Your referral links can drive major traffic, bring in qualified leads and grow your ecosystem with every click — if you build up the proper referral program to support them.
The typical B2B sales cycle can take anywhere from a couple of months to over a year depending on the price and complexity of the seller’s solution. Anything that can speed up that process is a welcome addition.
One of those accelerants is referrals. 84 per cent of B2B buyers enter the sales cycle through a referral. Meanwhile, companies that use a referral program report conversion rates that are 71 per cent higher. The numbers show that B2B referral programs are worthwhile.
Why launch a B2B referral program in 2023?
B2B buying decisions are high-stakes decisions. Locking your company into what could be a multi-year, multi-figure contract is a big deal — and decision makers want to ensure they’re making the right choice in those instances, to put it lightly.
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As a result, they look for reassurance that they’re making the right decision. A recommendation from a respected peer that has used a specific software solution can make a world of difference.
Despite the power of B2B referral programs, not every B2B company has a referral program. In some cases, companies think they have one, when they really don’t, so it’s worth going over what a B2B referral program is not.
A B2B referral program is not informal. For instance, your account executives may get occasional calls from happy customers with an introduction to a peer company that could benefit from your solution. While these informal recommendations are great, they do not make a referral program — but they’re a good sign that you could benefit from formalizing your referral process!
A B2B referral program exists by design and intention. It has:
- Assigned resources, such as people or technology
- A marketing plan to help promote it to companies that may be interested
- A recruitment plan to help find referrers
- Incentives to get referrers excited to participate
- Goals, objectives and KPIs to track the success of the program and ensure it’s supporting business goals on an ongoing basis
Here is how you can build a high-performing referral program from scratch. If you’ve already got one, we’ll also go over some strategies for injecting new life into your program.
What are some of the benefits of a strong referral program?
First of all, a referral program helps you speed up the sales cycle. As mentioned above, decision makers often start their journey with a particular vendor based on a referral. Plus, companies tend to close more sales when they have a formal B2B referral program.
Second of all, it helps improve important metrics for B2B tech companies such as:
Sales pipeline: How many qualified leads are in your pipeline? A formal B2B referral program can help fill up your pipeline with high quality leads who have heard about your product or service from a trusted peer.
Growth rate: This tracks how quickly you’re growing revenue, whether month over month, quarter over quarter, or year over year. Since referrals speed up the B2B SaaS sales cycle and lead to closed deals and revenue faster, it’s only natural that your growth rate would increase as well.
Customer acquisition cost (CAC): This is an important metric to stay on top of since you don’t want the cost of acquiring your customers to exceed their lifetime value. Referrals are a much more cost-effective way to bring in new business. Plus, you can calculate your referral incentives to be attractive to your referrers without taking too big a big bite into your revenue.
Churn rate: It’s important to know how many of your customers are choosing not to renew at the end of their contract. A referral program can help reduce this number simply because there’s a higher chance your product or service is a good fit for those customers. The person who referred them likely did so because they understood the problem they had to solve and believe your software to be a solution.
Net Promoter Score (NPS): Your NPS can improve thanks to a formal B2B referral program for the same reason that your churn rate may go down. Your customers are more likely to be a good fit for your product because they were referred by someone who understood their business needs well.
How does a formal B2B referral program actually work?
A formal B2B referral program works as follows:
- Your company decides on a set of incentives to give customers who refer other customers. It takes time to develop this incentive structure, and there’s a lot of decision making involved. You’ll need to answer questions like, “How much do we want to reward for each successful referral?”, “Do we want to give out micro-incentives when a referred customer gets to a specific stage, like the demo stage?”.
- Once you have an incentive structure in place, you can start to promote your program. First, you’ll need to promote the existence of your program to potential referral sources. Your account executives may just reach out to happy customers directly and tell them about the program. Your marketing team may develop a campaign targeted geared toward longtime customers.
