A strong referral partner program could transform your company’s sales. For example, if every one of your customers referred one new customer, your customer base would double exponentially! Or, consider this, what if you had several business referral partners regularly sending you ready to buy opportunities which they discovered and qualified themselves? Buzz words time… HYPER GROWTH PHASE!
Depending on your business model and product/service, 1 great Business Referral Partner can be worth 10 times more to your business then 1 great customer. However, rarely will you get such growth unless you have a formalized referral strategy.
Referral programs will reduce your acquisition costs to bring in new customers as well as increase your customer retention rates. Newly referred customers are stickier and less likely to leave you when a source they know, like, or trust endorsed and sent them to work with you. Furthermore, through my experiences, referred customers will have a higher spend per transaction with a higher likelihood of cross selling opportunities.
A quality referral program is vital to many businesses. It is important to put thought into planning the best referral strategy for your organization and document it. Dedicate time weekly to seek and meet referral partners. Build your Referral Partner Program with dedication to your plan. A quality program should revolve around creating advocates to your product/service.
Business Referral Partners should mostly commonly be an individual or organization with whom you share a common target client base. This makes it easy for the partner to qualify and introduce your product/service in their presentations or conversations. Ultimately increasing the likelihood of closing the sale.
Business Referral Partners should be nurtured and developed just the same as a Key Account Manager might focus on his/her book of customers. Get to know them, their sales process, their products/services, their mantra, their motivation, how to refer them business, key qualifiers of their ideal customer, their family, hobbies and interests, and so on. As you likely already know, most relationships in life are reciprocal where both sides give and receive. Business Referral Partners are just the same. Find the right partner, let them into your world, and get to know their world. New opportunities will arise and long term quality relationships are possible.
If referrals are the primary source of you gaining new business today, try to put a system and process in place to develop a steady stream of leads, prospects, opportunities, and sales. Effective and highly profitable referral marketing (Business Referral Partners & Customer Referral Partners) can quickly transform your sales pipeline overnight. In my opinion this is the most important sales and marketing channel to most any B2B sales model. Referral partners = sales machine.
As previously mentioned, it’s important to network or partner with those who you can easily refer to and who can easily refer to you. Ivan Misner has a name for such a symbiotic group “Contact Spheres.” Ivan Misner is the founder of Business Network International (a formalized networking organization).
Like most building blocks in the business world, creating and running an effective referral program takes some effort but will produce big rewards. Dive right into developing this sales channel if you haven’t already and make your referral program part of your weekly sales metrics.
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Business Referral Partners
Get ready to build a Business Referral Partner Program. First, identify the natural Referral Partner categories in your “Contact Sphere” so you can create a plan for meeting them. Think of BRPs as key customers. Create a miniature ICP restructured around BRPs to identify who your perfect referral partners would be. Are there certain individuals, industries, consultants, sales reps for large corporations, and entire sales teams of companies you consistently do business with, potentially a competitor who does not share a common target market or ICP?
For example, if you’re a handyman, your partners could include moving companies, new home builders, insurance agents, real estate professionals, or drywall installers. If you’re a Saas provider, partners could be Business Consultants, Cable Installers, Telecom Reps, Software Developers, IT Consultants, Accountants, or Technology Vendors.
Once you have identified who your target partners could be arrange a meeting with them to discuss a partnership or possible joint venture. Like any sales meeting, go in prepared. The more clearly you define your process to the new partner the sooner you will see results from your efforts. It is important to set expectations and educate them about how important referrals are to your business and how you handle referrals once received. Will the referral be a "hand off" of a name and phone number for you to run the sales appointment? Or, will the referral be the "hand off" of a signed contract from the referral partner? This process will vary from business to business. Imagine the difference in a referral partner program between an ecommerce website vs. a lawn maintenance company. What will work best for your organization?
Look at the program from the Referral Partner’s point of view. You, your business, product/service must be referable and bring value.
After closing a referral from a Referral Partner show appreciation. This can look very different depending on the structure of your program - paid or unpaid referrals.
• Make a phone call
• Send an email
• Send a postal Thank You card
• Provide a gift card
• Pay for their lunch every meeting
• Arrange a thank you event for all your partners
• Cash in hand
Bring value to the referral partner before they bring you referrals. This will help establish trust and indicate that you are committed to working with them. Learn the referral partners ICP and how to qualify potential business for them. Find out some important nuggets, hooks, value bombs, their elevator pitch, and key identifiers of their prospects. Find ways to contribute to their business and sales efforts. Ways to contribute to another’s business might be through sharing tools, data, resources, or providing an introduction to a prospect. Talk a little about how you might introduce and transition your referral to them. Perhaps they have a referral program already established which you may be interested in joining.
Stay in touch with them at least twice a month. This may be through a video chat, phone call, email, lunch, cocktail, or coffee. Stay regularly connected with your best referral partners and learn what’s going on in their business, bring them a referral, and update them on your business. Build trust and get to know one another. It might be important that you like one another as well depending on how much you will be working together.
Some thought provoking questions on qualifying referral partners:
• Do they carry themselves in a professional way that represents your brand in a positive light?
• Do you feel you can refer them business?
