This vacation brought to you by business referrals

Referrals take the guesswork out of your buying decisions

I’m sitting on a South Pacific beach, and you’d think that the farthest thing from my mind would be business referrals.  It was one of the first days of vacation and maybe I hadn’t quite pulled the plug, so I started thinking about referrals from a different perspective.  We usually think in terms of what referral advocates do to get the attention of prospects, but maybe we need to think more about the value of referrals to the prospects.

I did a thought experiment where I put myself in the role of a purchasing agent in a large organization.  And since I was settling into my vacation at a time-share resort, what better type of organization to consider. I need do no more than look around me to visualize the myriad decisions that I and my purchasing team would need to go through.  We’d have to find and source vendor relationships to support products and services such as:

Beach equipment – Who provides all the beach chairs, cabanas, and umbrellas that support our days of leisure?  What about the chairs and tables for the weekly outdoor luau, and the carts to move them? Who repairs this equipment after storm damage and normal wear and tear?

Towels – Where I was staying, every resort visitor gets two beach towels and can turn those in daily (or more often) for fresh towels.  Where does the resort buy those towels?  Who washes them? If it is the resort, then who supplies the laundry equipment?  The laundry soap and fabric softener?  Or, do they use a third-party service?  Same goes for towels, dish towels, and linens in the residence units.

Pool – Who maintains the pool?  Where do the chemicals come from?  Who repaints them?

Restaurant – One could dedicate a whole blog to food service.  Our resort has two restaurants, a pool-side bar, and a small convenience store/fast-food outlet.  How are they learning where to buy all the food and supplies for these facilities?

Furnishings and Appliances – Sofas, chairs, tables, beds, carpet, sliding glass doors, balcony tables and chairs, kitchen appliances, laundry appliances, and air-conditioning systems.  Where do you buy things?  Who services the appliances and air conditioning?

Communications – TV, Internet, and multi-function phones (the latter being overkill and mostly used for messages from resort staff).  Who is the ISP?  Who provides the connectivity?  Who wires the resort and maintains that wiring?

Golf carts – Not for the golf course – that, too, could be another blog.  But, golf carts used by resort staff to move supplies around.

Maintenance – Lawn mowers, tree trimmers, tractors for raking the beach, grass trimmers, leaf (and sand) blowers), painting, cleaning service.  Where does all of this come from?

And the list goes on.  Maybe we are sourcing some of these services from our local community for local use. Maybe we are helping the corporate office to source for regional or global distribution.  Our team is going to receive dozens of solicitations for each of the many products and services listed above.  We’re likely not satisfied with some of our current vendors, so we’ll be actively looking for replacements.  Other vendors will be trying to get us to replace vendors that we are currently using.  How do we make our decisions?  How do we decide which vendor calls to take?  How do we know which vendors to trust?

Referrals cut through all of this complexity.  Putting myself in the mindset of a prospect, if I hear from a colleague at another resort down the shore, or if a business acquaintance that I met at a hospitality business conference contacts me, I will listen.  If they tell me about good results from a service provider, I am going to listen harder.  I’ll respond to an email or return a phone call from someone I know, even a passing business acquaintance, ten times faster than any other solicitation I receive each day.  These are people with whom I already have a connection, and I’m going to listen seriously to their experience and the basis for their recommendation.  That’s why business referrals work!

The reality is, referrals are an important part of your prospect’s buying process. If you aren’t providing your customers and buyers with effective ways to give and get referrals, you’re missing the boat.

Now that I’ve got that off my chest and out of mind, let me get back to my Mai Tai.

Questions? Email me at LBloom@amplifinity.com

launching a referral program

Clear gaming smoke from your referral program

In running referral programs, you’ll want to assure that the referrals you receive are legitimate and honestly put forth.   While no software system can fully anticipate the vagaries of human behavior, there are many things a referral software system can do to minimize gaming.  Let’s look at the types of gaming and then take a three-pronged approach to address the problem.

