Word of mouth is already the largest source of sales for B2B businesses with 91% of B2B transactions being influenced by word of mouth, and so the opportunity to structure and formalise word of mouth with a referral scheme is one of the biggest opportunities in B2B. Particularly, when you consider that the average cost of a simple lead for a SaaS business is reportedly between US$50 to US$100 and telemarketing companies routinely quote US$750 and more per qualified sales lead.
What do we mean by B2B?
With any article about B2B, the main challenge is just the sheer diversity of what we include within the term B2B. From high consideration purchases that require studies, tenders and regulatory oversight to low consideration purchases of basic software for a fixed price, and then everything in-between. And cost is not always everything, even low cost purchases can have high business or reputational risks, when you consider that a US casino was hacked via a thermometer in the company fish tank.
However, to generalise, we can say that a typical B2B transaction will usually involve more of a considered purchase than a typical B2C transaction. This can mean a longer sales cycle, with several steps in the sales path, and a larger decision making unit involved in the purchase decision. All of these factors and more need to be factored into the design of a B2B referral programme, but of equal importance is the fact that, given that each B2B business is unique, a programme needs to be designed to fit the sales cycle and needs of each particular business. One size fits all is not a recipe for B2B referrals.
Here are some of the things that will need to be taken into consideration in planning a B2B referral program:
- Recording referrals
- Multi-stage Sales Cycles
- Reward Choices
- Multiple Referrals
- Fraudulent and Self Referrals
- Regulatory and other concerns
Recording your referrals
As mentioned above, if you are a B2B business, word of mouth is probably already a large source of business for you, but if you aren’t recording and tracking these referrals, then you are flying blind. To make your referral process effective, the first step is to accurately record where a referral comes from, who made it, when and how.
Referrals can come in via many different means; maybe via a simple email or Linked’in introduction to a lead, or maybe a referrer just passes the contact’s details to the sales person, or even you might require that the referrer fill in a form declaring the details of the person referred etc..
However, we often have seen that businesses don’t record referrals effectively or just have an ad hoc system whereby the sales team notes referral sources in the CRM or on a spreadsheet. Notwithstanding that these referral practices may not be in line with applicable laws and regulations, like GDPR and the CCPA, the unstructured nature of receiving and recording referrals often means that they are simply never rewarded at all, and communication with the referrer during the sales cycle is often non-existent and the whole process opaque and unsatisfactory.
Much more effective and transparent would be to have a central system for recording all referrals, allowing a referrer to pass a link or code or their own email to the person they are referring with instructions to ‘go to Acme.com’s website and request a demo and add this code’. Or alternatively, the sales person, on receiving the referral, can log it in this system creating a referral with the referrer’s details.
We offer this solution at Buyapowa, and the advantage this offers is that the details of the referral are always accurately logged and the referrer can have an account area where they can log in and see the progress of their referrals at any time, offering full transparency and creating the trust needed to engender more referrals in future
Multi-stage Sales Cycles
B2B sales typically have many steps. For example, we can compare these two different types of sales cycles:
A SaaS Software Business:
The stages can be:
- Prospect signs up for a demo;
- Pre-sales call to qualify;
- Sales has a demo;
- Prospect has a free trial or paid proof of concept;
- Sales closes;
- Prospect renews etc.
A Business Telecoms Provider:
The stages can be:
- Junior staff member at Prospect asks for information;
- Sales sends information and maybe does a demo;
- Junior staff member writes up report on supplier and submits to the decision making team who then review all options;
- Sales is informed that the company has been selected to participate in the RFP or RFQ process;
- Sales submits answer to RFP or RFQ;
- Sales clarifies responses and negotiates the price;
- Sales closes;
- Sales upsells and so on.
There may be a considerable amount of time between each stage in both of these example processes, although perhaps more so in the second example than in the first. But this creates a lot of issues to be considered, such as:
How do you keep the referrer engaged in and interested in the referral when there could be several months (or years) between the initial referral and the final sale?
Obviously, part of the answer here is transparency and having an account area where you record that a prospect who signed up for a demo was referred by person X and where person X can see the progress of his or her various referrals. Another part of the solution can be to record and pay out smaller, or even micro, rewards when different stages of the sales cycle are completed.
For example, you might want to give a small reward when someone requests a demo. Perhaps you might only give a reward if the prospect passed the sales qualification call or actually turns up for the demo with Sales. But you might think that your referrer will have little control over your sales qualification process and prioritize the number of demo requests over completed demos, and so pay out on submission of the form. You may think that the goodwill that this generates is worth paying out for a few leads that turn out to be poor quality.
Alternatively, you may only want to pay out when the lead is fully qualified. This would make more sense when you have clearly communicated easily identifiable criteria for sales leads to your referrer. Although, the added complexity of recording different stages may not be worth the effort and you may have privacy concerns in disclosing information.
Whatever you decide, the point is that you need a sophisticated enterprise level referral platform like Buyapowa’s, that can fit with the needs of your business and your sales cycle, not a cookie-cutter platform designed for the average business.
What if there are several people involved in the sale?
