Do you have the wrong KPI?
If you’re like most sales leaders, you’re tracking the wrong referral metrics and spinning your wheels. Craig had only one referral KPI, and it was the wrong one: the number of prospect meetings that his reps conducted. Meetings are an important activity metric, but your team will never fill their pipelines with hot referral leads if they skip the first step: asking for referrals.
It may seem obvious, but if you don’t ask, you don’t get. At least not at scale.
The Referral Metrics That Matter
Sales leaders tell their teams to get referrals, but their KPIs don’t include referral activities or results. Makes no sense, does it? Instead, they measure reps on calls made and emails sent. So, guess how reps choose to spend their sales prospecting time? Pestering strangers with cold calls, cold emails, and cold social media outreach.
Some sales leaders do measure reps based on referral results, but referral activities are the referral metrics that matter. Results metrics are a lagging indicator, and you can’t manage to results. You can manage to these activities: number of people asked, number of referrals received, number of meetings scheduled, number of meetings conducted, and the close ratio of referred leads.
Setting the right KPIs is your biggest competitive differentiator, because they determine how your team approaches sales prospecting. Measure the right sales activities, manage to those activities, and coach your account based selling team on the behaviors that turn those activities into revenue.
It may seem obvious, but if you don’t ask, you don’t get. At least not at scale.
Do the Referral Math
How do you determine your activity-oriented referral metrics? Begin with the number of new clients you must bring in and then work backwards. Let’s say that, on average, your sales reps need 10 new clients to reach quota. Here’s an example of how the math works:
• Ask 40 people for a referral introduction.
• Twenty people say they’d like to help, but they can’t think of anyone.
• The other 20 people provide introductions to your ideal client, because that’s who your team asked to meet.
• With a 50 percent conversion rate, you have 10 new clients.
Even better, your reps have earned the right to ask everyone they’ve met during the buying process for a referral. By the way, 50 percent is conservative. Most salespeople say the conversion rate with referrals is more than 70 percent.
Revenue isn’t the only metric that matters. Set referral metrics around sales activities you can measure and manage. Then adjust your KPIs to match. Set revenue goals for each person. Your veterans expect their goals to increase year-over-year, so there should be no surprises. Now it’s time to set KPIs for activities and behaviors that drive revenue. The last thing you want is your sales teams engaging in mindless activity.
Want to learn more about referral selling? Check out my acclaimed referral sales system.