Observed Gaming Behavior

Gaming of referral programs is generally driven by three different personas:  Sales Reps, Advocates, and Prospects.  Here are a few examples:

Sales Rep Referral Gaming

Sales reps have inside knowledge of deals, which gives them the opportunity to find ways to reap a referral reward in addition to their normal commission.  They may:

  • Ask a friend to refer a deal that they have already worked and is close to closing, then split the reward with the friend after the deal closes.
  • Pose as a customer to register themselves as advocates, thus setting themselves up to receive a reward for their own commissioned sale.

Advocate Referral Gaming

While loyal brand advocates tend to adhere to the intent of a referral program, less loyal advocates, or non-customers who sign up as advocates, may choose to maximize reward revenue via less-than-admirable means.  They may:

  • Attempt to do a self-referral to gain a reward for something they were already planning to buy.
  • Ask a friend to accept a referral for a service that has a trial period, suggesting that the friend cancel the service after reward payment but before the trial period expires.  
  • Do email blasts to a large, primarily non-qualified audience.  While not inherently fraudulent, this behavior can generate unhappy customers who find that the referred product is not a good fit. For product sales, this generates ill will; for service sales, this creates churn and unprofitable customers.

Prospect Referral Gaming

Prospect gaming is rare, but in some cases prospects who wish to game the system will look for loopholes in the referral offer.  For example, if the prospect receives a reward for signing up for a service, she may cancel the service after reward receipt but before service payment.

Amplifinity’ Answers to Gaming

The recommendations that follow are based upon Amplifinity’s experience in supporting millions of referrals that have driven nearly two billion dollars of new business.  We’ve learned that successful referral programs address gaming on three fronts to guide the user away from gaming opportunities, block gaming activity, and report on gaming activity that cannot be blocked.  Here are some guidelines, as embodied in our platform and our successful referral program configurations, to help you design a referral program that drives genuine referrals.

Guide Behavior

Start by constructing your referral program to minimize the opportunity for fraud:

  • Use Single Sign-On (SSO) to assure that advocates are legitimate customers, employees, or partners.  This helps to eliminate sales rep gaming that relies on a friend to make referrals for deals already in the works.
  • Similarly, if the customer does not use SSO, validate new advocate registrations against a list of known legitimate customers, employees, or partners.
  • Use a validation upon registration to gain assurance that an advocate is using his or her own email address.
  • For concern about sales reps that pose as customers to make referrals, consider registration of advocates by invitation only.  For example, the Amplifinity platform will import your list of eligible customers, employees, or partners and then invite them into the program.  In this scenario, only invited individuals can become advocates, preventing sales reps from posing as customers.
  • Select reward types that balance strong incentive value with discouraging fraud.  As an example, sales reps will not ask their friends to refer accounts already in the sales cycle if the reward is a bill credit, which the sales rep will never see.
  • Use reward retention periods.  To prevent advocate and prospect gaming by service cancellation, configure the retention period to be longer that the service cancellation period.
  • Amplifinity also recommends that brands make rewards revocable (in terms and conditions) to allow brand to take action if fraud determined after reward payment.

Block Behavior

Prevent actions that make it easy for users to game the system:

  • Prevent self-referrals by blocking referrals to an advocate’s own name and email address.
  • Prevent multiple rewards for the same referral by blocking an advocate’s duplicate email referrals to a prospect.
  • Prevent multiple rewards for duplicate referrals to a single prospect from multiple advocates.
  • Do not reward referrals that are entered after the sale is closed.
  • Block mass emails by limiting the number of referral emails an advocate can send in a single day.  Valuable referrals are made by advocates who thoughtfully select their advocates.

Flag Behavior

Even with programs that guide advocates well and block gaming behaviors, it is important to be vigilant for other types of gaming. Comprehensive reporting helps identify referral actions that don’t fit expected or historical usage and uncovers potential fraudulent activity, such as:

  • Shorter-than-usual referral-to-close cycles
  • High number of referrals in a short period of time
  • High number of successful referrals in a short period of time
  • If the brand is observing and of these potential bad activities, withhold reward payment for a brand-defined number of days to enable time for investigation of the flagged activities.

