What is referral selling and how does it work

What is referral selling and how does it work

Wouldn’t it be great if you could get more, higher-quality customers with a lot less effort on your part?

Well, you can, by using a simple referral sales system that most people are unaware of. One of the most valuable sources for acquiring quality sales leads is right in front of you, and it is your existing customers. Referral sales can become one of your most significant sources for hot leads and turning them into a massive growth machine for you if done correctly. 

There are plenty of ways to pursue sales referrals and generate new business. But one of the most effective methods is also the most underutilized, and that is by asking your current customers.

Referrals are some of the best tools you will ever have to generate high-quality leads. For instance, referral marketing platform Referral Candy has successfully seen rates soar as high as 7.5%.

Spending some time to change your overall marketing and sales strategy will help you see an even better number of sales driven by referrals. For this article, we are going to go over what referral selling is and how it works.

What is referral selling?

Referral selling is when you ask your current customers to refer your product or service to another person or business they know. You are leveraging the trust you have created with your customer and the trust your customer has with the others to open up a sales conversation. These sales lead generally have a much higher closing rate than sales leads generated through other lead generation strategies. 

Why is referral selling so effective?

Referral selling allows you to place the responsibility on your current customer base to do all of the leg work for you. Furthermore, your company benefits from the social proof acquired by your customers referring to your business. Leads are more likely to convert through referrals, mainly because they trust the source of the introduction. 

According to information provided by Harvard Business Review, nine out of ten buying decisions happen due to peer recommendations. That is why in recent years, social media influencers are thriving and changing the way companies use referrals. Furthermore, Nielson has discovered that 84% of customers are either entirely or somewhat trusting recommendations from family, friends, and colleagues about products, making these recommendations the information sourced rank at the top in trustworthiness. 

Moreover, referred customers are known for remaining longer and spending more than customers acquired through other means. A study posted by Wharton And Goethe German Banks revealed that referred customers spend 10-25% more on their initial purchases and make significantly more repeat purchases. The average lifetime of referred customers is somewhere around 16% longer than the average customer acquired through other means. 

Without using referrals, you are considered a stranger to that potential customer, they have no basis for trusting you. The advantage of a referral is that it leverages the goodwill between the referred customers and the referred individual. A referred customer already has some confidence in you, your brand, or your services. Hence, a referred customer will typically move through the purchasing process a lot quicker than cold opportunities. 

Why is it not used more often?

Now that you are aware of how impactful referral selling can be, you may wonder why there are not enough sales reps using them as often as possible.

There are several reasons why a salesperson would hesitate to use this strategy. A great percentage of salespeople may know the right way to ask their customers for referrals. Some sales leaders have even claimed that they never even considered the idea of requesting their customers to refer them out. The ones who are aware of this method may be hesitant to ask because they do not want to pressure their clients. 

The continued ignorance or reluctance of referral selling hurts not only the sales rep but the business as well. Since people fear asking for more once a deal has concluded, salespeople are concerned about jeopardizing their deal. It could also cause the positive conversation and relationship they have developed to become awkward. They believe that by adding another request, they could come off as too pushy and instead decide to follow up with another referral request at a later date. 

However, none of these excuses are good enough reasons to avoid asking for referrals. 

As we mentioned before, referred customers are known for sticking around much longer and spend even more than customers acquired through other means. While being rejected is terrible, when you receive that positive reply, chances are the lead will convert.

In essence, there is no actual reason not to be asking your customers for sales referrals. 

When is the best time to ask for a referral?

The best time to ask for a referral is right after someone has made a purchase. Do not wait until your customers have been around for several months. While it's a fine idea, it is also a good amount of wasted time. 

Once a customer decides to make a purchase, they are most likely to be convinced enough to tell others about your product. That is when you should take advantage of the moment to grow your business quicker. If they then tell you they want to make use of the product first before recommending it to their peers, accept the answer. 

However, in most cases, a significant amount of new customers will give you a referral right after they made their purchase. If you do not ask them for these referrals, then you will not be getting anything of value in the future. 

Make a referral selling strategy

If you want your business to start using referrals, you need to develop a defined strategy. Asking for, following up on, and converting referrals should become an innate aspect of your sales process. Although, do not assume that sales reps will typically consider asking for a referral. It is a whole other skill set, and not one that most salespeople are usually comfortable with, not even the most skilled and experienced sales rep. 

