Automate referrals for your B2B business

As we all intuitively know, word of mouth is the most effective form of marketing.  Referral customers come at a much lower cost, and convert roughly 30% better than leads generated from other sources (Tony Nissen, R&G Technologies, 2013).  The Wharton School of Business found that a referred customer has a 16% higher life-time value.

Generally speaking, few of us proactively ask existing clients if they could refer business to us.  However this can now be done automatically using new technologies and online systems. This article explains how.

Step 1 – Create a win-win offer

The first step is to consider how you will request a referral and if you intend to incentise this process. Many clients will simply provide you referrals if you ask for them, particularly if they are already a raving fan. However, if you are going to be asking for a referral, why not make it worth their effort? We have found that if there is a reward mechanism in place, you typically will receive more referrals over time from a particular client, rather than a one-off.

One approach is to provide cash incentives to clients, such as a finders fee or percentage of the first invoice to a new client. In this way, you are essentially recruiting your clients as a pseudo commission based sales force. Arrangements like these are common between businesses servicing the same customer segments.

However, it could be argued that providing cash incentives is counter-productive, in that it devalues the authenticity of the referral, and could damage the relationship of the referrer with the referee, if the commission is not disclosed to all parties.

Rather than providing cash, I personally recommend providing either a gift, or business services to the referrer.  In B2B businesses, this may be in the form of free hours of work, reduced invoices, credits for services or products, or even entry into a competition.  Gifts may come in the form of movie tickets, vouchers or coupons.  A gift can often work well, as it can be awarded directly to the person giving the referral, rather than the larger business they are apart of.

Another alternative is to reward the new client instead of the referrer.  An example of this is a 10% discount for your new client if they came from a referral source.  In this respect, you are helping your client build a stronger relationship with their friend, which could be worth a lot more than a cash incentive.

Better yet, provide a win-win for the referrer and the new client. For example:

"Both you and your friend will receive a 10% discount on your next invoice / service / visit."

Double sided referral mechanisms like this have the potential to go viral on social media, as there is a strong compelling reason to share, as well as implicit social proof as to the value of your service.

My personal recommendation is for B2B businesses is to select a two-sided non-cash referral system. Such a system is transparent and also avoids cash coming directly out of your pocket.

Step 2 – Create an automatic referral mechanism

Once you have decided on your offer, the next step is to create an automated way to capture referrals and deliver your offer.  As the business owner, your goal should be to create a system that works without you needing to be involved in the process, so that it may be outsourced to a team member or integrated into your regular client communications or website.

Here is one approach:

- On your website, create a new page that explains your special referral offer and enables clients to enter referral leads via a web form.  You may like to combine this form with a request for a testimonial and feedback on how you can improve.

- Ideally within the form, collect the email address of the client, so they can be contacted in the future to remind them periodically of your special offer referral program. 

- For any referrals received, ensure these details are automatically sent to your customer support email address, so they can be immediately followed up, and the client thanked for their referral.   This can also be done via email auto-responder.

- The above can be created by your web developer on your website, or you can use an online service such as: referralsaasquatch.com or getambassador.com

You are now ready to spread word about your program by linking to your web-page. Ask your web developer to setup a short URL you can link to, like www.yourwebsite.com/referrals

Step 3 – Spread the Message

A study by Wharton School of Business showed that 83% of satisfied customers are willing to refer products and services, but only 29% actually do.  So it really comes down to actually asking your customers. Here are some ways:

- Let all your customers know about your referral program using an email newsletter or print mail out. 

- If appropriate, enable customers to very easily share your offer using facebook and linkedin via links from your newsletter or website.

- On completion of an interaction with a client (such as a project or service), link them to your referral web-page.  You might ask on email “Do you know anyone that might find our service valuable?  If so, please let us know and we can get in touch.  You might also like to know that we provide you and your friend with whenever you refer us.”

- Advertise your referral program on your website during the check-out process.

- Include information on your referral program in your email signature, invoices and quarterly newsletters.

Don’t hold back on spreading the message.  Adopt a win-win mindset: you are doing your client and future client a favour by providing such a great offer that they can take advantage of.

Final Words

Automating your referral requests can be a powerful mechanism for super-charging word of mouth for your business.  I have personally found it to be very successful in our web publishing business and believe it is essential ingredient to long-term B2B business success.  To recap, provide a service worth referring, make it worthwhile to the referrer and referee (win-win offer), and setup an automatic means for collecting referrals / redeeming your offer.

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