Everyone knows referral programs are an important way to expand a business. According to the Edelman Trust Barometer, 84 percent of B2B buyers start the buying process with a referral.
Beyond getting new leads from a referral program, there are additional benefits. The leads tend to close more quickly, and at a higher rate. Why? Buying really boils down to trust. And if you’re working with a prospect who was introduced through someone the prospect knows, you’ve already removed, or at least reduced, the trust hurdle.
Even though sales and marketing people agree that referrals are powerful, not every marketing department has a formal program. Having a formal program, however, almost always leads to a greater number of leads.
A word of caution on referral programs. They are ultimately a reflection of the overall value your company provides to its existing customers. If a company doesn’t have a great product or service, it’s not going to have much success at getting referrals. While this point is fairly obvious, it’s important to reiterate.
Start with considering your referral program. It doesn't have to be as simple as, “If you do X, you’ll get Y.” In fact, in the B2B space, your program might not need to include an incentive at all. Some people make referrals just because you ask them to.
If there is an incentive, decide if your customer receives it for making the introduction or if the referral needs to buy your product or service before your customer receives it. Most programs require a transaction, but if getting a higher quantity of referrals is a high priority now, you may want to provide an incentive for just the introductions. For example, “If you provide us with five potential customers, we’ll give you X.”
If you're using a structured program that includes rewards, make sure that the incentive is enticing. Tesla has had some interesting referral programs over the years. The company originally offered customers $1,000 if a friend they referred ended up purchasing a car. Now the company offers a referring customer access to additional Tesla products, like their Powerwall Battery. At one point, the company had a program in which the first person to refer twenty new customers in a region received a Tesla Model X or Model S. This is clearly more of a PR stunt than a real incentive program, but it was enticing. Who wouldn’t want to be rewarded with a brand-new car?
Another example of a structured reward program is what I call the double referral: both the referring customer and the new customer receive an incentive. The idea behind this approach is that the referring customer feels good for taking care of his or her friend.
If you’re convinced that having a customer referral program is important, we can focus on the steps to take to launch a program.
Step 1. Identify your best customers.
Not all customers are created equal, and you want to focus on your best customers. They already see the value in what your company does, which means they’re more likely to be advocates.
When it comes to identifying the right customers, there are two schools of thought. The first is to start from a list of prospective customers and find out if any existing customers are connected to them. This is where a tool like LinkedIn comes in handy.
The other approach begins with your existing customers and describes for them your ideal customer. They already know your company and what it does, and they’ll have a good idea of whether anyone in their network would benefit from working with you.
Step 2. Monitor how things are going.
After you’ve identified the customer, be smart about the timing. Is your company in the middle of an intense project for the customer? Are there nagging or unusual issues challenging the relationship between your company and that customer? If so, it is not the time to ask for a referral.
I’ve found that the best time to request a referral is when a customer is happy. Sometimes, if my sense is the client is happy with our work, I incorporate the request into a post-project survey.
Step 3. Give before you ask.
In his New York Times best-selling book called Give to Get: A Senior Leader's Guide to Navigating Corporate Life, author Vishal Agarwal outlines a simple human principle that can be applied to asking for referrals. The general premise of the book is that you need to give something of value before you take something. What do I mean by giving? Well, it can be a small gesture like sharing an article about a topic you know your customer is interested in. Or it could be a more substantial gesture like taking a client out to a nice lunch or dinner. Whatever you do, the key is to give first. It's important to let the “give” sink in before you go in for the “take.”
Step 4. Ask.
Provide your customer with some context about expanding your business. Give examples of companies you are interested in working with. If you don’t have people’s names, give the customer an example of a buyer persona or avatar.
The means of communication are important. Never ask for a customer referral in email. Always do it in person or on the phone. Why is this important? The first challenge of getting a referral is having the person agree to help. You could say something like, “Would you be open to thinking about one or two customers who might benefit from working with me?” If you phrase it like this, it’s really hard for your current customer to say no.
Step 5. Employ the warm introduction.
Sometimes when you ask for referrals your customer will agree to it right away, followed by something like, “Feel free to reach out directly and mention my name.” This is the curse of a customer referral system. People rarely respond to such cold outreach, even when you use the customer’s name.
Ask your customer to go the extra mile and make the introduction personally. To make it as easy as possible for your customer, offer to write a generic email he or she could edit and send to the prospect to make the introduction.
Step 6. Update and thank.
If the referred customer engages with you, circle back to the customer who made the introduction. Let him or her know how it went. Most important, thank your customer. A simple phone call, email, or thank-you card will go a long way.
Step 7. Give a gift.
What should you do when you’ve secured a new customer from a referral? Naturally, you want to send a special gift to the customer who helped you out. Or, if you’re using a structured program, it’s time to deliver on what you promised. For unstructured programs, it’s really important to take the extra step and give a gift. This will encourage your customer to make additional referrals.
Want to join our mailing list?
Signup and start growing your professional service business faster.