Referrals are an integral part of everyday life. Whether texting a friend the address of a good mechanic or posting a photo of a recommended beach on Facebook, today’s consumers are constantly sharing referrals. But what about in the B2B universe? Is there a way to harness the power of our referral culture to help grow a small to midsize B2B company? The answer is ‘yes, no, it depends’. Why the cryptic answer? Because referral programs can work for some B2B companies, but they may not work for others.
Referral Programs and B2B Lead Generation
When 600 B2B professionals in various sectors and positions across North America participated in a survey, the results were very pro referral programs. Almost 70% said that referrals closed faster than any lead, 71% said that conversion rates were higher on referrals and 56% said that referrals were ‘very valuable’. The simple conclusion would be that referral programs are fantastic, let’s get started! But consider the survey questions. The comments above are referring to the value of a referral, not the value of a referral program. If you were handed a golden egg you would say it’s valuable. But if you were told you needed to spend X person-hours and a prohibitive number of dollars to obtain that golden egg, would it still hold the same net value? No. This is also true for a referral program. Sure, referrals convert really well because the person who is referred is already interested in a product or service like yours, which makes them highly qualified. However, how many referrals can a small to midsize B2B company expect to generate from a referral program, and will it be worth the effort to do so?
Programs That Work and Programs That Don’t
Referral programs can work very well if your business sells commodities that most other companies regularly need, like printer toner. There are many toner choices out there and buying plans to choose from, so a referral can really help tip the decision in your favour. But what if yours is a change management service provider that helps companies with SAP implementations? Is that something your satisfied customer would think about referring to colleagues at their next networking event? Would it even be relevant to their colleagues? All the stars would need to be in alignment for it to work; your satisfied customer would need to be in contact with another decision maker about how happy they are with your change management services, and that decision maker would just happen to need change management for SAP at that point in time or in the near future. This scenario doesn’t sound very likely.
A good rule of thumb is, if your company is more transactional, has a short selling cycle for a product that many other businesses need and you’re dealing with one main decision maker, then a referral program could work. But if your company takes a more consultative approach to sales, selling a specialized product or service to a buying group of decision makers, then a referral program may not make sense. At the very least you would need a strong and influential advocate within the buying group to steer the decision your way.
When considering whether a referral program is right for your business, in the end, a cost-benefit analysis will always be your best guide. It’s important to investigate how much time and money a referral program will cost you and whether your market could generate enough quality referrals to justify those costs. When you look at the survey stats above, what is most notable is that the organizations with the most successful referral programs have a formal program in place managed by a marketing department with the necessary tools or software to help them.
A referral program is a big commitment. It needs regular feeding, managing, upkeep and ownership, so you need to consider whether there is someone on your current staff that has the bandwidth to do all this. The best B2B referral programs create a community or environment for satisfied customers to share their feedback, backed by a reward for referrals. And since companies can’t just keep asking the same customers for referrals again and again, they need a deep pool of customers to approach. If all of the above sounds a bit daunting, then you may want to consider other ways to spend your marketing dollars.
Alternatives to a Referral Program
A referral is essentially the voice of the customer, and there are many ways to incorporate Voice of Customer (VoC) marketing into your plans, without going to the trouble and expense of a referral program. Include a ‘customer testimonials’ page on your website or put relevant customer quotes on your products/services pages. Use case studies to show how your products have helped customers with real world problems. Add a short customer endorsement to your acquisition campaign emails.
If you ask them, you’ll find that your satisfied customers are often happy to lend their name to a quote or let you do a case study on their project. After all, it promotes their company too. At the very least, figure out how many repeat customers you have as a percentage. If the number is good (and you’ll know what counts as a good number in your industry), then use it in your company’s email signature. For example, “More than X% of our customers are repeat and wouldn’t go anywhere else.”
If you do happen to get referred, warmly thank the customer who referred you, whether or not you landed new business. Encourage such referrals with a nice gift. For most small to midsize B2B companies, that is a great way to boost further referrals with minimal expense and effort. It’s the large companies with long-established customer bases, selling products with broad appeal and with the team and technology to manage referrals that see the greatest benefits. In most cases, few B2B companies that we speak to are in a position to have a referral program. If you are interested in learning more about lead generation, download our latest whitepaper on Getting ROI From B2B Lead Generation.
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