Over the past few years, referral incentives have become more researched and understood. More people are understanding their value, learning how to properly implement them into their channel. But in spite of this growth, there are still some people who consider incentives to be suspect at best — or at worst, unethical.
People who are against referrals generally consider them to be bribes, and worry about the ethical implications of “buying” referrals from partners and customers. They believe that partners and customers should be giving referrals because they genuinely believe in their product or service, not because they are expecting to get something out of it.
And that much, at least, is perfectly true! Great referrals come from people who are genuinely happy with your product or service and want to pass on that knowledge to other people, and an incentive should not be the sole motivator for a referral.
But does that mean that incentives are bad?
The dictionary definition of incentive is “something that incites or has a tendency to incite to determination or action.” It’s easy to see how some people might look at this and come away thinking of incentives as simply “bribes.” But for referral partners and customers, this definition is far too limiting.
Because the incentive rarely “incites” the referral. Instead, incentives are a way to say “thank you” to a partner or customer for giving it.
After all, our partners and customers are busy. And they’re taking the time they could be devoting to something else to make a referral for you. When looking at it that way, it is easy to see why incentives matter. Incentives show that their referral is appreciated, and that you don’t take their work for granted.
They also make referrals fun. Trying to get that next incentive or reward is like a game for some partners and customers. And who doesn’t like games?
But what about . . .?
Even with this major misconception out of the way, some reservations about referral incentives linger.
For example, some might worry that incentive programs aren’t sustainable. But with automation software, this is no longer a concern. Automation also helps combat the worry of fraud or abuse of the system.
Still others are put off by the cost that referral incentives have inherently attached to them. But when you consider the fact that referral partner leads convert at a much higher rate than standard leads, and when you consider how incentives can encourage repeat referrals from partners, then the investment quickly becomes worth it.
But what incentives should I use?
Even if you’re considering an incentive program, it can be difficult to know what kind of incentive you should be giving your partners and customers. Turning to research can help you figure out where to start.
For partners, The trend is moving towards ACH rewards. The most popular amount is between $101-1000, with the average reward amount being $182.
For customers, gift cards are king, taking up 52% of referral incentives. The most popular incentive amount ranges between $41-100, with the overall average being $110.
These statistics offer a good baseline, whether you’re looking to start an incentive program or if your current program isn’t delivering the results you want for the investment that you’re putting into it.
How do you build a incentive strategy?
Building an incentive strategy is simple, but not easy. You need to find the correct mix of appropriate amount, structure, and motivation.
There are, as we’ve touched on before, 7 factors that go into a good referral strategy. When planning, you should consider the following:
- Timing and Multi-stage
- Prospect reward
- Campaign Bonus
While this can seem overwhelming, it doesn’t have to be. Exercise 11 in our Referral Guidebook is all about calculating incentives, and it comes with interactive worksheets that make this step — and every other part of building a referral channel — much less stressful.