- After you’ve got referrers, engage with them. A customer’s initial enthusiasm for your referral program isn’t necessarily self-sustaining. They have their own projects and goals they’re focused on, so you’ll need to invest some time into continuous engagement and communication with the members of your referral program. Collect feedback on what they like and don’t like so you can continue to refine your referral program.
- Goals, objectives, and KPIs are another important component of a formal referral program. Before you launch your program, it’s important to identify what success looks like and then keep checking in to make sure you’re on track to meet those goals. That said, you may have to adjust your goals over the course of the program.
- Referrers are given a personalized UTM link that they can share with potential customers in their network.
- Your company assigns a dedicated person to oversee the referral program and communicate with participating customers.
- Your company purchases a referral management system or referral software like PartnerStack that allows you to automatically generate personalized links, run segmented email campaigns, track goals, and manage incentives.
What metrics should you use to track the success of your referral program?
Unsure how to set goals and objectives for your referral program? Start by understanding your metrics and then use them to formulate specific goals. These are four go-to metrics to keep tabs on for your referral program:
- Campaign page conversion rate: How many of the people who visit your referral program campaign pages actually convert and become referrers? This metric tells you whether your potential referrers are interested in your referral program and whether it’s easy for them to participate in your referral program.
- Referral link share rate: How many times is each personalized UTM link being shared? This will help you understand the reach of your referral program. This will also let you know how easy it is to share your campaign links and whether some referrers are outperforming others and should be compensated or recognized differently.
- Referral email click-through rate: How many people actually open and look through your referral invitation emails? It should be a relatively high number since these referral links are coming from people they know.
- Referral email conversion rate: How many people who receive a referral program invite from a peer actually turn into a referrer?
Once you have your metrics, you can develop SMART goals for your referral program such as:
Defining and tracking your metrics can also help you identify focus areas of improvement. For instance, if few people are clicking through your referral emails, it may be a sign that your emails need better subject lines or more opportunities for personalization by the person who sent the referral link. If your campaign page conversion rate is low, it may be that the value of the referral program isn’t clear to your loyal customers or that it’s hard to get started with your referral program. Is it easy to generate and share a personalized link, or are you asking your customers to do too much in order to participate?
What are the different types of referral systems?
There are various types of referral systems, but it’s important not to confuse these variations with a fully-fledged referral program:
Direct referrals or word-of-mouth referrals: These are referrals that happen informally. While they can have incentives attached to them, they don’t usually happen within the context of a formal program with goals, objectives, metrics and referral software technology to keep track of everything.
Online reviews: Online reviews, especially on B2B technology review sites like Capterra, Trustpilot, and G2 can be helpful sources of social proof. You can offer incentives to people just for writing a review on one of these sites. You might even consider offering an incentive each time they write a review on a different site.
Social media sharing: Similar to online reviews, social posts about your products offer strong social proof that can lead to new customers. You can consider offering an incentive for social media reviews.
Email referrals: These referrals rely on personalized UTM links that your existing customers can send out to their network via email.
The most accessible and scalable method for your B2B tech referral program is one that relies on personalized UTM links. These can be generated directly within referral software and tracked. Using technology to support your referral program gives you the data you need to improve your program while also freeing up your teams to focus on the high-touch, relationship-focused elements of a referral program.
What are the different processes involved in a successful B2B referral program?
A successful B2B referral program includes four main steps:
This is the process of getting customers to refer your products or services to their network. This is essentially a marketing exercise. You’ll want to develop a formal marketing plan that includes the following activities:
- Account executives reaching out to their best customers to tell them about the referral program
- A digital marketing campaign that shares the benefits of your referral program
Invest time into developing a smooth, painless onboarding experience for your referrers. Remember that until someone actually makes a purchase, your referrers are doing you the equivalent of a favor by sharing your referral links, so it’s important to make it easy for them to get started. Start by sending them a personalized UTM link they can start sending out immediately and log-in credentials to a referral management platform so they can keep tabs on their link’s reach.
