If you’ve ever been the beneficiary of a solid-gold referral, you’ll be fully aware of the business value of a direct, qualified recommendation. At align.me, we most certainly are. There are over 100 people who actively introduce us to others from time to time as the occasion presents, and these referrals form a core component of our client base.
Yet, in our experience, referrals are an underleveraged marketing tactic. Business leaders perhaps feel that to ask for referrals is ‘cheesy’ and serves to cheapen their brand and weaken their relationships. We agree. Yet, as you’ll find in this article, referrals are well worth a business’s time, attention, and formalised process – therefore, we dedicated our most recent referrer’s lunch to the topic.
A referrer’s lunch about referrals? Have we run out of ideas? Or is there perhaps something in this topic worth exploring…
The case for referrals… is clear
First, let’s look at what the data tells us about referrals:
Heinz/Influitive research on referrals found that 84% of surveyed business buyers start their journey with a referral. 74% reported that referrals are their least expensive type of lead generation, and 69% reported faster closing cycles when sales come from a referral. Furthermore, respondents reported an impressive 71% uptick in conversion rates for business that stems from a referral.
Social Media Today found that 78% of businesses surveyed received good or excellent leads from referrals, and the Wharton School of Business found a 16% increase in lifetime value when business comes from referrals.
Across the board, referrals are reported to be affordable, plentiful, faster, and more consistently converting while delivering a higher lifetime value to businesses. Referrals also tend to be higher quality leads that align with Ideal Client Profile (ICP) criteria.
The relationship between trust and referrals
How do you tend to feel about a product or service if someone in your sphere of influence recommends it to you? There’s generally an inherent positive regard without any effort on the part of the business being referred. This is a hallmark of referrals.
A Forbes article states that referrals come with a lot of trust – the foundation of any business transaction. This trust can lead to truncated sales cycles, longer retention rates and a significant reduction of acquisition expenses, time and effort.
Further, a Sprout Social article mentions that referrals are not only marketers’ second-highest source of quality leads, but 63% of people implicitly trust referrals (McKinsey). Sprout Social also found that a significant portion of consumers trust online reviews (49%).
We’ve seen that referrals give businesses opportunities to achieve higher returns more easily, suggesting that a focused approach to referrals is worthy of investment.
The big question when it comes to referrals
What we’ve seen statistically about the value of referrals naturally leads to the question: How can we more effectively leverage referrals as a lead generation and marketing tool in our businesses? Is ‘just do great work’ enough? Or is there more we should do?
Our Referrer’s Lunch was an opportunity to host a collaborative conversation with our own referrer’s community and leverage the collective wisdom on the subject. Hugh, as provocateur, assembled some thoughts to spark a useful discussion beginning with further insights around the value of referrals from align.me’s Funnel Plan.
What does align.me’s Funnel Plan have to say on the topic of referrals?
Funnel Plan plays a key role in setting the strategy and aiding the execution of B2B go-to-market plans. One of the outputs is an execution brief, which includes a best practice guide for each of the 70 possible tactics in common use in B2B sales and marketing. One of these tactics, unsurprisingly, is referrals. Funnel Plan tells us the following about referrals:
Referrals are usually provided by people who want good things both for your business and the referred prospect.
Your salespeople need to be trained and coached to extract a deeper understanding of the prospect’s concept of their situation, objectives, challenges, and what they think they need. Salespeople also need to understand what the referrer thinks of each of those (if different). They then need to close the loop and ideally retain the referrer as a coach in the sale.
Consider the following four components of the referral process:
Planning:
- Get your team behind the referral process.
- Train them to be able to engage with referred prospects and extract useful insights.
- Use technology to support the process of referring and tracking referrals.
Communication:
- Maintain regular communication with referrers, updating them on the status of their referrals and thanking them for their support.
- Include a feedback loop. For example, ask: Was it a good referral? What value was created for the target of the referral?