 

No More Referal Program GamingIn working with our customers, we’ve found that our referral platform capabilities and operational recommendations described above dovetail cleanly into the referral experience of advocates making genuine, legitimate referrals.  At the same time, this approach frustrates the efforts of would-be referral gamers.  This enables our customers to maximize referral success while minimizing the impact of gaming.

Questions? Email me at LBloom@amplifinity.com

SaaS referral automation

 

 

Rewards drive referrals. But, must they be cash?

It sounds simple: let’s have a referral program and reward advocates to drive business our way.

So, you’ve made the decision that your business is ready to accelerate lead generation via a referral program.  You’ve determined the specific pool of advocates (customers, employees, partners, …) that you want to target as referrers.  You’ve selected a vendor to host your referral program.  Now comes the hard part – what incentives do you use to motivate your advocates?

In many ways, this is the most pivotal decision in referral program design.  From my point of view in pre-sale discussions, I look at the implications of rewards on the back-end configuration of the referral platform.  This is mainly a straightforward, mechanical decision process.  From your point of view, though, you know rewards drive referrals, but there are philosophical questions about what motivates referral behavior and what is appropriate for your referral community.  And in certain industries, such as financial services and insurance, you must consider regulatory compliance.   What are your options?  Will people refer without a reward?  Must rewards be cash?

The answers to these questions are tied to the type of product you are offering and the audience that you are asking to make referrals.  That said, the majority of the customers that we work with have opted for some sort of monetary reward, whether e-gift cards, bill or account credits, checks, or product discounts. Cash works effectively for subscription services ranging from telecommunications to mosquito control and from payroll processing to SaaS-based CRM.  These are all cash-up-front types of businesses where competitive price negotiation and price incentives are not unusual, so the notion of cash rewards dovetails nicely in these businesses.  But, there are market segments with less mercenary, more altruistic attributes that open up the discussion of alternatives.

Getting to Non-Cash Referral Rewards

One market segment where non-cash referral rewards are desirable is higher education.  University advocates (students, alumni, and employees) are motivated by their results-driven loyalty – “My life-enriching time at university”, “My secure employment”.

In this realm, we’ve started working with Northern Michigan University (NMU), a terrific public university in Michigan’s Upper Peninsula.  They are about to launch Alumni and Student referral programs.  NMU looked at the question of rewards, both philosophically and in context of a fuzzy regulatory environment that has unclear rules around rewarding for enrollment.  They took a fresh look at what the rewardable activity should be, as well as suitable rewards.   As to rewardable activity, while the utlimate goal is enrollment, NMU knows that candidates who visit the campus are very likely to enroll in the school.  So, they selected completion of a campus visit as the rewardable activity (in a similarly regulated industry, we have an insurance client who rewards when a prospect receives a quote after a referral, rather than when the prospect buys a policy).

As to the reward, NMU has been exploring a choice between non-cash and cash options for its advocates.  For Alumni, this may be a choice between campus swag (e.g. NMU jacket) and a Tango Card (electronic gift card).  For students, the choices can be more varied, starting with Tango Card on the pure cash side.  Also, on the cash side, but more focused, are an NMU bookstore gift card or dining dollars, both of which are more like credits than cash because they aim to reduce student expenses.  Another option under consideration, especially revered in a land with seven-month winters and 150 inches of annual snowfall, is a student parking pass.  While the pass technically has a cash value, it is its value as perk that provides the motivation.

Two other examples from different markets:

  1. One of our SaaS CRM customers lets their succesful advocates opt for training credits as one its reward choices.  This is akin to NMU’s bookstore gift card in that it has a cash value but its usage is focused on an essential activity rather than as a free cash giveaway.
  2. Several years ago, the Sierra Club mounted a campaign to save the endangered Florida Panther from extinction.  They leveraged our referral program to reward anyone who successfully rallied 5 people to sign their petition.  To say “thank you”, their referral reward was a premium Sierra Club duffel bag.

