If you have satisfied, loyal customers recommending your brand, then half the battle is won. But did you know, you can elevate these client relationships into a formal partnership? If you’re starting to see more sales from customer referrals, it might be time to develop a successful referral partnership.
Also called referral partner programs, these partnerships are a proven way to bring in qualified leads through word-of-mouth marketing and existing client relationships. It’s a formal association between business owners and customers, and serves as a natural and authentic promotion for your brand.
In this article, we’ll define referral partnerships, the benefits to be gained, and how to run a successful partner referral program that leverages sales and drives business growth.
What are Referral Partners?
A referral partner is an individual or business that recommends your brand to their network. This is a type of channel partnership and is slightly more formal than a customer referral program. That’s because referral partnerships begin with a detailed and formalized agreement. The partners agree to promote your product or service for a reward, and with every conversion (be it quality lead, sale, or new customer), they receive a commission. This can be a percentage of the sale or a flat rate known as a referral fee.
Referral programs encourage partners to benefit financially from opportunities not directly tied to their company’s core products. A good referral can help managed service providers (MSPs) generate new sales, as well as:
- Cold calling
- List rental
- Trade shows
- Online advertising
- Joining industry organizations
Channel and referral networks help a business scale, expand reach, create demand, and increase new customer acquisition.
Benefits of Having Referral Partners
Referral partners already know a brand's product or service and need little coaching. They drive qualified leads through personal connections and provide a host of unique benefits, like:
Referral partners only refer people with whom they've built a personal connection. When it comes to closing sales, this pre-existing relationship is very powerful. People explicitly trust the referral source, making them more willing to investigate your product/service and ultimately make a purchase.
This all equates to higher quality leads and customers that are likely to stick around for longer periods. This results in a higher customer retention rate and average customer lifetime value. Despite the lead pool being significantly smaller (partners only recommend to people they know), the quality and trust factors make up for it.
Partners already have experience with your brand and products. These people are existing customers turned strong advocates. They know the strengths and weaknesses of your offerings and can authentically communicate these selling points to buyers. Since these people are already your ideal customers, they know how to recognize other potential clients to refer.
Brand experience leads to a more efficient sales cycle, where referred leads close faster. It allows a company to save money on marketing and increase return on investment. Referral partners are doing the bulk of marketing for you.
Access New Networks
Partners help you make new business connections and opportunities you might not have had access to otherwise. They can reach people that you can't or that might not even be on your radar. As long as the audience aligns with your ideal customer, everything should fall into place.
Just like channel partners, referral affiliates can help a business access a more comprehensive network, spreading brand awareness. Larger groups of people are hearing, learning, and talking about your brand.
Referral Partners vs. Affiliate Partners
Referral partners differ from other types of channel partnerships in a few ways. First, they help a business maximize returns on MDF (marketing development funds) and target audiences in a more focused way. While affiliate and referral partners help generate sales in exchange for commissions, affiliates are usually content creators.
Affiliates build an audience through their own channels, like blogs, websites, and social media pages. They may not have any experience with your brand, but they have a reliable network of people that hang on their every word. However, in most cases, affiliates don't personally know their audience members.
Referral partners, on the other hand, personally know the people they are referring your product to and have used it before for themselves. So, even though affiliates have a wider audience, they are less connected with them than referral partners. Affiliate partners also don't have as much of an authentic experience with your brand. This can result in lower-quality leads that take longer to close.
Subsequently, Affiliate partners tend to bring in more leads than referral partners, so there's always a balance. No one says you can't use both forms of marketing to your advantage. A hybrid version may be the most successful.
Which type of partner is best for your business? That all depends on a variety of factors like longevity, company type, and circumstance.
How to Run a Successful Referral Partner Program
Whether you’re a small business or a large enterprise, running a successful referral partner program takes a certain amount of strategy. Here’s a step-by-step process to get set up:
1. Develop an Easy Referral Sharing Program
The easier you make it for people to refer your brand and collect a payment, the more they will do so. Making life simple for partners breeds positivity in the business relationship. One of the quickest ways to simplify things is to give referral partners several different ways to share an offer. This can include:
- Referral links
- Social media shares
- Referral codes
- Email templates
- Landing pages
Of course, when done manually, it will be a lot of work. Luckily, referral software eliminates a lot of tedious tasks.
2. Scout Potential Referral Partners in Your Existing Client Database
The biggest pot of gold lies right in your lap. Referral partnerships that bring in the best results are customers that have experience with your brand. Some of your best existing customers can easily slide into the role of brand advocate because they authentically like your stuff! If a loyal customer has already left you a good review or referred people in the past, it's time to set them up with a program.