• Will you enjoy spending your valuable time with them and meeting on a regular basis?
• Are they self-driven or will you need to continually spend time coaching this partner?
• Would you personally do business with this person?
• Are they trustworthy?
Customer Referrals make a powerful impact to your sales metrics. In my personal survey over 80% of sales and marketing professionals agreed that customer referrals improved sales revenue. Furthermore, there is a longer lifetime value to the new customer.
Focus has been a theme in my previous writing and still applies with customer referrals. Not to be misunderstood, a referral program should be broad but you’ll need targets. Consider current customers and past customers, respected industry influencers, vendors, peers and colleagues.
Give and thou shall receive.
Customer Referral Partners
Get ready to build a Customer Referral Partner program. Think about what type of customer experience you would need to have with your product/service in order to refer it. Ensure you are referable before asking for a customer referral. If your customer had a bad experience they will not want to risk their reputation if you provide their referral a poor experience as well. If you are not referable then visit your protocol on how win back customers and receive positive feedback to maintain a higher Net Promoter Score.
Again, what type of customer experience you would need to have with your product/service in order to refer your product/service? Review your sales cycle and on-boarding process to determine when to approach customers for referrals. Customers are more likely to refer more people when they’ve had a good experience with your product/service. So, be sure to work the better side of probability. Asking for customer referrals requires strategy and timing is a critical factor.
Don’t forget to stay in touch with customers on a regular basis to build your relationships and create more opportunity to talk about your product/service offerings. Try and educate customers in a direct and/or passive way. Either way just make sure you stay in touch. Then, through good experiences and staying on the forefront of their mind you increase the probability of a customer referral.
Be a service oriented professional and not just a salesperson. Be a SME (Subject Matter Expert) with a focus on customer service. Let customers know the importance of how your product/service effected their success and happiness - and service the heck out of them. Under promise and over deliver is the approach some sales pros take to improve ensure customer satisfaction and a good Net Promoter Score.
***** Remember to keep it simple. If you have a paid customer referral program it needs to be easy to understand while having a simple process in place. Customers often don’t want to spend much time on processing a referral or endorsement unless there is a sizable incentive.
PAID or UNPAID Referral Partner Programs
Will your referral programs be Paid or Unpaid? Think of it this way, what’s a new customer worth to you? What is your cost for a quality referral lead that converts into new business?
Not all referral programs need to be paid. Some partners will only be interested in receiving referrals to their business in return. Motivating factors such as these should be determined in the initial meeting with the prospective partner.
If you decide to create a paid referral program it must have a compelling value to the referrer. If it takes an hour of effort to refer you a customer and your program pays $5 per referral that may not be enough of a cash incentive for an accountant to send you business.
How do you determine payouts on a referral program? One general formula to consider in calculating your payouts is below. You should ensure profitability and consider all factors.
To begin, consider what goes into your journey of acquiring a customer. Customer acquisition cost is the amount of money that it costs to gain a customer. It may be in your best interest to review the COGS (Costs Of Goods and Services) in your business plan. Let’s look at this simply from a Sales and Marketing perspective. The acquisition cost is calculated by dividing the cost of sales and marketing by the number of customers acquired. This formula can be used to evaluate and determine acquisition strategies like Referral Partner Programs.
Customer Acquisition Cost is calculated by dividing the cost of sales and marketing by the number of customers acquired.
(Costs for sales & marketing to new customers)
____________________________________
# of customers acquired
Determine the life cycle of your product/service. Do you sell a fidget spinner and have a very high # of single 1 time transactions? Do you provide a contracted weekly consultative service that guarantees revenue week over week?
If you sell an individual fidget spinner in 1 single transaction it is my suggestion to build in the reward to the referral partner into the total cost.
As a service provider that operates under a term contract, I suggest trying to recoup the cost of acquiring a customer within the first 12 months of a 36 month agreement. Although, this suggestion is relative to your service.
Understanding how to calculate Customer Acquisition Cost helps determine profitability goals and prioritizing your sales and marketing channels.
Let’s assume you have your Referral Partner Program created. You must not forget to inform any teammates on the program. Train anyone who has post-sale contact with customers how and when to introduce the program. Examples of referrers can be field technicians, salespeople, customer service pros, account manager, and administrators. It should be a best practice for everyone in the organization to know how to present your referral partner program. Some ways to help market the program are:
• Sending emails to past customers/contacts promoting the referral program.
• Adding links at the bottom of email signatures.
• Creating a contact form.
• Adding pop-up forms to your website providing information about the program.
• Developing scrips for staff to reference in the right scenarios.
• Put referral buttons on social media sites.
• Create and manager your own networking group
Today's Exercise: Now that we have gone through the basic understanding of Business Referral Partner and Customer Referral Partner programs let’s try another very important exercise. Develop a list of your Top 10 BRP and Top 10 CRP. If you have yet to obtain referral partners put it in gear and get started. This list will become a living document that changes from time to time because referral partners sometimes run out of referrals within their sphere of influence. Other times you may have a relationship with a partner that is continually growing new referrals. Either way, always keep track of your best partners and give them the attention they deserve. They are feeding your organization new sales. So, the next step is to show them your appreciation - Take action and stick to your plan!
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