Referrals! They are the low hanging fruit often ignored in creating a growth engine. Despite the well-documented value of this marketing channel, it is one of the most overlooked, particularly in B2B and high value B2C purchases such as cars and electronics. Even those who understand the value of it do not actively embrace it, leaving money on the table! In this post, I outline how to set up a referral engine that is seamlessly integrated with your operations and continues to create incremental value for the company with minimal ongoing investment.
To refresh, below are a few awesome advantages this channel delivers -
>70%
purchases influenced by WOM
- Reduce cost of acquisition, increase conversation rate and reduce prospecting cycle time
- Create a scalable growth engine with less churn and overall LTV increase by 25%
- Enable adoption of the product/service at scale beyond the pilot stage
- Create unbeatable market buy-in, entrench and kill your competition
- Limited to Zero ongoing investment
Now, let's look at a few reasons why companies are not going gaga over referrals and then look at ways to address those concerns and inertiatic speedbumps
- My sales person knows he has to, but does not see the value.
- It is too difficult to track and measure
- We have done it in the past and it was not effective.
Source: customerthink.com
The key to overcoming these hurdles is to establish a process where collecting referrals becomes a natural part of the business operations rather than an interruptive system. Addressing the issue requires management imperative and company wide execution. There are three functional aspects that need to come together for a Referral mechanism to be set up and executed well - Organization Structure, Process and Systems.
ORGANIZATION STRUCTURE
Many companies have segregated sales and client management teams. In this system, referrals have to collected by the client teams and then fed back to sales, creating and lot of inefficiency and lost information primarily because incentives are not aligned. There are two ways to address this - change the incentive structure or change the client management structure. The latter is easier to adopt and executes better as account teams primarily concern is ensuring customer success and we do not want to take away attention from that.
“The research discovered that 68% of reps with formal referral marketing strategy rated these tools as effective or highly effective, compared to 40% for those without a formal strategy.”
Create Customer Lifecycle Sales Teams
The closing sales person, and team, must stay involved with the customer through their lifecycle, perhaps at a lower frequency than the client relationship teams. For general B2C a touchpoint every 3 months is good number to target and for higher price items a schedule similar to B2B can be adopted. For B2B and enterprise product industries, a touchpoint every 6 to 9 months is a good benchmark. That allows sufficient time for any delivery or operational kinks to be ironed out and keeps the account manager as the primary client contact while not losing sight of the team effort.
Incentivize Client Facing Teams on Efficiency of Referrals
While it is important to allow a sales person to independently manage their resources most efficiently against targets, it is equally necessary to ensure that the everybody in the firm and team adhere to common best practices. The easiest way to do this for an organization is to include it as a performance KPI for the individual. Identifying the weight allocated to this metric must be a scaled effort - small companies should value this more than discrete sales. In larger companies, the weight for this parameter should scale up as the role progresses to be more managerial indicating the strength of relationships and influence a senior sales person can create.
The team needs to incentivized to collect quality referrals that enables the success of channel. Key metrics to track referral efficiency of a contributor are -
Process
Setting up the Org Structure correctly is only the start getting the ball moving. It needs to be back by appropriate process and systems back up to actually perform. Training is critical to the success of any sales team. Particularly, if they have no experience in a referral engine then without proper enablement, they are less likely to succeed in doing it. The sales structure needs to be aligned to this goal and every incoming new sales rep needs to be trained in the importance of and the method of collecting quality referrals.
Train Sales Team to Instigate Referral making
Source: Linkedin Study
Outside of the regular training, sales people should be encourage to actively seek out Second and Third Degree connections of existing clients, employees and peers. Just as they leverage Linkedin to find potential leads, they should also look at other 'communities' offline and online and actively seek to participate in the conversation. Be proactive on social and not wait for referrals to come in and coax the process through including shamelessly getting involved in conversations online and create an opportunity to be introduced!
Build an Active Feedback Engine
3-6M Touchpoint frequency is optimal
Successful referrals start with feedback. If you have never asked the client what they think of you ever, you cannot ask for an introduction out of the blue. You have to cultivate that trust and a two way communication. Make it about them and they will be more open to share their friends and network with you. When you listen to what they say and make any changes, circle back to them and keep them updated on their role in bettering the offering. Create touchpoints along the customer life journey from onboarding to source feedback at regular intervals. Clients are different: Sales and CRM teams should work together when is a good time to touch base with a referral request. It generally varies based on the type of engagement and milestones involved. But, never ask before 3M or the first milestone is completed brilliantly, whichever is longer. Here are some great ways to collect feedback.
SYSTEMS
Much as your sales team knows it is all about the target and how to get there fastest, they really don't like asking. To acknowledge this is important. The persona of a successful salesperson is not best fit for a referral seeker. By nature, the best sales people are those who are confident, aggressive, alpha dominant. To someone like that, seeking a referral is paramount to asking for help, which, goes against the very grain of their personality and they will find ways to avoid if they can. As a team leader, you can help them and the company a lot by recognizing this behavioral pattern and creating a system that captures the value without diminishing the ego of the person(s) involved.
25%
Increase in LTV
Automate the referral collection
Build in checkpoints along with the feedback engine to collect referral. Emails and thank you notes are a great segue for asking. The often used one for one referral offer is popular and proven effective in B2C and this can be easily automated by even a static landing page on your site. In B2B and enterprise solutions this requires a less passive touchpoint. They can be coupled with the solution review cycles, completion of milestones, social occasions and other natural ways of connection with the customer.
There are also third party software solutions that you can use to manage and run your referral programs and reward structures. Having formal tools in place makes it 3X more likely to accelerate the creation and conversion of referrals.
Focus on delivering the first Milestone at atleast 150%
Source: Linkedin Study
Yes, you may not be able to do this with every customer. Even before you start the prospecting, your sales team must chart out the network weight for each client. For those who are potential influencers, make them the priority on delivery. Each milestone is important and you cannot afford to be lax about any, but the first few are crucial. Blow them away and delight them way beyond expectation and you will have a captive sponsor. This client will not only be a happy customer but also be a strong enabler because they love to talk about their success and your enabling them to reach that!