True Non-Cash Rewards

These examples show creativity in rewards selection, but also highlight the challenge of getting to a true non-cash incentive.  In each case, the “non-cash” rewards still have a clear cash value.

So, are there any true non-cash options?  Here are a few examples that we have discussed with our customers but have yet to see gain significant traction.

  • Thank you email – The principle behind this is that people are willing to refer as long as the process is easy.  This is appropriate for brands with high loyalty and could, in fact, be used with university alumni and with donors to non-profit organizations where the ease of referral is more important than the reward, and where it doesn’t make sense to give cash to the same people from whom you seek donations.
  • Charitable contribution
  • Advocacy round table (an advisory panel to company executives) or other company-wide recognition

Using referral rewards in higher ed

Truth be told, though, cash is king.  It may be more appropriate in less commercial environments to use merchandise, brand-specific credits, or perks but, in the end, it all has cash value.

 

Questions? Email me at Lbloom@amplifinity.com

 

What is brand advocacy?

 

 

 

 

The stormy challenges of an in-house referral program

Developing software in-house is always a risky business, and this is as true for referral programs as it is for other types of software systems. Marketing lead-gen teams must fight through stormy weather when having to design requirements from scratch while simultaneously navigating the turbulent waters of IT concerns and project priorities.

At Amplifinity, we’re proud to say that some of our most successful referral programs are for customers that had endured the storm of their home-grown systems before turning to us. These are both B2B and B2C brands that were unable to scale their programs sufficiently to meet their referral goals.

With their in-house programs, these brands had high operational costs and frustrated their advocates with poor communication. While these programs achieved some level of referral success, they did not achieve the level of solid lead generation and closed sales that was anticipated.

Here is a typical example from our most successful telecom customer::

This customer had a home-grown reward fulfillment process that took 30 to 45 days to issue a bill credit to their customers. In addition, their referral program did not generate any status communications to the advocates, so advocates had no clue whether or not their referrals were even processed. This resulted in large volumes of calls to the call centers to inquire about the status of referrals and referral credits. And, because there were no automated status updates to inform advocates about referral progress, the advocates lost interest and made few additional referrals. With these program weaknesses, this customer was more than ready to graduate to an automated referral platform when we reached out to them.

In this post, I’ll focus on three challenges of in-house programs: scale, advocate experience, and operational costs. Implicit in the text is the understanding that a solid SaaS referral platform addresses the challenges with the right mix of enterprise hardening and rich feature sets. In future posts, I’ll focus more on the best referral practices and program features that make for the most successful referral experience.

Scale

By “scale”, I mean the ability to support millions of referral events without depending upon IT to keep the software running, without requiring manual intervention to complete any of the referral processes, and with sufficient tooling to support program changes without involving IT.

We’ve seen in-house referral systems that successfully empower advocates to make referrals, but then require manual intervention to complete the referral process. They don’t effectively close the referral loop so that advocates get rewarded in a timely manner, they may calculate rewards with a spreadsheet, or they may require manual steps to fulfill the rewards.These manual steps are manageable at the outset of the program, but when referral volume climbs to hundreds or thousands of successful referrals per month, manual processes cannot keep up. Operational costs go up and advocate experience goes down, as in the telecom example above.

Advocate Experience

The number one factor driving successful referral programs is a fully-engaged advocate base. Once a customer, employee, or partner accepts your invite to become an advocate, your referral program has to do everything in its power to deliver a positive advocate experience.  Happy advocates make more referrals. Unhappy advocates abandon the program.

In-house programs often struggle to keep their advocates happy. We hear stories like:

“My friend told me he bought your product, but I never got rewarded.”

This happens when the referral loop doesn’t close, either because of inadequate system design or because of dependence upon a manual process. That hurts!  It drives calls to your call center and discourages the advocate from making more referrals.

