Get more enquiries with a B2B referral system

Article content:

• What is a referral system?
• What are the benefits of a properly set up system?
• How a referral system works
• How to create your own referral system?
• Examples of successful referral systems

What is a referral system?

A referral system is a word of mouth form of marketing where you encourage your current customers to tell their friends, family and colleaguesabout you and your product or service. Under the scheme, the recommender (sometimes referred to as the tipster) receives a reward if the referral buys something from you.

To motivate your customers, you need to offer them a reward. This can be various discounts, gift vouchers, free products or even promotional items. In some cases, the reward can even be financial compensation.

The form of referral varies by system - the referrer can fill in a form with contact details with the permission of the referred person (this is more common in B2B) or a referral link where the referrer has a unique link and receives a reward if used by the referred person - this is more common in B2C.

The goal of a company using a referral system is to get another channel from which enquiries for their services or products come. This channel is unique in that you might not reach the same customers through other avenues (such as a paid campaign on Google). In addition, these enquiries have a higher chance of closing because there is already a trust built between the company and the enquirer through the referrer.

What are the benefits of a properly set up system?

A referral system is suitable for any type of business and any size. The direct benefits right from the start of the program are as follows.

🔧 Attractiveness through simplicity

Even the happiest customer won't recommend you unless they have an easy and clear way to do so. In this case, it's a good idea to have a direct referral system that makes it easy to enter, evaluate, and display the reward. At the same time, by putting a system in place you increase the likelihood that customers will consider recommending you.

💰 Low acquisition costs

The market standard is a 30% acquisition cost. With referrals, these costs can be significantly reduced. Plus, the cost of leads via referrals has a variable cost - if they don't come, you pay nothing.

🙋‍♂️ Ready-to-Buy Customers

With a referral, the potential customer already knows what to expect, knows roughly the terms and conditions, is ok with them. There is no need for additional "selling". The probability of closing a deal through a referral is higher than with a cold contact. According to statistics, a referred customer also spends 25% more, has a 37% higher likelihood of repeat purchase and has a 16% higher lifetime customer value. It's basically a money machine.

👍 A proven and successful method of acquisition

Many businesses have already verified this for you. The referral system works. And now we don't have to talk about OVB financial advisors. But even companies like Revolut or Tesla rely on the referral system.

Despite all the benefits mentioned, there are still firms that don't address this. And they have to pay dearly for enquiries. Let's take a look at the few steps that separate you from having your own referral system.

How a referral system works

The right referral system combines technology, products, communication and the right motivation factor.

Various marketing tools are used to run the system, which generate codes, links, or into which a new lead can be entered. In the case of a referral and successful implementation with a reward at the end, what happens is that the customer recommends you again. And then again. And again. And why? Because the referral gives them social status among their referrers.

"Thanks to your product, you solved a problem for my friend, just like you did for me before, and I've gone up in price with my friend because of it."

And people like to share things that make them go up in price.

Moreover, repeating recommendations creates a sustainable flow of new business. Not only that, with a select group of customers (chosen through a referral system) you have a higher chance of more loyal customers - they came to you with conviction, not because of cheap advertising.

How to create your own referral system (5 steps to success)

To create a successful referral system, just follow these few steps. The preparation is more important in this case than the actual promotion of your new program.

1️⃣ Set your program goals

First, answer the question, what does your company expect from the referral system itself? The most common goals include number of leads, number of new business closed, number of followers/fans gained, improved conversions, increased sales.

Define your goals clearly and numerically. This way you can evaluate the success of the system.

2️⃣ Choose the right reward

Before you start promoting your referral system, choose the right reward. The best approach is to select a few incentive rewards -coupons, gift items, money, restaurant vouchers - and then ask a few of your satisfied customers which item would make them happiest if they were successfully referred. It doesn't always have to be money - money can even be a deterrent!

Be sure to choose a reward that's right for you and your CFO.

In addition to giving something to your customer, consider giving something to the referrer as well. This will double the effect and increase conversion.

Another important factor is the reward structure - one-time or recurring. One-off can also be differentiated by the number of referrals - for example, a frequent referrer will get more gifts/more valuable than the person who makes the first referral. For recurring, make sure you are able to measure everything well. Again here - the easier to understand the better. I.e. don't invent complicated structures. Just have a reward - when something happens, you get this. Or you get 15% of every customer payment.

3️⃣ Prepare a referral system including a homepage

The fact that there is a referral system may be the first time your customer hears from you. You need to be able to explain it well so he or she gets it "right the first time". First, explain what it is on the page, then explain the mechanics of the referral and how the customer will get rewarded.

The last, but even more crucial, element of your efforts must be the message your customer has to convey to the person they are recommending you to. Give them a pre-written text including links/coupons. Let them edit the message to make it more authentic.

A little tip - if the system allows it, put a little form where your customer enters their name and their friend's number. You then send a text to that person telling them to check out your page. That invites him to >add your customer's name<.

4️⃣ Select a system to keep track of the entire program

The system should be simple for you, as the administrator, as well as for the users themselves. Often the less functionality the better applies here.

You need:

• see all the people who have made at least one referral
• all recommendations and their status
• rewards paid and rewards to be paid

Your tipster in turn needs to see:

• everyone he recommended and their status
• rewards to be paid and requests for payment
• the ability to enter a new lead, generate a coupon, copy a referral link
• email or sms notifications (for example, if a new reward is awarded - it puts a smile on people's faces)

Ideally have the system linked to your CRM, accounting system and/or bank. This will give you real-time data.

5️⃣ Tell the world

Before you announce to the world that you have a referral system, test everything on yourself or close customers who will forgive you for the shortcomings.

Once the system is debugged, announce it to the world. The most common variants of announcements are:

• Website - create a special page for the recommender system and link to it from the homepage.
• Social media - write a post or full article about what you have launched. Put it on facebook, instagram, tiktok, linkedin, twitter or youtube.
• Email - send an email to your customers who you assume might recommend you (for example, you know their review of your product).
• Phone and support - if your customer gets in touch with you and you've solved their woes, ask for a referral through the new referral system

Examples of successful referral systems

There are some very good examples of successful recommender systems. The main ones are:

• Revolut
• Dropbox
• Paypal

Revolut sends you a notification every now and then that you will get 1000-1500 crowns for referring a person. You just need to set up an account and meet a few other conditions.

Dropbox offers extra storage space for referring a paying client - 250 MB for both parties. Not a staggering amount of storage space from today's perspective, but back in 2009 it wasn't bad at all.

Paypal was giving $20 to both you and the referrer. All you had to do was sign up for an account. As a result, they grew from 1 million users to 5 million users in a matter of months (March-September 2000). Subsequently, Paypal was sold to eBay for $1.5 billion.