I have been asked many times recently if networking really works or if it’s just a waste of time, effort and money?

My answer: it depends.

It depends on the salesperson, the situation, the sincerity, the integrity of the salesperson and most of all the work. Networking or “referral marketing” if you want to use the buzzword works when done properly, consistently and honestly, it doesn’t work instantly.

If you want instant results then do yourself a favor and quit whatever networking organizations you are a member of and do some form of advertising. Mail out a series of letters, buy some TV commercial time, a radio ad and/or a newspaper ad or create some sort of online advertising campaign. Any of those mediums will give you instant results somewhere around .1% to maybe .3% if you are really, really lucky.

So let’s do some math and see how that works out:

You create some sort of advertising campaign with a target market of say 100,000 people and just for the easy math let’s assume that your ad is getting an absolutely HUGE response rate of .3% (which is very, very rare btw). So that means out of the 100,000 that are exposed to your ad 300 people respond to it with contact information so that you can follow up and try and close the sale.

If you have the apparatus in place to respond to all of them in a timely manner so that their need and/or impulse hasn’t disappeared yet, how many of them do you think you will actually get in front of? 20%? Maybe 50% ?

Let’s assume for the argument that you can get in front of 50% of them, so that means you set 150 appointments with these prospective customers. Out of those 150 you will probably actually get in to see 120 or so in reality based on the reality of life and people changing their mind, ducking you or just deciding to cancel for no apparent reason.

Again assuming you can do this all in a very timely manner how many do you think you can actually close? 10%? Maybe 20%? So say you do close 20% that means you have made 24 sales from that ad campaign. Pretty good right? Well it depends…how much did the ad campaign cost you? What is the retail price of your product/service? What is your cost? How many hours did you spend creating the ad, making the phone calls to get the appointments, actually doing the appointments, writing up the order and following up on the delivery and/or completion of the order?

I won’t try and run those numbers with you because there are just way to many variables for me to even guess at. Is it possible to be profitable in this way? Sure, business has been run this way for hundreds of years. Is it the best way? Or the most profitable way?

Out of Pocket: Potentially thousands of dollars and dozens if not hundreds of hours.

Let’s look at another scenario and compare:

Let’s say you become a BrowseYourTown member and attend just one meeting a week. If you are smart you spending 15-30 minutes a week preparing for that meeting and 90 minutes at the meeting. At that meeting you ask for very specific leads and on average you will receive 6-10 leads from each meeting you attend. For the sake of argument let’s assume 5 leads a week, it makes the math simpler.

You call those 5 leads and since you were referred to them by somebody they know personally you are more likely to actually be able to meet with them and help them out. Out of those 5 leads you get 4 appointments and are able to actually meet with all 4 of them. If you work it correctly at least one of those 4 will immediately need what you have to offer and 1 other person will need what you have down the road.

So at this point you have 1 confirmed sale, will get a second sale in the not too distant future, 2 other people that have a positive impression of you that will probably buy from you when they are ready and 9 other people from the meeting you attended that know who you are and what you do.  All of this in what maybe 8 hours of work and the cost of your annual membership. Now imagine if you attended 2 meetings or 3 meetings a week?

Out of pocket: Cost of the annual membership and 8 hours of work.

Now do you understand why referral marketing works so well? You get to leverage the time, knowledge and connections of the other people in the organization instead of just your own time, money and effort.

As Ray Kroc once said “I would rather have 1% of 100 men’s efforts than 100% of my own efforts”

The SalesGuy

Tags: actual sales, networking, referral marketing