Are you giving your referrers the tools and information they need to promote your products? If you have passionate referrers, they’re going to want to share your links out regularly, but they also need help when it comes to explaining your product’s messaging correctly. Developing enablement material is useful for your team as well. The last thing you want is referrers going rogue and sharing a message about your product that doesn’t properly align with your marketing messaging.
How easy is it for your referrers to get paid? Is it as simple as getting a deposit every month or receiving discount codes via email? Or do they have to follow up with a member of your team and wait for them to calculate the payout on the backend? This is where referral software can help simplify and enhance your entire referral program. If your referrers can easily see how much they’ve made, when they'll receive payment and then get paid all within the same portal, it increases the legitimacy and attractiveness of your program without creating a lot of manual work for your teams.
How can you optimize an existing referral program?
What if you already have a referral program but it isn’t performing as well as you’d like? Here are some tips to help you optimize it:
Actionable today
- Conduct an audit of your current referral program. Look at the results of your program. Have you brought in very little revenue? Why? Is the messaging on your referral program landing page clear? Did you have a lot of referrers at the beginning of the program who have since dropped out? Why did they leave? Did you nurture your referral program participants? Did you supply them with referral enablement content like updated product messaging, graphics, or videos? Look at the results of your program. Have you brought in very little money? Why? Is the messaging on your referral program landing page clear? Did you have a lot of referrers at the beginning of the program who have since dropped out? Why did they leave? Did you nurture your referral program participants? Did you supply them with referral enablement content like updated product messaging, graphics, or videos?
- Talk to your existing referral program members. If you have active participants in your referral program, have an open-ended conversation about what they like and what they don’t. You should also consider interviewing referrers who initially participated in your program but have since dropped off. Find out where existing participants need more support, what discouraged former members from continuing to participate, and what would compel new members to join.
- Evaluate your enablement materials. Are you giving your referral program participants the information they need to successfully promote your products? If you’re not sure what they need, ask!
Consider actioning tomorrow
- Consider your timing. Maybe you’re asking your customers to join your referral program too early, before they’ve had a chance to assess how much they like your product. Keep an eye out for important milestones (e.g., one year anniversary, big business problem solved) and ask for participation while your customers are the most happy.
- Find out what kinds of incentives your customers are interested in. Maybe your customers are thrilled with your product, but don’t find the incentives you’re offering worth their time. This is especially true if you’re offering B2C incentives like electronics or cash to companies that would be more interested in discounts, a free upgrade on their subscription or free access to training courses for their technical resources.
- Develop an engagement strategy for referred customers with your sales and marketing team. Remember that a referred prospect isn’t a done deal. They may be a warm lead, but they’ll still require education and nurturing, so develop a strategy in partnership with your sales and marketing team in order to figure out how to get this done.
Actionable goals for the quarter
- Create different tier levels for your referral program. If you’ve got some referrers knocking it out of the park, consider creating a separate tier of referral partner status.
- Consider gamifying your referral program. Badges and leaderboards are a great way to add some competitiveness and interactiveness to your program.
- Consider rewarding people for non-monetary wins. Often, the hardest part is just getting a customer to sit down for a live demo or a discovery call. Consider offering rewards for referrals that lead to these important sales cycle milestones.
- Smooth out the user experience. Is it difficult for referral program participants to get a personalized UTM link, find enablement materials, ask questions or get paid? These are all signs of a poor user experience. Identify the pain points, so you can smooth them out. Hiring a dedicated partner program manager and taking advantage of referral software or a referral management platform are also important steps.
- Remember that your referral program needs marketing love, too. When it takes off, it’ll help promote itself, but in the early days it’ll need to be promoted.
Referral programs help speed up the awkward (but incredibly important) “get to know you stage” in the B2B sales cycle. And since B2B sales cycles can take anywhere from months to years, this acceleration is definitely welcome. That said, creating a successful B2B referral program is more than just an informal drip of recommendations. It’s a fleshed-out program with goals, metrics, resources and the right technology to support it.
Learn more about how PartnerStack’s referral management software can help you take your B2B referral program to the next level.