Choose customers with a strong network of relationships, especially ones within your target audience. It might also be a good idea to promote your partner program publicly, and then have customers apply. You can vet and handpick the best ones.
3. Reach Out With an Offer
Once you have found the partners you want to work with, it's time to send them an offer. Reach out to potential partners with an offer that's valuable to them. Besides a commission on every successful referral, what else is in it for them? Can you contribute to their business or career as well? Can you help them accomplish their goals? Find that one thing that creates more value than commission and send it with the offer.
4. Sign a Referral Partner Marketing Agreement
Once the partner agrees to do business, everything needs to be put in writing. A formal referral partnership agreement should include as much data as necessary to cover your business from liability. It can have (but is not limited to) the following:
- Expectations from each party, including project scope, payment types, and terms
- Commissions, including the rate (fixed or tiered) and what must happen to trigger a commission
- Branding, which includes data on the ideal audience, value prop, and product differentiators
- "In case of" can consist of indemnity clauses and other ways to settle when expectations are not met
The written agreement holds both parties accountable.
5. Onboard Your Referral Partner
You want your referral partner to be as successful as possible, so it's critical to be thorough during the onboarding process. The next few weeks will set the tone for how a partner best recommends your business to others. Some topics to cover include how you want your brand represented, who your ideal clients are, and what differentiates your business from the competition. Answer all the who/what/why's for them, so they don't have to guess.
You should also train referral partners on your ideal buyer persona. They need to be able to quickly identify when someone might be a good fit for your product or service. Go over the following buyer details with them:
- Values and key behaviors
- Demographics (gender, age, location, job, etc.)
- Needs and pain points
- Obstacles that stand in the way of purchasing
If you're a B2B, give a partner the ideal company profile, including industry, niche, size, and why they would need your product or service.
6. Communicate Often and Incentivize Your Partners
The lines of communication should always be open, whether your partner is thriving or needs continual support. The more you are available, the easier it is for them to reach success. Make sure they know exactly where to contact you with questions, and it should be through multiple channels. Also, regularly check in with partners, regardless of how well they're doing, to show appreciation.
Every time a referral partner brings in new leads, you should reward them. Typically the commission is cash-based and is either a percentage of the sale or a fixed amount. However, you can incentivize partners with things like:
- Free trips and events
- Product credits
- Gifts or rewards
- Pay per post
You can also break up the commission payments. For example, if you're a B2B with a lengthy sales process, a small commission can be paid for the lead and a larger one when the sale is made. Whatever form of payment type and strategy you choose, partners should be on board. However, the payment structure must also be sustainable enough that your business can afford to pay after each sale.
Another means of incentivizing referral partners is to reward them whenever their lifetime sales exceed a specific goal. You can also consider retention bonuses if the partner's referral makes repeat purchases or renews their subscription.
7. Track Sales and Reward Referrals
Managing a referral partner program can be overwhelming, especially if you've taken on a ton of partners. To keep everyone happy, they need to be rewarded as soon as the sale is made. However, it can be nearly impossible to track the success of every partner.
That's where PRM (partner relationships management) software and apps can help a business train, manage, and track referral partner relationships. The technology streamlines all partner management tasks and can automatically onboard partners, readying them with important information about your brand. It helps all parties to communicate through a universal dashboard, which makes it easy to quickly share important information that referral partners can then pass on to their customers.
Getting started with a partner program begins with the right technology. Additional benefits for partner relationship management SaaS include:
- Distributing unique referral links
- Sharing important training documents with partners
- Partners can keep tabs on the status of their referrals
- Track and measure partner success in real-time
- Reward referral partners in a more efficient manner
The more a business grows, the tougher it becomes to go at it alone. Automating processes with the right technology ensures partner programs run smoothly for years to come.
Successful referral partnerships positively impact business growth and help to maximize channel revenue. You can earn pre-qualified leads, strengthen brand awareness, and gain access to new networks. Providing an incredible user experience with your brand will naturally lead to new referral partners and will help to develop your partnership program further. It all comes full circle.
Have you decided that a referral partnership program is something that will fit your business? Relevize can provide everything you need to turn your top referral partners into your best revenue channel. We offer features for seamless partner onboarding, launching paid programs with one click, and analytics for clear insight into which partners are performing well. Scale campaigns and train new referral partners quickly with a brand that helps you rethink what it means to be partner-first. Try a free demo with Relevize today!