction report card. About a week or so after every sale, I always make a follow-up courtesy call. I've never had a client say he or she didn't appreciate this gesture - in fact, most have a question or two they forgot to ask earlier. Every one of these follow-up visits is another opportunity to ask for a referral.

6) Ask Early, Ask Often, and Build on Your Success
Start by asking for referrals at the earliest practical opportunity: the day of the sale. While this should generally be your first attempt at referrals, I'm sure you already know it should not be your last! Your second request for referrals can come when the policy is delivered, with more requests during every follow-up or service call.

Once you receive a referral, follow up on it quickly, so that you can use it as a source for additional leads. You might call this approach "working the peripherals." Simply put, it means using one referral to generate another - soon you'll be working on fifth, sixth and seventh generation referrals - and even more. As you do, the referrals become even more effective. The best analogy I've encountered is this: Did you ever notice that when one duck goes in the water, they all do?

7) Go Beyond What's Required or Expected
A Baylor University study shows that a small promotional follow-up gift actually increases referrals by 22 percent. You won't need a calculator to figure out the amount of additional business that could generate. And while you're figuring that out, don't forget to factor in the significantly higher closing rate you can achieve on referral-based appointments.

For example, after a client has given you a referral, you can make that referral even stronger by asking the client, "Don't you think they might like to hear from you first?" Then suggest that they telephone or e-mail the referral.

Testimonial letters are also valuable. Don't hesitate to ask for them. Alternatively, you could offer to draft a short note for them - right there, right then. Have a supply of preprinted notes or cards with you, and don't hesitate to offer to use them.

There's no such thing as too many referrals - just like there's no such thing as too many satisfied customers. And while it's possible to run out of referrals, it's not possible to run out of places to ask for them!

By working for referrals, asking for them without fail, and following up on them without exception, you can dramatically improve the quality of your leads, increase your closing and retention averages - and, yes, boost your commissions, too.

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As published in print:
Michigan Agent - Published by The Michigan Association of Insurance Agents - May 2001
metalmag.com - Published by Spiderweb, Inc - July/August Issue