The difference between a Lead and a Referral

What is the difference between a Lead and Referral?

This topic was inspired by real life, I was having a meeting with a new business contact, Sharon and she inspired me. She inspired me because we were talking about the difference between a lead and a referral.

I run a business called Out of the Box Biz, we ran live networking and business education events for 4 years. The business now provides online services sharing business education and promoting our members.

At an Out of the Box Biz event that I was sharing the business tip ‘What is the difference between a Lead and Referral’, this business contact that had inspired me, Sharon, happened to attend.

Before I continue with this topic, I want to share another reason why I was motivated to share this topic and business tip.

Business Lead

For many years, I had seen many business people hear a need from a contact they just met, and immediately thrust a business card of a colleague they knew, saying call them they can help you with your need. Then they would go back to their business colleague saying ‘expect this contact to call’. While this appears helpful for the new contact. It can be misleading for the colleague that has been referred. The contact has not given any indication of interest and if they will indeed call. Therefore, this is a business lead because no commitment or permission has been established.

Another example of a business lead is when a business person hears a need from a new contact and asks for their card and gives it to a business that can help with the business need. However, no conversation was had with this new contact if:

a) they would like to be connected with someone that maybe able to help them with their need?

b) they wanted their contact details passed on?

But back to our topic, the difference between a lead and a referral, the key is to gain permission.

business connections

Frankly the above scenario when it is the only strategy used to connect can be a complete waste of time for the 2 people that are being connected filled with frustration and potential misunderstandings. I understand that not on every occasion, especially at a busy networking event, permission cannot always be established. However, a short email or phone call can be made the next working day to establish this and set up the connection to be a referral and therefore potentially much more successful.

Back to the Out of the Box Biz, for example, I was talking to a hairdresser about Out of the Box Biz members, Natasha and Paula. Natasha and Paula are interior designers. So if the hairdresser was considering redesigning her premises then mentioning either Natasha’s or Paula’s name without permission and without exchanging contact details, makes this a lead only.

A Business Referral is when

The hairdresser has expressed her interest to redesign her premises. When this need is highlighted, I say to the hairdresser:

‘I know a fantastic interior designer, would you mind if I pass your contact details on? You can meet for a cuppa and get to know each other and see if it is a good match’.

If the hairdresser says yes then that’s a referral.

3 way Referral

business referral

Traditionally, before emails, mobile phones and social media, when you wanted to introduce 2 people in business you believed could help each other. You would bring them both together for a meeting. Yes you would meet with them.  Yes with all three people there. You introduce them and then leave them to continue the meeting. That’s the ideal. This is why networking events are useful because you can connect people in the room immediately. However unfortunately most people think networking events is only to ‘hunt’ for new leads and referrals for yourself. They can be used to build long term business relationships. This is a 2-way relationship. To help them and for they to be motivated to help you.

You can also similate a 3-way introduction via email from yourself to the two people you wish to introduce. It is critical you gain permission prior to sending the email and outline briefly why you believe they can help each other. It is also a delicate balance to introduce them but not for them to feel like they ‘have to do business together’ just because you introduced them. Simply to introduce them, outline why you think they could help each other but then leave enough space for them to get to know each other and for them to decide if they’ll do business together.

A good practical exercise you can do at a networking event is

To find a Lead or Referral in the room for someone seeking assistance.

For example, when I hosted an Out of the Box Biz live event with the theme ‘Money Matters’ I invited all those there to connect with someone needing assistance in matters of finance in their business to the Money Matters experts in the room. For example, you can have a successful business but still want to improve your cash flow:

1. Get up out of your seat.

2. Ask people in the room to describe what they do. Known as the elevator pitch up to 60 seconds long.

3. Then ask them What their Number 1 need is in business not personal

4. Share what you do and your Number 1 need

5. With this information you can then potentially find a lead or referral for anybody in the room if you repeat this conversaton with several people.

Specifically for the event today, find someone who has a finance need. Then we can introduce them to the Money Matters experts in the room, if relevant.

Here is the footage from this event where I explain the difference between a lead and a referral live:

I would love to hear your experiences of connecting in business and if you felt you have received leads and/or referrals. Please share in the comments below:

8 Replies to “The difference between a Lead and a Referral”

  1. Hey Fleur,

    What a great idea for a post!

    You made the difference super clear when you say, ‘the difference between a lead and a referral, the key is to gain permission’.

    That is so important and makes all the difference to how you feel about the interaction that follows.

    Similarly, just this morning I got a call from a recruiter who announced that someone with whom I had worked had passed my name on as a reference. I can’t tell you how quickly the hairs on the back of my neck stood to attention. The person in question had not sought my permission for this and even though I was fine about providing a reference, I am sure the reference would have been even better had they asked me first. Not asking my permission simply got my back up.

    Cheers,
    ~Mark

    1. Hey Mark, yes absolutely I know what you mean. Giving people the courtesy is so much more meaningful and builds rapport and trust so much faster. Glad you could stop by. Cheers for your comment!

  2. Having been to hundreds of networking events during my lifetime I really get that most people do not understand the difference between a lead and a referral.
    I also know that most people are pretty bad at networking for this very reason.
    They go to get contacts and customers but do not realise that by getting other people referrals they are raising their own credibility and trust which in time will lead to getting more customers for themselves.
    You give a really good explanation of this here but I don’t envy you having to run networking events. It must be difficult to get the real point of networking across to people and then have them act on your advice

    1. Thanks Karen for adding your views to this discussion. Yes networking events are an interesting type of event to run. I spend the majority of my time online networking now but do still enjoy face-to-face opportunities when they arise

  3. Hey Fleur, I really enjoyed reading your post. I loved that you made the difference so crystal clear between those two things. because they really are two totally different things. I don’t think there is any better about one or the other they are just for two different things. like email marketing or actually gain trust.

    1. Hi Aaron, thanks for your comment, yes it is important to have both leads and referrals into your business however I believe referrals convert to sales at a higher rate than only leads.

      Regarding your final comment, did you mean email marketing can gain trust?

    1. That’s my pleasure Mugalu, I’m delighted to hear this has helped you gain some clarity on the differences. It is so helpful and can assist you to go that extra step to turn a lead into a referral.

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