Just as customers provide referral marketing for businesses they like and trust, companies can return the favor by referring customers to other firms. In the business context, this is called a referral program.
- 78% of B2B marketers say that referral marketing programs generate good or excellent leads.
- 60% of B2B marketers say that referral marketing programs generate high-quality leads.
- 54% say that referral marketing programs have a lower cost-per-lead than other channels.
Though it’s undoubtedly beneficial for all involved, not every company knows how or why to set up a referral program—or what value they offer their customers and partners. This blog post will explore the different types of B2B referral programs and what benefits each participant can reap. By understanding these programs and their value, your business can start reaping the rewards of successful word-of-mouth marketing.
What is a B2B referral marketing program?
The purpose of a formal B2B referral program is to encourage your most satisfied customers to recommend your product or service to compatible partners within their business network.
Why is B2B referral marketing valuable?
The most effective advertising campaign a company will ever have is a referral from a satisfied customer. Most business leaders prefer to do business with someone they know or have heard of. Consider some of the following facts:
- B2B companies with referrals experience a 70% higher conversion rate.
- Referral leads have a 30% higher conversion rate than leads from any other channel.
- When referred by other customers, people have a 37% higher retention rate.
- 84% of B2B sales begin with a referral, according to Harvard Business Review,
For these reasons, getting referrals should be part of your sales team strategy. Of course, the referrals you obtain might only get you to the first stage of the sales process, such as securing a meeting, but that can be critically important.
Why are referrals so powerful?
As mentioned above, people prefer to do business with people and organizations that they know. Hence, referrals make sense for most companies. Additionally, referral marketing reduces customer acquisition time and costs. 83% of the customers are open to referring a business after conducting a successful purchase.
- 78% of the B2B referrals create viable customer leads for the business.
- Just 3 in every 10 B2B businesses have a formalized referral business.
- Referrals end up creating 65% of new business opportunities
Lastly, with less time spent on searching for prospects, business can focus on customer satisfaction and enhancing their circle/network of influence.
How does a B2B referral marketing program work?
A formal referral program is a customer acquisition method businesses use to promote their products or services by actively pursuing referred businesses. B2B referral programs involve a streamlined referral page where clients enter their peer’s information and easily refer them to your business. In addition, these programs automatically track the referrals your clients make and reward your clients whenever their recommendation leads to a sale.
Types of Common Referral Marketing Programs
Experience-Based Referrals Programs
An experienced-based referral marketing program is the most common referral for most small-to-medium-sized businesses. These referrals result from the relationships companies develop while working alongside one another. Current B2B partners could be your best vehicle for driving new business leads. Thus, B2B clients must value your product and service and reliably receive high-quality client experiences.
Reputation-Based Referrals Programs
When business people are familiar with a company and its reputation but are not current, past clients may still have the confidence to refer the business to other companies based purely on reputation. Therefore, a company’s name and brand are essential to develop, maintain and protect; companies with well developed reputations attract good B2B partners and customers.
Reputation awareness has many benefits; a few include:
- Increase trust with prospective customers
- Builds brand equity or value
- Grows market share customer referrals
- Eases the scaling of operations
- Collect audience data for future referral-marketing
In sum, a solid reputation means prospective B2B partners perceive the business as providing substantial value allowing them to charge a premium. What’s more, firms with good reputations have loyal repeat customers willing to buy a broader range of products and services.
Note: B2B referral programs are essential for small business owners.
Social-Media Based Referral programs
When B2B customers share your referral program on social media, business leaders instantly become aware of your company and its work. Furthermore, if a few prospective B2B partners become new clients, there is a high likelihood that word-of-mouth will ensure the referrals will continue to provide returns. A successful social media-based referral program is known as a “viral loop.”
Incentive-Based Referral Programs
A Referral-incentive or Reward program has proven to increase the probability of acquiring new customers. Whether it’s a monetary incentive, a free offering of service, or something of value, incentive-based referrals give customers a tangible reason to provide referrals. Therefore, rather than a passive word-of-mouth referral, your company can create a results-based referral marketing program that is reliable, scalable, and rewards results.
Examples of Incentive-based referral marketing programs:
SurveyMonkey Referral Program: SurveyMonkey is a SaaS company that makes it easy to survey respondents, analyze responses and then report on the results. In addition, they use referral marketing software to run a fully automated referral program for B2B enterprise clients. (referral link system)
Paypal’s Referral Program: Paypal offers a double-sided reward, creating a domino effect that further increases referrals and sales team conversions. Mentioning the name of the person who referred reinforces that domino effect. Trust between business partners, existing customers, friends, and family is an effective way to encourage effective and reliable referral marketing results.
Tesla’s Referral Program: Elon Musk capitalized on his customers’ loyalty and launched a referral program that provides an example of how to reward referrals with something other than pure product discounts. With its resounding success, Tesla closed out Phase 9 of their referral program and introduced a new referral program in March 2019, continuing to make referral a crucial part of its growth strategy.
Four Reasons you should start your own referral program:
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- Standardizes the sharing process (referring customer or referral link)
- Attracts new customers at a meager cost (best customers)
- Brings in high-quality repeat customers
- Has a proven track record of success
USA Jurisdictions that place limits on referral reward programs
The following states have laws prohibiting remuneration to a person for referrals, regardless of whether patients are paying with cash or through an insurance claim:
- Texas,
- New York,
- Florida,
- California
If you’re not already actively seeking out and cultivating referral marketing relationships, now is the time to start. A Referral marketing program is one of the most valuable (and underutilized) sources of generating high-quality leads for businesses. And with the right referral strategy, they can be a powerful tool for growth. So what are you waiting for? Start implementing these tips and see how referrals can help your business take off.
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