Referral programs are nothing new but few know how to run them effectively. Yet the impact of referrals is undeniable. Here's some evidence to prove it:
76% of B2B executives prefer to work with vendors who have been recommended by someone they know.
73% of B2B executives prefer to work with sales professionals who have been referred to them by someone they know.
84% of B2B decision makers start the buying process with a referral.
Source: Harvard Business Review
B2B decision makers are over 4 times more likely to meet with you if there is a personal connection involved.
Source: Sales Benchmark Index
Let's first define what is a referral program.
A customer referral program is a word-of-mouth marketing strategy that rewards existing customers for spreading the word about your product or service with family, friends, and colleagues.
Let me point out the relevant action in the definition: spreading the word.
It means that you are asking your customers and clients to invest their time into actively telling others about your offer.
Do you think this is a priority task on a B2B decision maker's mind? I don't think so either.
Let's make an example Return on Investment calculation why you should invest in referrals and building a systematic process of generating them. Your initial offer is €10,000 or greater. Once you get a client, they buy on average €42,000 worth of your services throughout the lifecycle of their customer relationship.
A typical buyer persona is in a decision-maker role. They have a professional network of 750 people. Out of those 750 people in their professional network, it's reasonable to say 30% of them are decision-makers like your client. Birds of a feather flock together.
Obviously, not all of these 225 people are in a particular industry you serve, a leadership position that would make purchasing decisions for your services, or would otherwise match your Ideal Customer Profile. But let's say one in five of them do.
Out of those 45 people, you and your client will further qualify 80% of them as potential referrals. And you are able to get hold of three out of four of them. Out of these 27 decision-makers, 84% will start the internal purchasing process, and every other one will actually meet with you.
You further qualify 50% of them as a potential client and you'll make an offer to them. Every other of them will say "YES". That's three new clients.
So, walking a single client through the process just generated you 30,000€ worth of new deals and €126,000 in new LTV.
69% of customers who had a positive experience with a company would recommend the brand to other people.
64% of B2B executives appreciate introductions to new people.
Referred customers are 4 times more likely to refer others to you.
Only 11% of salespeople ask for referrals directly.
Source: Dale Carnegie
The activity of spreading the word about your offer and the value and results it can generate for your clients must be in your control. So, instead of asking your customers to spend their valuable time on spreading the word, you must be the one taking the initiative.
Your happy customers are the source for referrals, not the producer.
There are a few pre-requisites for an effective referral system.
If you struggle with number 3 or do not have a systematic way of producing case studies, our Social Proof System offering might be of interest to you.
The following events should prompt your salespeople to begin the referral system process:
We will help you set up these triggers so that the process is activated automatically when a certain event happens in your business or your sales process. If there are any other useful business event that should trigger the process, those will be charted and configured to trigger the process.
You source the referrees from your customer's professional network. This happens either beforehand by your salespeople or together with the customer, depending on the circumstances. We will show you how to do this step-by-step.
In case you aren't able to access information about customer's professional network, you'll do the sourcing and qualification step together with the customer. We will teach you an effective method of performing the sourcing and qualification together with the customer.
We will provide you software to carry out the sourcing and qualification process free of charge. Your sales people will be equipped with tools to carry out this process effectively.
Once you know who you want to pursue as potential referrees and future customers, it's time to lay the groundwork for successful outreach.
You'll get in touch with your referrer and ask for the referrals.
We will show you
We will give you the exact script structures, systems and methods to use.
These have been proven to work in the companies that we have set up this process for and trained the salespeople how to operate in it.
We will customize them for your business and context so they can become sales assets for your sales teams.
Next, once you have the referrals, it's time to reach out to the referrees with meaningful sales interactions to set up a meeting.
We will give you the exact script structures and approach methods how to do this effectively.
We will show you
Again, we will customize them for your business and context if necessary.
Implementing a effective referral system is a actually a very straightforward process, but reliant on aligning it with your day-to-day sales operations. Get Sales can facilitate you a smooth and efficient implementation process, with the referral system operational within a single day once all prerequisites are met.
The article was written in cooperation with Lauri Jutila.