How to Add a Referral Program to Your Affiliate Partner Program

Double down on partnership program growth by adding referrals to your offering.

Your affiliate program is going well and you’re getting some sales from a few of your best partners. Why not strengthen those relationships by adding a referral program to your existing affiliate partner program? 

Understanding referral programs

The difference between affiliate and referral programs is subtle, says Bianca Balazic, PartnerStack's Customer Success Manager. 

“On the affiliate side, it’s simply casting a wider net.” With affiliates, you’re trying to generate top of funnel and an affiliate program is meant to support marketing activities by accessing new audiences.

But with a referral partner, Balazic says, “the customers they're bringing in are a lot more targeted.” Referral partners have a one-to-one relationship with the end customer that can provide valuable targeted leads that are further along in the sales funnel.

Adding a referral program also means creating a formal referral agreement with your partners. They agree to promote your products and services to their customers and send warm or qualified leads to your sales team. Each time a sale is closed or a lead is generated, the partner gets a fee or commission for the successful sale or lead. 

An image depicting the difference between referral partners and affiliate partners

Related: Optimizing your partnership funnel for signs of leakage.

Benefits of integrating referral programs with affiliate programs

The first benefit is the relationship between your referral partner and the lead. While affiliate partners are great for raising brand awareness and converting end customers who may already have been interested, referral partners are more targeted towards conversion.

 The lead, having an existing relationship, trusts your partner’s recommendation for the product or service. This makes them more willing to try said product or service. Since the lead is warm, it’s more likely that the sales team can close the sale. 

There may be fewer leads with a referral program as compared to affiliates, but since they’re high-quality, pre-qualified warm leads, there is likely a higher conversion rate. According to Finances Online, leads generated from referrals have a 30 per cent higher conversion rate than leads from other channels.

The second benefit is that since your affiliate, now referral partner, has experience with your product or service, they’re already brand advocates and ambassadors. They know and like your product so they can authentically highlight the selling points to a potential referral partner. Since they also know the lead, they can pinpoint precisely what they care about, helping move the sale across the finish line.

Key components of a successful referral program

Tracking success measurements

The best key performance indicators for measuring the success of a referral program or partnerX depend on the company and industry, says Balazic. The best way to set partner program KPIs is to make sure there is alignment within your departments. 

“Understand what metrics matter to your company and align them with your sales team and your marketing team.” 

She also recommends looking at what your marketing conversion is for like organic for paid search and  referrals and the understanding goals of your sales team. The goal of your referral program is to support your sales team by generating ideally qualified and more warm leads for them, so aligning with their goals will ensure success.

See more: How to set strategic partnership KPIs to drive revenue in 2024.

Supporting sales teams

While it seems that closing sales is the job of the sales team, Balazic says that partnerships need to be a company-wide initiative. There  should be an understanding that partnerships can help the entire company including sales and marketing. 

Balazic says that companies should make sure that the sales team has the support it needs to close a sale and to prevent common referral program challenges.

Common challenges and solutions

Managing channel conflict 

Channel conflict is when different departments go after the same referral lead. “Sometimes the sales team is going after an account but if a partner gets it and then that can get a little bit sticky,” Balazic says. 

To prevent that, you want to make sure the sales team is asking the right questions and have the correct information immediately available. That includes having a clean and updated customer relationship management (CRM) database. 

That way, when a warm lead comes in, the different departments can check who has it and can even work together to close the deal. 

“There are two great tools in the industry — Reveal and Crossbeam — that we have integrated into PartnerStack. They give the sales and the partnerships teams visibility into what each other's working on.”

You might also like: The anatomy of a high-performing referral program.

Cross-functional communication

Sometimes departments can feel siloed but Balazic says cross-functionality is key for a successful referral program. It’s often the case that different departments have different information that can be used to close a lead successfully. Communication between those departments leads to more closed-won deals.

One example is the classic one-pager on the product. The sales team would have that information already, so the marketing team doesn’t have to create one. The marketing team, in turn, can support by providing the demographic and competitor data. 

An image showing a tug of war game between sales and referral partners

See more: Partner-driven represents the highest revenue source for top performing sales reps.

Step-by-step guide to integrating a referral program

Start with the right referral partner training

We’ve talked about how to understand and successfully manage a referral program within your company but what about setting your partner up for success? They’re not employees but they are a vital part of your program. So how can you support them? 

Balazic says it’s important to make it easy for them to send over those warm leads. “Is the lead form on their content a link and how does that process work? Does it go to your CRM?” 

While we said that referral partners aren’t employees, Balazic says that the best programs treat their referral partners like employees. 

“Don’t treat your partners like a second class citizen to your sales team,” she says. “When you look at your sales team, how do you enable them? You give them training, you give them one-pagers on your competitors and you incentivize them” 

She says companies can run a certified referral partner program which means they go through product training and sales onboarding. This allows a program manager to ensure that the provided resources are up to date so they can access the latest information for their interested customers. 

“You can upload your resources. If you have a new product feature and there's a one pager that they can see on your website, or they go email your partner program, don't assume that they're doing all this research.”

Related: How to win more customers through referrals in 2024.

Understand referral commission structures

When setting up your referral commission structure, Balazic recommends first figuring out the point in the process that your partner will get paid, as this may differ from how you’ve set up your affiliate program. 

Do you pay them when the sale is closed or on a cost-per-lead basis? It all depends on the length of the sales cycle and the industry. 

“The main thing to think from a commission standpoint is that a percentage is not getting paid until the deal closes,” she says. “If you have a very, very long sales cycle, that is six months to a year, a partner can be sending you a lead, and they're not being paid for maybe a year? You want to keep them motivated.”

She says that with a referral program, your goal is to get a really high value customer. Since the conversion is higher, you're willing to profit share with them. Some companies might be unwilling to pay on a cost-per-lead basis but it’s important to keep in mind that these are warm leads so are more than likely to convert to sales. 

When thinking of adding a referral program to your affiliate partner program, it’s not about which one is better. It’s about understanding the difference between the two and leveraging the benefits of both for the company, the partner and the customer. 

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