Referral partnerships is a rare marketing strategy that appeals to businesses of all sizes. It’s cost-effective, which small and medium-sized businesses (SMBs) love, and scalable, so larger companies can leverage their extensive customer base. Not to mention, it’s pretty effective, with a success rate of 49 per cent compared to other marketing tactics, as reported by a TrustRadius study.
While launching a customer referral program is similar irrespective of the business’ maturity level, there may be some differences in approach. As Bianca Balazic, Customer Success Manager at PartnerStack, says, “Starting a referral program isn’t easy whether you’re small or big. The obstacles will just change as you grow.”
With that in mind, we sat down to discuss the obstacles businesses face at SMB, mid-market (MM), or enterprise level and how to address them through a strong customer referral program and a partner relationship management tool, like PartnerStack, that makes managing programs seamless. Read on for Balazic’s insight on creating a revenue-earning referral partnership program for SaaS vendors of all sizes.
How to set up a successful referral program
As mentioned, the setup process for most referral programs is the same despite the business size. But here’s a quick refresher on the basic steps to creating a formal high-performing referral partnership program.
Set the program's goals, objectives, and KPIs
Once these are set, communicate them with relevant stakeholders. If it’s your first time launching a customer referral program, you might not have KPIs to aim for. In such a case, Balazic suggests chatting with peers on platforms like LinkedIn to understand what to work towards.
Decide on a set of incentives and a reward structure
Do you want a double sided referral program or a single one? Tiered rewards structure or flat? Choose thoughtfully to operationalize your referral program most effectively.
List your source of referrals
Here, define your ideal buyer persona and understand their habits. Then, head over to where they are hanging out, purchasing organically. These sources should include existing (happy) and potential new customers. Balazic recommends at least five sources, noting the importance of being “diversified in recruitment”.
Choose the right referral marketing software
Choosing the right PRM is essential. You’ll want it to not only automate the bulk of the referral process but also help with tracking. With PartnerStack, you can automate payments and email marketing campaigns, track progress, and generate referral links. Select a referral program software that can handle your business at its current level and scale as you grow.
Promote your own referral program
Publicize per referral incentives, encourage existing customers to refer a friend, and cross-promote your campaign everywhere, from email to social media ads and content marketing. Give referrers a unique referral link they can share with their network.
Ensure that you’re not only tracking partner program metrics, but also communicating them with top partners. This will help you make data-driven decisions. When asked what makes a referral campaign successful, one of Balazic’s top recommendations is that companies’ focus on being data-driven. “They’re not just guessing. They’re looking at which resources are being used the most — which partner recruitment panel is the most successful and why.”
These are the fundamentals of starting many referral marketing programs. However, there are a few differences regarding the company size.
A glance at referral programs across three business maturity levels
Components of referral programs and how they differ by growth stage
Let’s look at four key aspects: prospecting, reward structures, automation, and high-touch vs low-touch sales.
Prospecting is the process of identifying potential partners and reaching out to them. Do some companies find prospecting easier than others? Maybe in terms of response rate due to name recognition. But according to Balazic, “The fundamentals do not change. You have to be out there [prospecting], whether it is on LinkedIn or Google or going to events.” Whatever the business size, a strong referral program relies on continued work in this area to ensure a pipeline of new revenue-driving partners.
Your referral bonus could be monetary (in the form of cash rewards or credit) or non-monetary (for example, premium features). It’s easy to think the bigger a company, the more attractive their referral reward. However, that’s not necessarily true. The bigger ones don’t necessarily offer more significant referral rewards. It seems counterintuitive, but in Balazic’s experience, “The smaller ones usually do because they are just trying to get in there.” This applies even more so if they’re up against bigger competitors in their niche.
Note: What makes for the best referral program is not only the primary incentive, but also additional benefits. For instance, provide referring partners constant ways to earn more money. Also, good customer and partner support, resources for self-serve, shorter and simpler sales cycles are all strong incentives for partners.
It doesn’t matter if you’re an SMB, mid-market, or enterprise: You want to automate your sales cycle to a certain degree for a successful referral program. Focus on quality, not quantity. The automation type that will work for an SMB isn’t necessarily the same for businesses at different maturity levels. In Balazic’s words, “It’s not about how much automation or having the best automation, it’s about having the right automation that works for your partner base and being smart about it.” Being smart means manually interacting with referrers when they need one-to-one support and automating where they don't.
High-touch vs low-touch sales
Every program needs a combination of a hands-on individual to guide partners and a self-serve system (a high-touch and low-touch model). For the degree of combination, Balazic suggests an 80:20 ratio. “Bottom 80 per cent of revenue drivers should always be low-touch. But the top 20 per cent, — which changes across companies — should always be high-touch.”
Referral marketing for all organizations
Contrary to most “Best referral program examples” lists, small companies aren’t the only ones benefiting from partner referral programs. These lists would have you believe that because companies like Dropbox, Uber, and PayPal employed referral programs in their early days to achieve viral growth, only SMBs succeed with referral marketing.
But that’s not true. Case in point, Google launched the Google Apps Referral Program (now Google Workspace) when it was already an enterprise to great results.
Regardless of your business’ maturity level, follow the best practices when setting up a referral marketing program, track success often and adjust as necessary. From Balazic’s experience, seeing exponential growth takes 12 to 18 months, so remember a healthy dose of patience as you watch your program grow.