First off, let me say that I’m a big fan of pilots. If you’ve never done a referral program before, a small DIY pilot can be a great way to prove out the value of referrals for your organization. With it you can recruit a few sales people that already rely on referrals to fill their pipeline and create a landing page with a form for them to share with their referral sources. Once this is done you can track them manually through to making a purchase and recognize and reward those referral sources to make your sales people look like heroes and make their referral sources more likely to refer again.
So then what? Chances are other sales people are going to hear about it and want in. Before you know it, manually tracking and managing rewards has turned into a full time job but isn’t really getting the scale to justify your time sink. Previous to getting into that mess, learn from these six common and very real horror stories that we’ve seen in DIY referral programs that come to Amplifinity in desperate need of a solution (referral software).
#1 – Broken referral tracking
When your genius Marketing Ops decides they can stitch together a referral program using the tools in your MA and CRM systems, you will likely end up with glitches in the tracking. This is an extremely common issue that has disastrous consequences. One client had this happening seemingly at random and got tons of calls to salespeople, marketing and the support line wondering where their reward was. They had no way to prove if the referrals were actually generated by the person calling and ended up paying out tons of unconfirmed rewards. Worse yet, sales lost confidence in the program and in marketing, leaving damage between the two departments that took years to repair.
#2 – 178 lead forms in a single referral program
You read that right, one client’s referral partner network was growing so fast that they just kept creating a new lead form for each new partner. 178 was the tipping point. They couldn’t manage it and needed to hire additional partner marketing and marketing ops people to keep going down this path. Furthermore, they were doing a ton of work, but not able to gain consistent revenue because all of their time was spent on managing the program backend versus engaging with the partners for more referrals. Fundamentally, it put the entire partner referral program at risk.
#3 – No data visibility
Broken referral tracking is the worst, but we’ve seen programs also suffer terribly just from lack of data – both internally and in terms of visibility for their referral sources. A referral is a personal introduction (even if done digitally). The person making the referral wants to know where that referral is at, how its being handled, what stage they are in the sales process and whether or not they’ve earned a reward. Without easy access to this information, many of our clients experienced a huge influx of calls to their call center and/or salespeople. This raises unintended negative visibility to the program and becomes an operational nightmare to figure out a process for a person to find the data and follow up with each individual. It ends up being a horrible experience for everyone involved.
#4 – Friendly fraud
Sadly, we’ve had multiple clients experience fraudulent behavior from their salespeople. It happens so much in DIY programs that the industry has termed this “friendly fraud”. We’ve seen this happen in two ways. One is where the salesperson has a “friend” that is in the pool of referral sources and they attribute all of their leads to this person either as a favor to the friend or they share in the kickback. The other behavior we’ve seen is where a salesperson will wait until a deal closes, then call up marketing and insist that the lead came from said friend. It becomes the salesperson’s word against marketing. Without rules in place for referral attribution and visibility, trust gets completely lost and smarketing alignment is out the window.
#5 – Reward fraud
It isn’t just the salespeople that can take advantage of a DIY program, your referral sources can get in on the action too. Many DIY programs are doing manual reward fulfillment of physical checks, gift cards or swag. And that means no tracking data on who got their reward. These clients say they often would get emails and phone calls from their referral sources saying “I didn’t get my reward – can you resend it?” They can never prove it, but they just know they are being taken advantage of and it puts a black eye on the program.
#6 – Tax gotcha
When you start a program out DIY, you often don’t consider the long term implications as the program grows. Often this nightmare comes from a surprise conversation from finance. Basically, finance catches wind of the reward payouts going above taxable limit of $599 and asks for tax information on all referral sources. In multiple clients, this was so devastating to the programs they had to be shut down and lose this source of revenue until the problem could be solved.
How to avoid these mistake
If you don’t want to feel the pain above, you’ve got two options. One, is never start a referral program. This is a safe choice – at least until you get let go because the company doesn’t hit its revenue numbers. The second choice is to get referral software that works for complex go-to-market scenarios. It’s a simple addition to the tech stack that keeps your program compliant, keeps sales and your referral sources happy and provides direct revenue and operational savings for your business. Continue learning how to avoid becoming a referral horror story by exploring our resource library!