Once you have identified your referral sources, you’ll need to construct a referral strategy for recruiting and motivating your sources. If you have an existing relationship with your referral sources (like customers or existing partners) then sales can help recruit. If there is no relationship with the referral sources, a formal marketing campaign may be in order to attract referral sources to your program.

However, even if you create the most thorough recruitment campaign, it won’t be very successful if it isn’t motivating.

To ensure your program is motivating, start by creating a strong value proposition.

6 questions to create a strong referral program value proposition

Successful referral programs have a win-win for the company and its referral sources. To lock onto the most motivating value proposition, consider these six questions about your referral sources.

  1. Does recommending your product/service put them in a good light?
  2. Does it help to be perceived as a trusted advisor?
  3. Does your product/service add complementary value to their offering?
  4. Does your product/service make their offering stickier by increasing usage or value?
  5. Does a customer having your product/service help them make more money through value-add services or offerings?
  6. Will the referral source be motivated by a financial incentive?

To assist you in turning the answers to these question into a value proposition, download the worksheet. Additionally, take a look at recommendations on Developing a Compelling Channel Partner Business Proposition from SiriusDecisions analyst Stephanie Sissler.

In regards to question six, we know that most (if not all) referral sources expect a financial incentive. We then must ask ourselves – what level of incentive motivates a specific referral source, and will provide a high ROI?

Your strategy for calculating referral incentives

To start calculating a motivating incentive for a referral source, you’ll need to calculate the cost per acquisition (CPA) of your inbound marketing efforts using the following formula.

Take a year of your total marketing spend and add it together with the total cost of marketing resources during that year. Then divide this by the total number of new customers generated by marketing that year. This is your CPA. Use this number as the maximum threshold for your incentive to maintain a high ROI.

In the SiriusDecisions whitepaper, Keys to Engaging Referral Partners, they find that typical referral fees fall between 5% and 25% of first year revenue.

To see what fits your company, take the average first year of revenue from a customer and multiply it by 5%, 10%, 15%, 20% and 25% to see what the incentive amount would be. If any of them are greater than your current CPA you can remove it from the mix. Ideally, the incentive will be significantly lower than your CPA.

The other option is using a flat bounty. Try using the calculated incentive amount from the above equation for direction.

To help guide you, try downloading and filling out this worksheet.

Or fill it out right on this page for your own knowledge.

When you are done calculating your incentive, you can test your program ROI using the free referral ROI calculator.

Lastly, to see how reward structure fits into your overall referral strategy, download The Referral Guidebook to get all 20 exercises to build your referral strategy into a revenue generating channel.


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