Asking for referrals should be a constant process happening each passing day. To make sure that happens, you need to come up with a strategy and a process to pull this off. Your salespeople also need to be trained in the appropriate way to ask for referrals. 

Come up with a strategy

To ask your clients for referrals, you need to come up with a plan that ensures your request for one is respectable and repeatable. To devise one, you need to consider some questions: 

Develop a process

When you have finally come up with a strategy, you need to think about the best way to execute the strategy. A referral strategy or program is an organized way of getting customers to make referrals about your company. It often involves rewarding existing customers for introducing new clients to your business. Rewards are offered through referral incentives. These rewards can include discounts, coupons, free cash, exclusive access to features or programs, and much more. 

Timing: The most appropriate time to ask for a referral is after the customer has managed to benefit from your product or service. The moment your customer compliments you, that is when you make your request. 

Make it person: Using a generic email response won’t simply cut it. If possible, ask personal or over the video call to give a personal touch. Offering a direct approach is hard to ignore and forces the customer to stop and consider any possible referrals they could send out. 

Keep it simple: Referring to your business should not be overly complicated. Offer some template email with some transparent benefits from choosing you so they can send as is or personalize as they wish. 

Reciprocate if possible: Is there a situation where you could possibly referral them? If so, ask them what is the best way you can refer to them. At times, they will reciprocate and ask you in return. 

Use social media and influencers

Aside from relying on email, you can also use social media platforms to request referrals in sales. The way people conduct sales is constantly changing each year. Social media has become a significant part of most people's lives and is taking over the way we market our businesses. 

It is common knowledge that most people will trust word-of-mouth from friends and family. But it also turns out that people are willing to trust online influencers who conduct reviews as long as they have developed their credibility. 

That means that influencer marketing on social media can take your referral strategy to another level. Keep in mind that this means every type of platform out there has all sorts of people from celebrities to personalities with massive followings, reality stars, athletes, actors, musicians, Youtube sensations, and so forth. 

Testimonials are also referrals

You should be aware that testimonials are also considered referrals. Don't limit your referral strategy by only asking your customers to recommend your product to people they know. Take the time to ask for testimonials and rewards afterward. That serves as an excellent sales engagement strategy for you. 

Use that testimonial to tempt your customer and tap into the psychology of selling. People are willing to trust another customer instead of a sales rep. 

However, with times changing, you must get created with your testimonials. Instead of having your testimonials all in one place, scatter them throughout your social media accounts or even your blog. For example, quote your customer in an email and insert a link to redirect customers to visit your website sales page.

Referral metrics

Similar to how you track your sales growth, your marketing efforts, and so forth, you must monitor your success rate with referrals. Like any other metrics, having too many new goals at once can become counterproductive. 

Start with only one or two metrics. Consider measuring your number of referral introductions or referral sale meetings per week, the number of new customers acquired through a referral, or additions in revenue or profit connected to referral sales. 

Select a focus and work to improve that metric in your referral program during the first quarter. During the next one, change to another focus. Using automation tools and CRM can help you remain on the right path by tracking your referral progress. 

Follow up

At this point, you have reached out either by asking a customer for a referral or to someone a customer has referred you to. A couple of days have passed, and while things seem promising, there is no communication heading your way. 

There are several reasons why people do not reply. The silence could be due to them having a higher priority or forgetfulness than a lack of interest. If this happens, you can follow up with an email to remind them. Not doing so can ultimately lead to you losing out on a referral and revenue. The only reason not to do this is if they have stated they are not interested in referring. 

Always thank them

Thanking someone is a good idea in general. Always show the people around you gratitude when they do something nice for you. 

Although, thanking someone is even more critical in business. If you do not thank the person when they send new business your way, you’re doing yourself and your business a massive disservice. Not only will the customer be less likely to refer to your business, but their overall loyalty will decline over time. 

Regardless if you incentivize referrals or not, always thank the referring customers for their assistance. 


As you can see, referral selling is a valuable strategy that can ensure your business manages to acquire more customers and revenue. The process behind this isn’t overly challenging and can be vastly rewarding when applied correctly. It doesn’t hurt to ask your customers to refer to your company, so why not try it out for yourself?