The more involvement from the referral source in securing the referral, the stronger the opportunity to close the sale.

By Dr. Ivan R. Misner

A referral is a referral, right? Once a referral source has given you the name of a person to call, it’s up to you to do the rest. A referral is better than a cold call because you have the name of the prospect and, if you’re fortunate, you can use the name of the referral source to open the door. What more could you hope for?

Actually, there’s quite a bit more you can expect from referrals that have been properly developed by their sources.

Referrals come in many different grades. I’ve identified ten levels of referrals that vary in quality according to how much involvement your referral source has invested in preparing the referral for you. The more time and effort your source puts into qualifying, educating, and encouraging the prospect before you become involved, the higher the quality and level of that referral. Conversely, if your referral source only passes a prospect’s name to you, most of the work of converting that prospect into a customer falls on you, and the likelihood diminishes significantly.

Of course, the effectiveness of your referral network in providing you with quality referrals depends on the amount of work you do to develop your sources. There are many ways to encourage them to become active and enthusiastic members of your marketing team. In this article, we’ll address several methods for building the effectiveness of your referral network.

Now let’s cover the ten levels of referrals, ranging from “nothing but name” to “the full Monty.” I ranked them in order of ascending quality.

Level 1. Names and Contact Information Only

This isn’t much better than having just a name to call. It only indicates that your referral source has done just enough work to provide you with a phone number, address, or some other way of contacting the prospect.

Level 2. Literature, Biography, and Company Information

When a referral source offers to give a contact your marketing literature or other information about your business, all you can be certain of is that the prospect will see the materials. The prospect’s interest in your product or service will depend solely on the impact of your marketing message.

Level 3. Authorization to Use Name

Once a referral source has authorized you to use her name, you can feel fairly certain that you’ve established a good level of credibility with her. By allowing you to say that she endorses your product or service, your source has given you valuable leverage with the prospect; however, the problem with this shade of referral is that the burden of developing the prospect still rests on you. Once you’ve conveyed that your referral source recommends you and your business, the task of selling really begins.

Level 4. General Testimonial or Letter of Recommendation

Getting a referral source to say or write nice things about you is a major accomplishment. His willingness to communicate positively about you and your business shows that you’ve built a moderate level of trust with him. Of course, testimonials and letters of recommendation are fairly common in the business world, so their impact on the average person is limited.

Level 5. Letter of Introduction and Promotion

This is the first level of referral that truly involves a modicum of effort on the part of your referral source. Unlike the letter of recommendation, which requires little more than a written endorsement, the note or letter of introduction implies a more substantive relationship between you and the referral source, and it usually includes background information and a description of your product or service as filtered through the lens of the author. It also infers that the prospect will be hearing from you.

Adding the element of promotion increases the effectiveness of your referral source’s effort on your behalf. Promotion is advocacy–an outright recommendation of your product or service with a description of its features and benefits.

Level 6. Introduction Call and Promotion

Another level up in terms of effort is the referral source who makes a personal phone call on your behalf. It takes preparation and effort, but a telephone call from your source is more effective than a letter for paving your way to communicate with the prospect. Including a promotion makes it even more favorable.

Level 7. Arranging a Meeting

Your referral source moves beyond the role of a promoter to that of a facilitator, taking the responsibility of working out the details of getting you and the prospect together. This is a big-time referral effort.

Level 8. In-Person Introduction and Promotion

At this level, your referral source is making a serious commitment of time and energy in support of your business. By agreeing to serve as an intermediary in a face-to-face introduction, your source becomes an active business agent. This demonstration of deep trust in and approval of your product or service substantially raises the referral’s effectiveness with the prospect. Adding promotion further enhances its power, because your source is then actively engaged in selling your product or service rather than just facilitating a meeting.

Level 9. Assessing Need and Interest

In this level of referrals, your referral source has done the work of assessing the need a prospect may have for your product or service and has gauged the prospect’s interest in learning more about it. This enables you to focus your selling effort to needs you know the prospect has an intention to fill, and it allows you to select or tailor your products or services to provide specific benefits.

Level 10. Closed Deal

At the top level of referrals, the sale has been closed before you even contact the prospect, solely on the strength of your referral source’s efforts. Nothing else is required from you except to deliver the product or service and collect payment.

The amount of work you have to do to close a deal is based on the level of the referral. If you’re given a level 1 referral, you have to do 95 percent of the work to close; this is not much better than a cold call. On the other hand, if you get a level 9 or 10 referral, then the person giving you the referral has already done most of the work for you. It’s easier for your referral source to close the deal than it is for you, because your source already has a relationship of trust with your prospect. For this reason, it’s important for you to do a superb job in fulfilling that referral so your referrer will get great feedback and want to refer you again. The referral giver is, in essence, lending you her credibility; this is not something to be taken lightly.

Called the "father of modern networking" by CNN, Dr. Ivan Misner is a New York Times bestselling author. He is the Founder and Chairman of BNI, the world's largest business networking organization. His newest book, Networking Like a Pro, can be viewed at www.IvanMisner.com - Dr. Misner is also the Sr. Partner for the Referral Institute, an international referral training company.