Relationships:
- Periodically reach out to key referrers, nurturing the relationship and demonstrating appreciation for their continued support.
- Always be transparent with referrers about the results of their referrals, whether positive or negative.
Post-referral:
- Encourage the referrer to provide feedback on how the referral was handled and if there are any areas for improvement.
- After a successful sale through a referral, reach out to the referrer with a thank-you note or token of appreciation.
At this point in the event, it was clear that there are a bunch of things we should think about when we’re looking at referrals as a tactic, including:
- Who should we ask for referrals?
- What is the ‘best’ time to ask – when value is delivered or after the sale?
- Programmatic or organic?
- Who owns the referral program (if there is one)?
- Who does the asking?
- What should we ask of the referrer?
- How should we communicate with them once referred?
- How should we incentivise? If indeed we do so.
A quick sidenote about incentivising – it’s worth sharing that there were differing views on the need to incentivise to drive referrals. Though industry research leans towards yes, our attendee group and align.me’s experience is counter to this opinion.
What systems do we need?
We discussed four of these questions in detail in our live event workshops. This is where the combined expertise in the room really came out. However, first we took a quick pulse check on the current percentage of business our attendees receive from referrals, and the level of maturity in their referral programs.
Attendee polls
Our event polls showed that nearly half of our participants get approximately 2/3rds of their business from referrals – yet no one had a strong or defined referral program. That invites the question of whether one even needs a referral program. If the businesses represented in the discussions are enjoying significant referrals without a formal referral program, why invest?
We’ll offer a view on that later in the article, but the punch-line is simple enough: good work is necessary, but not sufficient. While doing good work generates good outcomes, there are many more opportunities that are not necessarily uncovered in the absence of a robust referral program.
Money being left on the table, and value not being delivered.
With these results (and the presentation insights) front of mind, our live attendees broke into groups for two workshops to discuss what good might look like regarding referrals, and how this might affect our ideas going into the future.
Workshop insights
We discussed four of the nine questions listed above during our participant workshops:
- What is the ‘best’ time to ask – when value is delivered or after the sale?
- Who owns the program (if there is one)?
- What should we ask of the referrer?
- How should we communicate with them once referred?
When should we ask?
There was solid group agreement on requesting referrals once value has been genuinely delivered rather than at the ‘false dawn’ right after the deal was signed. Our participants discussed the difference in service delivery and lead time, but their collective experience was firm on waiting for the honeymoon to end, the dip to be experienced, the pain to subside, and the benefits to be realised.
One group shared a key insight that even though the temptation falls heavy on asking for a referral after some initial value has been delivered, if you wait till you have been through a few delivery cycles, have experienced some bumps and demonstrated your value by navigating some hurdles, then the referral comes from a place of deeper relationship value (and better evidence).
Who owns the program (if there is one)?
The consensus regarding this question was that there is a shared responsibility between Sales and Marketing when it comes to referrals and that the nature of existing relationships dictates it.
What should we be asking of the referrer?
Our on-the-day participants brought some wonderful insights back to the group in response to this question:
- Asking ‘why did you refer us?’ to better understand the background of the referral.
- Ask ‘what worked effectively for you’ so we can refine those skills moving forward.
- Ask the referrer about the relationship and their previous experience with the customer to ensure the right fit.
- Ask them how they would feel about referring you – sensitively framing the request is important to avoid discomfort. Consider how to lighten the load of asking and being asked to give a referral.
- Get coaching from the referrer on how we best engage the prospect, even using their knowledge of the prospect to inform the proposal stage.
- Another group shared their discussion around specifically asking a referrer to help shape the outreach message to the referral target. This approach could sharpen your proposal or provide helpful context, especially if the referrer is already working with the customer.
Hugh had also tabled earlier that the referrer is in an ideal position to share what they think the issue is and what is needed for the referred lead, to contrast that with what the prospect thinks they need, and to then stay on as a coach for the sale.
