Four ways to develop a referral network to boost sales
This column is part of Globe Careers’ Leadership Lab series, where executives and experts share their views and advice about leadership and management.
By: Brent Halverson
In a world where business is more competitive than ever, thinking outside the box ensures you stay on top. In the past, most companies worked with resellers when bringing a product to market. Yet, this approach requires considerable financial and resource investment from both parties. The reseller must commit themselves to becoming a 360° product expert, which requires sales training and in depth education on the product. While there are still benefits to this approach, with strong competition for every customer, it is also vital to consider incorporating other methods to accelerate sales and generate leads.
Referral partnerships require significantly less investment. The referral partner’s primary function is to introduce your company to their existing clients with a need for your solution, meaning they only need an understanding of your product’s benefits. Your sales team retains ownership of the selling process and moves leads forward to close. With substantial rewards on both sides, this relationship can be highly lucrative. For you, it’s a cost effective way to reach a new customer base without expanding your sales and marketing efforts, and fast tracking the sales cycle.
While you already know who your prospective customer is, you might not have a relationship in place to sell them on your product. On the other hand, a referral partner already has a trusted relationship with the customer and can recommend your service, bypassing the need to nurture the contact. On the referral partner’s side, the benefit of this relationship lies in the extra revenue it generates from their customers without the commitment to reselling products. Additionally, by helping to resolve pain points for their clients, they are demonstrating added value, strengthening their business relationships.
In my experience, implementing the following best practices for developing referral partnerships, can work alongside your reseller relationships to ensure maximized profits:
Make the right match Always ensure you select referral partners that are the right fit for your offering. A good partner will have an existing client base in your vertical markets with the functional pain points to benefit from your company’s solution. After all, taking the time to nurture a referral partnership would be futile if the organization’s customers had no need for what you are selling.
Make sure prospective referral partners already have a number of customers in mind who could benefit from your solution and then encourage them to introduce at least two or three of these to you right off the bat. Not only will this ensure you’ve made the right match but it will also create strong momentum to build upon as your relationship develops.
Incentivise to motivate No one wants to work hard without compensation. Historically, referral partners have received 5 per cent to 10 per cent of the initial contract value for customers they’ve introduced. That’s not necessarily enough to make it an interesting proposition. Instead, think about offering a higher percentage on the first year of the contract value and even offer a small percentage for future years. That will get their attention and ensure the partnership provides the strong incentive they need to bring in valuable leads.
Yet, incentivizing the organization’s channel management is not enough. In the end, it’s your partner’s sales representatives who have the trusted relationships with their clients which you want to leverage. Without engaging them, your partnership will not succeed. It is therefore crucial to also motivate your partner’s sales organization through incentive programs like a Sales Promotion Incentive Fund (SPIFF), providing representatives with their own individual rewards when you close a deal with one of their prospects.
You might ask if this is a mutually beneficial partnership? Will you make a profit while offering such substantial compensation? Although offering incentives of this kind may initially impact your gross margin, at the end of the day your net profit will not be affected. This is because these enticements take the place of the costly, lengthy sales campaigns that would otherwise be required to attract new leads. Instead of tying up expensive resources and personnel to implement expensive marketing promotions, with a fully incentivised referral partner you are simply sending out an annuity cheque for each successful transaction they bring in.
Proper support means maximized profit Once a partnership is established, getting the most from the relationship requires more than just having your logo on their website. Your partner’s sales team will need to understand the benefits of your product so they can better select and prepare their clients to be introduced to you. This means that, while a referral partner requires less instruction than a reseller, it is still important to provide them with clear sales training during the referral onboarding process.
You can then further maximize your referral partner’s ability to bring in customers by producing an educational webinar for prospective leads. This will allow your partner’s sales reps to follow up with their selected customers, promoting you further by encouraging them to register and take the next step towards an introduction.
The proof is in the pudding When all is said and done, the final key to a successful referral partnership is making sure concrete expectations are set. Your partner needs to know the results you anticipate from them otherwise there may be misunderstandings regarding how success is defined. Ask your partner during onboarding how many prospects they have and the time frame they think is required to introduce them to you. This will provide you with a metric to periodically evaluate together to assess how well the partnership is going, alongside improvements that could be made and further support that might be needed.
How often you review is really dependent on your procedures and sales cycle but, ultimately, it’s crucial to make sure you have the system in place. Because, in the end, if you’re not keeping score, how do you know if you’re winning?
Brent Halverson is president and CEO of ecmarket, creators of Conexiom, Vancouver.