Making Sense of Referral Programs and Influencer Marketing
You’re ambitious. You’re energetic. And, what’s more, you’re ‘on the hook’ for generating revenue. So, like many folks in the same boat, you’ve got your eyes peeled for efficient ways to achieve your top-of-line growth goals.
To that end, chances are you have come across – either deliberately or by happenstance – a new category of solutions that help boost your growth by tapping into the power of referrals. But, understandably, you’re skeptical because you’ve seen the all-too familiar promise of ‘everything you need’ applied to new offerings many times before.
So, how can you make sense of the rapidly expanding selection of referral programs and related technologies that are now captured in the broad category that is labelled ‘Influencer Marketing’?
Well, to start getting a handle on the offerings let’s explore the differences between solutions that aim to bring you customers who are consumers (i.e. B2C) and those that will bring you customers that are businesses (i.e. B2B). But, why do this? After all, a ‘referral’ is a ‘referral’, right?!? It turns out that there are very real differences that can help you decide which, if any referral program, is right for you and which is right for you now. In an upcoming article, we’ll tackle some of the pros and cons of the key players in this growing field and how some blur the line between B2B and B2C. But, to begin, let’s compare the nature of B2C vs. B2B programs.
To clarify the difference between B2B referral programs and B2C referral programs, we’ll focus on seven important dimensions, specifically:
- The core purpose of the programs
- The primary motivations for referral sources to refer
- The primary mechanisms for recruiting, and engaging with, referral sources
- The kinds of skills that referral sources need to be effective
- How to determine if a referral program is right for you and right for you now
- Measures of success
- What you should have in place before looking to leverage a referral program
To help provide clarity around B2C referral programs, I’ve summarized the insights from Arash Alborz, the Founder of Echomybiz. In just one year, his company has grown rapidly and now has a handful of marquee clients and several thousand active referral sources using their disruptive ‘white label’ platform.
So, let’s begin…
The Core Purpose
B2C and B2B referral programs share a common goal: to increase sales. However, the focus of how that increase is achieved differs drastically. B2C referral programs look to grow sales by increasing ‘word of mouth’ – that is, targeting the frequency and breadth of coverage that a product or service receives in online/offline conversations and publications.
In contrast, B2B referral programs focus on helping you achieve a sustainable increase in sales while shortening your sales cycle. This is achieved largely by eliminating the most expensive and time-consuming hurdle in your B2B sales efforts: the costs of building brand awareness and recognition.
The Primary Motivations for Referral Sources to Refer
B2C referral programs are built on referral sources having one over-riding motive to take action: receiving some sort of financial reward. That reward can be in the form of a fee, a credit, or a coupon. As a result, B2C program technologies build in rewards and/or gamification functionalities. The secondary motivation for referral sources is assumed to be being recognized as an opinion leader or influencer (hence, the term ‘influencer’ used to sell many B2C referral program technologies).
The motivations in B2B referral programs on the other hand are far more complex. These programs recognize that your referral sources are spurred into action in part due to their position and/or title within and organization(s) combined with personal motivations that extend beyond a formal organizational role. To make matters even more complicated, the motivations for your B2B referral sources to act evolves drastically over time – reflecting their personal, career, and life aspirations. The result: an effective referral program must acknowledge and address the unique motivations of each of your referral sources.
The Primary Mechanisms for Recruiting and Engaging with Referral Sources
B2C referral programs draw heavily on technologies that facilitate the sharing of product knowledge and making endorsements. These technologies, by their very nature, are built so that referral sources can easily spread the word on popular social media platforms (e.g. Instagram, Facebook, Pinterest, YouTube, Twitter, etc.). These platforms, along with App stores are the primary method by which referrals are drawn into, spread, and publicize the referral program and its benefits.
In contrast, B2B referral programs can be completely ‘technology agnostic’. That is, they do not have to be bound to any specific platform or enabling tool. Rather, recruiting effective referral sources is a deliberate and targeted effort that reflects the unique value that each referral source brings. And, engaging with your referral sources throughout these programs requires a broad set of inter-personal skills combining elements from multiple disciplines such as project management, change management, account management, sales enablement, loyalty marketing, and data science.
The Key Skills Referral Sources Need to be Effective
Because B2C referral program success is based largely on the ability for referral sources to make endorsements easily, technologies that facilitate these programs do not demand referral sources have any particular skills or knowledge.
In contrast, successful B2B referral programs are built on leveraging and enhancing the skills of your referral sources and those who are responsible for managing them. As a result, in addition to having domain-specific knowledge, your referral sources need to have a range of interpersonal skills and sales enabling skills.
How to Determine if a Referral Program is Right for You and Right for You Now
As mentioned earlier, B2C referral programs aim to grow sales by increasing ‘word of mouth’ – that is the frequency and breadth of coverage that a product or service receives. So, not surprisingly, organizations that want to leverage and/or build upon a strong reputation look to these referral programs to accomplish this goal.
Your need to reduce the time it takes to close sales deals faster is the most compelling reason for implementing a B2B referral program. Common symptoms that organizations exhibit that spark programs to be adopted include: sales cycles increasing rather than reducing, and sales stalling – particularly during the ‘middle of the sales funnel (MOFO).
Measures of Success
B2C and B2B referral programs share several quantifiable metrics because they have a common purpose, specifically, increasing sales. These shared metrics include: the number of newly referred purchase transactions within a defined period; the amount spent by the newly acquired customers within a defined period; and the number of specific products or services purchased within a specific period. Furthermore, there are shared metrics of efficiency such as reducing customer acquisition costs within a given period. There are also longer term metrics such as the lifetime customer value (as defined by factors other than sales transactions).
At the same time, B2C referral programs have some metrics that are not used in B2B referral programs. These include the frequency with which existing customers, would-be customers and others mentions a brand or product on specific social platforms. These same programs also look to measure the degree to which messages have been amplified – i.e. being taken to new members of targeted groups. Finally, B2C referral programs also look to measure different levels of referral and customer engagement – such as the number of times someone visits a specific website and/or visits a ‘bricks and mortar’ property.
In addition to the measures of success shared with B2C programs, you should measure your B2B referral program by its ability to reduce the time it takes to close specific sales or types of deals. Over time, you should measure the program by how it is stabilizing the flow of revenue during times of the year when sales are slow or unpredictable. Finally, you will measure B2B referral programs with relationship-building and/or trust metrics.
What You Should Have in Place Before Looking to Leverage a Referral Program
Regardless of whether you are considering to implement a B2C or B2B referral program (or both), you need to conduct a thorough analysis of your internal capacity to establish, manage, and integrate the learnings from the program. At a minimum, you need to have the following in place:
- A person who will own responsibility for the program;
- A budget for building, managing, and sustaining the program; and
- A means to collect, analyze, and report on data collected throughout the program.
Andrew Brown is Founder and Chief Innovation Officer of Bridgemaker Referral Programs. He is the lead author of the ‘How to Grow Your Business Through Better Relationships’ series – which includes books on getting the most from referral sources, channel partners, and strategic alliances.