1) The referral audience (or “referrers”, if you will) who provide the name and other pertinent information of a prospect at the point in time when the prospect needs your products/service the most. Because they are identified at the time of need, these prospects are relatively easy to convert. What’s more, in some instances these prospects may be pre-converted to a “closed/won” status before you even get the lead.
2) Rewards to referrers aren’t paid until the sale is closed, or even after the initial invoice is paid.
These two points combine to mitigate the risks typically inherent in all sales and marketing programs, which include both time (sales resources) and money (lower out-of-pocket cost per sale) on your end.
In fact, using our own experience designing and deploying referral program clients, we have seen their impact on close ratios be as much as 35% higher along with ROI up to 400% higher than would typically be attained through other types of marketing programs.
To capitalize on these benefits there are two key components uniquely inherent in any referral program: The referral audience and the program infrastructure. Embellishing each individually, the referral audience consists of groups of individuals that can provide a prospect referral–likely because they interact with prospects at or near the ideal time of need for your product. Typically, these consist of multiple audience groups who are as diverse as: your employees, certain classes of channel partners, strategic business alliances, affinity organizations and more. Second, the program infrastructure consists of all sub processes deployed to facilitate referral lead capture and closing, which typically include: a micro site (the contents of which may be specific to each audience), lead routing rules, rewards structure fulfillment processes, and a communication plan. I won’t go into detail on those points here, because they are the subject of our new eBook entitled: “Exploiting the Benefits of Lead Referral Programs as a Marketing Tool”. Instead, what I would like to explore in this entry is the proper application of referral programs as a marketing tool.
As a type of opportunity management program, referral programs are quite different than its cousins– lead management and deal registration. It’s uniqueness lies in the fact that a 3rd party is responsible for identifying and submitting the referral, and that 3rd party may or may not have a formal business relationship with you, nor may they necessarily be responsible for “closing” the sale. Therein lies both the beauty and challenge of referral programs as a marketing tool.
While referral programs may be used in any industry, they have long been a mainstay in industries that have subscription-based revenue models. Examples include: telecommunications services (including: video, internet service providers, and land or cellular telephone services), home security, and even financial services. What all these industries have in common is that the products have to be fulfilled (or sales completed) by the vendor themselves, as these products (or services) are not otherwise stocked on the shelf at a local outlet. In such instances, referral programs may be implemented effectively with channel partners as an alternative to deal registration because of their inherent simplicity. For example, a reseller may interface with a referral platform to sign their clients up for T-1 access in exchange for some form of reward or commission after service is initiated. This reward may be paid to channel partners, both managed and unmanaged.
With this as background, what HUGE trends are going on within the tech industry thatare creating new candidates for referral programs every day? That’s right. “The Cloud” and “Managed Services”. These two trends are ripe opportunities for referral programs as a way to affordably, and dramatically increase sales.
To assess if a referral program is right for you, ask yourself the following three key questions:
1. Are there Word-of-Mouth (WOM) audiences you can tap into that are willing to recommend your products/services to other individuals or businesses in exchange for a reward? (This can include: channel partners, current customers, employees, strategic business partners, and other near-engagement business entities)
2. Is your value proposition well understood by those audiences? Enough so that they can communicate it to prospects on your behalf generating initial interest or acknowledgement of need?
3. Is the margin on your product or service sufficient enough that an investment in capturing leads and paying commissions on business won from those leads makes sense?
If you answered “Yes” to those questions, you just may have found the next business-building tool that can truly give you a competitive advantage. If the thought of implementing a referral progam makes you curious, check out our new whitepaper.