For a simple sale or demo request, you may choose to reward the first referral received, which emphasises the importance of being able to accurately record your referrals. But it is often not as simple as that. What if the same person is referred by two different people at different times but, on the first occasion, that person didn’t show for the demo? All of which emphasizes the importance of accurately recording referrals and being transparent.
However, in the second example, it is more likely that you will have had several touch-points with that client and plenty of scope for people to argue that the sale ‘did not come from that person’s referral’. For example, your sales team might want to take the credit themselves and downplay the influence of referrals. Yet the reality is probably that each referral played its part, maybe even just getting your business into the consideration set. So you may want to give some reward or recognition to everyone who was involved.
It’s your choice. But the software you choose has to be able to support any configuration you want.
Another key way in which B2B differs from B2C is often the generosity of the referral rewards on offer. When a person refers you business worth several tens, hundreds or even millions of dollars, perhaps fairness suggests that the final reward should reflect that? As a result, it is not uncommon for B2B referral rewards to be very generous. A connected question is whether you should pay flat fees or bounties linked to the value of the actual referred-in sale? In the second case, you need to be able to accurately track referrals to outcomes in your CRM.
This opens up several questions to consider. Typically a referral reward in a B2C context is a thank you for the effort undertaken by a brand ambassador, but should not be so generous as to change a person’s behaviour and have them quit their day job, try and pressure sell your product to strangers or encourage them to game the system. But for a B2B sale, you might be offering, subject to local legal requirements, US$1,500 or more for a referral that leads to closed business. So there is more temptation involved.
The first thing to consider is that your advocate has a choice between referring you and your competitors’ business. So you should have one eye on what your competitors are offering. You also need to consider what would appeal to your potential referrer. With a large reward, it is typical to pay cash rather than the rewards common in B2C referrals. Who would want US$1,500 in Amazon or Spotify vouchers?
While cash seems to be the best option for the final payout, you can use alternatives for micro-conversions, like offering US$50 in Amazon vouchers for a demo request or the completion of a specification form. So it is important that your referral platform can support both cash and non-cash rewards.
Two other things to bear in mind are that if your referrer is with a large business it is possible that an anti-bribery policy or other internal policy may prevent him or her from receiving a reward. In such a case, having a series of reward choices – such as the ability to gift the reward to a charity or even their grandson’s college fund – might make sense. In addition, establishing whether a reward is made in a personal or professional capacity might make sense. If you capture a work email for a referrer, you may also want to capture a personal email in case they change job before the referral is complete.
This is something we often see forgotten with B2B referral schemes which are built in-house. Quite simply, if you treat your referrers fairly and with transparency, and if you offer them incentives to refer again – and you remind them to refer again – then, guess what? They will refer again.
In the context of B2C referrals, we often see that over 80% of referrals come from much less than 20% of all referrers. The same can be true of B2B referrers, particularly if you use smart psychological tactics like gamification, intelligent and tiered rewards.
When there could be a long time between the initial referral and the closing, it is only natural that your referrers might lose a little interest. Hence the importance of micro-rewards, such as a US$50 Amazon voucher after the demo. But imagine how much more powerful that could be if you offered an additional prize for five demo requests, or three leads getting to the demo stage. This regular trickle of news and rewards is much more likely to keep your referrer engaged and, more importantly, referring again and again.
And let’s not forget that your referrer might be useful after the initial introduction, as a means to get feedback from the person they referred or to use a bit of persuasion on their friend who is hesitating between you and a competitor. When they have a few thousand dollars on the line, you can be sure they will be interested in helping you.
Fraud and self referral
While this is primarily a concern for B2C referrals, it is also very relevant for B2B – particularly when you are paying out large bounties. Sources of fraud could be simple self referral, where a prospect refers him or herself to pocket the referral reward while his or her company buys the product. It could be fraud within your own sales team, where sales reps create fake referrals to enrich themselves, or give additional discounts to customers. It could simply be sales that are made and then quickly cancelled within the cooling off period.
Whatever and however, this means that you need a referral platform that integrates with your back end and anti-fraud processes. Otherwise you could be just burning money.
Regulatory and other concerns
While most businesses may not be too concerned with who refers them, as long as it results in new business, regulated businesses will typically want to take more control over who is referring, due to the potential liability for pre-contractual misrepresentation and misstatements made by referrers. So, for example, you may want to limit the referral program to declared and vetted referrers, who can only access the referral scheme with a special code or from behind a password-protected area.
While generally, if you are regulated, we would advise taking control of the referral process as soon as possible in order to control what has been said, there may be circumstances where you want your referrer to be more knowledgeable. In which case, limiting the programme to identified referrers within a logged-in area where they can access approved marketing materials might make sense.
After all, it’s your business; you decide.
As you can see above, having the right referral programme can be a very effective sales channel for any B2B business. But, because each B2B business is different, you can’t simply cut and paste the programme from another business onto yours. This is why, at Buyapowa, we have developed a fully flexible first class enterprise referral platform capable of meeting the specific needs of any B2B business.
We would love to talk to you. Why not drop us a line?