A synonym for referral is “recommendation” while “testimonial” is a synonym for reference.  While the difference may be subtle, to me it is very important.  In a business sense, a testimonial is reactive and a recommendation is proactive. Sounds like English 101 but please bear with me and I will demonstrate the difference and why it is very important for your business’ long-term growth.

What is a Reference?

Most sales people would kill for a reference able customer.  This is because prospects usually want to check with existing customers to find out if all the expectations being set in the sales process are in fact the truth.  That confirmation is often critical in the purchasing decision because it demonstrates to the prospect’s boss that she has performed her due diligence.

The way the process works is that a salesperson asks “his most satisfied” customers if they will serve as a reference.  A yes answer gets them on a centralized list that someone manages to make sure no one customer is buried in reference requests.  If a reference helps close a new order the salesperson may invite the reference to lunch as a thank-you.

The reason I called a reference reactive is that it is created in response to a request from the supplier.

What is a Referral?

A referral is usually, but not always, an unsolicited effort on the part of a customer to advocate for a partner/supplier/vendor with friends and associates.  This is lead-generation, pure and simple.  One of your customers is so wowed by your whole company that she just has to talk you up at meetings, conferences, and maybe even social activities.

Another way to look at a referral is to call it a recommendation.  This is important because many of us survey our customers and ask the now famous loyalty question “How likely are you to recommend company A to a friend or associate” or some similar question. Here we are looking for people who rate us 9 or 10 on a 0 to 10 scale, These recommenders fit my definition of a referrer – same action, different name!

Here is a real life example (mine).  I have a 4-year-old MacBook; a simple computer that makes me feel good every time I sit in front of the screen.  I know I “sold” at least 3 of these over the years because friends, who know I have a Mac, ask me “do you really like it?” I go into my sales pitch about the design, ease of use, the Apple Store with Genius Bar and all the stuff that people write about.  I even took a friend to the nearest Apple Store (less than 5 miles from home) to demonstrate that everything I was telling him was true.  I am the ultimate referral!

In a B2B business, there should be a protocol to follow whenever someone refers a prospect to you:

As soon as you find out about the referral you should pick up the phone, call your referral customers, and thank her for her kind effort

When the order is received, which should happen unless you screw it up, you again call and share your good news and offer to take her to dinner to help you celebrate. Now comes the fun.  When the product or service is successfully delivered you should again call and this time offer to make a contribution to a charity of her choice, in her name. Depending on the order size a donation of $100 or $250 would not embarrass anyone and will leave a lasting positive impression.

Share this story inside your company to make sure everyone is on the same page and, if you have customer meetings, get permission from your referring customer to tell the story at the next meeting.  You never know who is just waiting for a little push to go and sell for you.

Finally, track references and referrals and try to determine what makes some companies unlikely to make a referral.  Fix the problem.

If you follow these steps, you will not only increase your sales but will also go a long way to retaining your customers. And because the customer goes public and praises your business without any asking you can see why I call this a proactive action.

Of course, you should be working to convert reference and all other accounts into referrals. Done well it will become a perpetual motion machine cranking out highly qualified (actually pre-sold) leads. Sounds to me like a great way to grow your business while retaining your current customers.