There was a lot of discussion about the importance of using the relational nature of referrals to ensure referrals match our ICP upfront. Our participants shared wonderful insight into their reasons for wanting to work with clients who are the right fit and the benefits these strategic and values-based alignments bring to the success and longevity of working relationships. The group viewed referrals as a unique tool for leveraging ICP relationships.
How should we communicate with them once referred?
The main insight from this question was to communicate promptly and continuously with referrers. There was group agreement around the importance of saying thank you and expressing gratitude. This stage of the referral process could include a feedback loop to ensure the referrer receives timely updates about how the referral is progressing.
align.me’s Brett Bonser summarised the insights from the group and added his experience highlighting the time-sensitive nature of inbound requests for engagement – the data shows that 30 minutes is the ideal response time and that after 48 hours, lead outcomes can plummet. This reinforced the group’s thoughts about the importance of prompt and consistent communication with referrers and prospects at all stages of the referral process.
At this stage, it was clear that if businesses put process and investment around referrals, they can be accelerated – and align.me has some compelling examples of this approach in action.
align.me’s experience with referrals
Like any service business, align.me relies on and enjoys referrals. In 1997, 25% of our work was for clients who had been referred to us by board advisors, influential members of major vendor ecosystems, and past and present customers. Rather than thank those who referred us privately, we decided to bring them together as this format allowed us to not only offer our thanks, but also provide a speaker and a topic that could offer some return value.
The format worked, and we found that those who joined received at least as much value from each other as they did from our speaker. We repeated the initiative every three months, and our small tribe of believers grew.
Today, we are fortunate to enjoy the support of 100 active referrers. These are broadly the same composition as described above and are people who believe in what we’re doing – to make B2B marketing a respected management science worldwide – and are positioned to recommend us to others. They are not incentivised to do so other than their own motivation to have us ‘do our thing’ for a business they care about.
We switched to virtual when COVID threatened to end our quarterly in-person lunches. Surprisingly, the per-person costs increased rather than decreased, but this group and their support are important to us, and we didn’t want to lose momentum. For now, despite the joy of meeting in person, we continue this as a virtual event, allowing us to rope in supporters from cities and countries other than those closest to home.
Six years on, 75% of our revenues come from businesses that have been referred to us. We never ask for referrals. These referral events are to express thanks and to share some return value, not to ask for referrals.
Despite this, we find that even the process of inviting our much-loved referrers to this quarterly event generates referrals. “I can’t join this one, but that reminds me…” is a common reply.
And sometimes, the gods really do align.
Literally, on the day we ran this event, we were graced with confirmation that three new clients will be joining the fold, all from referrals – and not because of the event, but because we have a mature referral program. That is, these were not referrals offered at the event. That is rare, although not unheard of, largely because the coincidence of the timing of our “thank you” and of a chance conversation with a business colleague who is ready to grow is unlikely. Rather, these were businesses that had been referred months earlier by members of the group whom we consider to be ‘our tribe’. More importantly, perhaps they consider us to be a part of theirs.
Bringing it all together
There was a universal feeling that few attending this event were executing formal programs to nurture and grow referral opportunities, yet over half were enjoying more than 40% of revenue from referred sources. So why was there no formalisation?
Perhaps it’s because we don’t know what these programs look like, or we feel uncomfortable about being direct in encouraging referrals. Maybe there is an assumption that referrals will happen naturally when we do good work, and we should focus on other lead generation… Yet the demonstrated business value of referrals tells us that the referral process should be formalised.
Among the numerous details for consideration from this event was Brett’s summary statement:
If you are doing good work, then why would we (as a referrer) not want to inject you into other client relationships? We can deliver value for our clients if we can refer them to a great business. This is where referrals become a win/win.
A note to our referrers
We trust you’ve found this an eye-opening discussion. As a company, our journey with referrals has been intriguing and rewarding and has sparked our enthusiasm on this topic. We want to finish by including a special note for our referrers community: You’ve honoured and trusted us with referrals and introductions – thank you.
