Originally published on Loyalty360 by Jim Tierney

Customer referral programs are seeing considerable growth due to changes in buyer behavior, which has created an urgency for companies to reach and influence buyers in a different way.

That is a central theme in Amplifinity’s paper, “The State of Business Customer Referral Programs – Annual Report.

“The most successful programs have variable or escalating incentives which ensure customer advocates are being rewarded appropriately for their efforts and encourage repeat referrals during the year,” AmplifinityCMO Trisha Winter told Loyalty360.

Marketing, sales, and customer success all interact with customers and should be trained and managed toward driving advocate recruitment and asking for referrals from customers, the report notes.

“Marketing also needs to provide customers with the tools they need to make referrals to their network,” the paper says. “This additionally keeps customers engaged and informed during the referral process through to reward fulfillment. While the programs analyzed had varying levels of maturity in running their referral programs, the objective they are all working toward is to run customer referrals as an always-on channel for customer acquisition. To do this, referral selling becomes a part of normal operations for the company.”

Six methods customers refer to are email, lead forms, print cards, social media, shareable URL, and verbal.

In 2016, the average number of customers enrolled in a business customer referral program was 5,850.

Customer programs continue to organically grow as a company grows its customer base. The largest customer referral program in 2016 had 115,230 customers enrolled. But, enrollment doesn’t mean that all were actively making referral shares in 2016. Customers may refer at a point in time, but if they aren’t being regularly asked to refer as a part of engagement with employees, they may become inactive. Additionally, customers may leave the company where they use the product, in a sense this is advocate churn and is a natural part of any program over time.

Of the 5,850 average customers enrolled, an average of 2,106 made referrals in customer programs. This means that 36 percent of customer advocates made referrals in a given year.

Here are some key takeaways from the report:

Referrals need to focus on 1:1 interactions.

When it comes to choosing referral methods, companies should survey their customers to better understand how they prefer to connect with their network.

Engage advocates to increase referral activity.

Automate your referral channel.

“The increase in the lead to deal conversion rate by 17 percent proves that referral selling is an integral part of a successful referral channel,” Winter explained. “Marketing can drive some activity, but sales is in a perfect position to recruit customers to become advocates and ask for referrals. And when sales and marketing work together, conversion rates improve!”

The report’s data supports the concept that marketers already know, Winter notes.

“Personalization improves conversion,” she added. “The same goes for referrals. Social media, which is typically used as a one-to-many referral method was the most used, but the least successful. Referral programs need to enable one-to-one referrals with methods like verbal; which had the highest success rate. Some purists believe that a referral from a customer does not need to be rewarded. If referral collection is ad hoc, I don’t disagree. But if the goal is to get a consistent flow of leads from customers and get repeat referrals through the year, those customers need to be rewarded for their time and effort in making the recommendation and influencing the deal. In fact, I’d argue that relative to the average CPL/CPA that most companies aren’t rewarding their customers enough. When you can enable and incentivize customers to market and sell your product to their professional network, and do it at scale, it’s easy to see how lead quality ad conversion to purchase would skyrocket.”