The Missing Link in Your Lead Generation Strategy

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Are you in a referral business or lead gen business? If you mix those up, you’re making a mistake that’s costing you ideal customers. Here are some ideas on how to build trust and generate leads by understanding which strategy is best for your business.

referral and lead gen puzzle

Job number one of every business is to have a healthy flow of new profitable customers.  But how you actually get those customers actually depends on the type of business that you have and what sales and marketing activities that you’re comfortable with.

This isn’t something that a lot of business owners think through.  Usually, we just jump into one of two basic strategies; referrals (or word of mouth) and lead generation and acquisition.  

There’s a difference.

  • When referred by a friend, people are 4x more likely to make a purchase.
  • Referred customers’ Lifetime Value is 16% higher when compared to non-referred customers.
  • Customers acquired through referrals have a 37% higher retention rate 

What is the Difference Between a Referral and a Lead

The first step is to understand the difference between a referral and a lead.

  1. Leads are cold. Referrals are warm. Getting a business card and calling someone who isn’t expecting your call is a lead.  Having someone introduce you to the person with a phone call or an email is a referral.
  2. Leads are unqualified. Referrals are qualified.  Leads may or may not be able to buy from you, but a referral is someone who has expressed a specific need for your product or service.
  3. Leads are loose connections. Referrals are loyal.  There is very little risk to your reputation when you pass on a lead, but a referral is different.  When you refer someone, you are putting your reputation and credibility on the line.


Which Strategy Should Your Business Use?

Business owners don’t often stop and think about whether they should focus on referrals or lead gen.  They often just do both and do neither exceptionally well.

Luther gives several examples of businesses that took the time to strategize:

  • A luxury real estate agent who only deals with properties that sell at $20 million or more realized that her SEO website was attracting unqualified leads.  She focused on connections with her prospect’s influencers instead.
  • Another luxury realtor realized that three connections were sending him almost all of his business.  It didn’t make sense for him to attract dozens of leads when building a relationship with just one more community influencer would provide him with more of his target customers.

Luther also says that the typical Main Street business owner needs to start with BOTH.  Of course, your website has to have some way for prospects to contact you and you also need to nurture relationships that will ultimately deliver your ideal customers.  But after you’ve done this for some time, it’s time to do the following:

  1. Take a close look at who your best customers are.  How would you profile them?  Don’t just look at all your customers, focus on your BEST customers; those customers who are not only profitable but who are a pleasure to work with, who value what you offer and who are referring new business.
  2. Notice where those customers are coming from — was it online, social media, or referral relationships.
  3. Start focusing just on those strategies that are delivering your best customers.

Be Creative in Developing “Lead and Relationship Magnets”

“One of the great things about being in marketing is that you get to be creative.” Says Luther. But first take a look at what’s going on in your industry right now — just search it on Google.  Then start exploring fun creative strategies that you can try.

One example Luther gives is running a monthly Happy Hour and inviting prospects to mingle with sales reps and company reps.  He says it was wildly successful in that it brought target customers to sales AND it allowed the salespeople to start building relationships.

Get This Through Your Head

I have to admit that when Luther started talking about the distinction between referral and lead gen strategies I was blown away.  It’s not like what he said was something new, it’s that what he said brought out the fact that we’ve collapsed and combined two very different strategies for two very different types of businesses.

Here are a few shortcuts:

  • If you have a “high involvement” product or service — one that is expensive or that has a big impact on your customer’s life i.e. lawyer, real estate, chiropractor, dentist, etc.  Referrals are going to be an important marketing element for you.  Take a look at where your best customers are coming from and leverage those connections.  You are better off building solid relationships with a few specific people than wasting money on online lead gen strategies that may only deliver unqualified or irrelevant leads.
  • If you have a business that requires less investment in relationship or money; agency,


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