With in-house referral programs that successfully close the loop, which is great news, there remains a missed opportunity to stimulate the advocate to make more referrals, which is an active, and automated, nurturing program. Every time a prospect takes action, whether responding to an advocate’s email or completing a purchase, the brand has an opportunity to reach out to the advocate, thank her for her referral activity, and ask for more referrals. In-house programs generally don’t have this capability and lose out on a key method for amplifying the success of the program.

A closed-loop assures a positive advocate experience. An effective nurturing program turns that experience, and the referral results, to great!

Operational Costs

Above, I mentioned how manual processes and an unclosed referral loop increase operational costs. Interestingly, these are not IT costs, but the cost of extra work on the business side to keep things moving.

On the IT side, the largest operational cost for in-house systems comes from the management of the referral program content. This includes the web pages that advocates and prospects use, the referral tools, and the emails that go to prospects and advocates. What we’ve seen in home-grown systems is that it is expensive to maintain this content, and that maintenance generally depends upon IT involvement.

Successful referral programs are built on platforms that remove IT dependency from the equation once the initial integration to the back-end systems are completed. This require tools that allow marketing teams to manage their own content and to configure their reward rules. We have found this self-management capability to be very popular with our customer base.

Summary

It takes time and money to build and maintain an effective referral program. Organizations that choose to go it alone find that they are putting Referral Program Calm Watersmoney and time into an unproven, incomplete referral platform, which more times than not results in lackluster referral results. This blog has focused on the turbulence of in-house referral programs as compared to using referral software. In subsequent blogs, I will address specific capabilities that the most successful enterprise referral platforms use to calm those stormy in-house waters.

 

Questions? Email me at lbloom@amplifinity.com

 

Referral programs & affiliate programs – 4 big differences

I am a referral program consultant with Amplifinity, and a frequent question asked by prospective customers with whom I work, is: What is the difference between a referral program and an affiliate program, and which one is better for my company?

The differences are more pronounced than they expect. The simplest answer is, referral programs leverage the trust and enthusiasm of people who know your brand, and turn those trusted individuals into a new and high quality customer acquisition channel.  On the other hand, affiliate programs place a brand link on a brand or blogger website with the intent of motivating site visitors to click the link.

Let’s look at four major differences between these two programs:

Referral programs more successful than affiliate programs

1) Referrals are personal.  The advocate (the person who makes the referral) and the prospect know and trust one another.  Prospects are more likely to trust a recommendation from a friend than any other source, Nielsen has found. In contrast, affiliate programs generally don’t leverage relationships and transparency. When I read a blog post recommending a brand, it’s not nearly as influential on me as if a friend recommended the brand.

2) Referred leads are higher-quality.  As opposed to affiliate programs with their low personal connection, in referral programs brand advocates know both the brand and the prospects they refer, so there is a high probability that they are referring friends and associates that are a good fit for the brand.  The advocate has effectively pre-qualified the prospect and provided the prospect with an endorsement of the brand.

3) Referral programs drive high lead-close rates.  With referrals, the marriage of high advocacy participation rates and trust that originates from the personal connection ensures higher conversion rates and a shorter sales cycle.  Our data shows that personal referrals close 42% of the time, double the industry average of 21%.  That translates to two new customers for every five referrals made.

4) Referral programs drive high advocate participation. They enable brands to directly reach out to their customers, employees, and partners to uncover loyal brand advocates.  Affiliate programs typically do not reach the level of engagement and penetration that referral programs do, mostly because of less program structure and, again, an absence of the personal relationship that naturally drives trust and brand loyalty.

 

All-in-all, the proactive approach of referral programs trumps the generally more passive nature of affiliate programs. This is not to discount the value of affiliate programs – just to show that you can do better.  In fact, affiliate programs can work well in parallel with referral programs.  But, on their own, our data proves time and time again that affiliate programs will not contribute to the bottom line to the same extent as a well-managed referral program.