6 real life DIY referral program horror stories (and how to avoid them)

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!

resource library

Referral Strategy: Create an onboarding process for your referral sources

After identifying your referral sourcesdeveloping a recruitment strategycreating a sales enablement plandeveloping a plan to enable referral sources, and constructing a referral incentive strategy, you can start to fashion a referral strategy that enables you to create an effective onboarding process for your referral sources.

To build an onboarding plan, you need to first determine what information should be collected at registration for different referral source and the training they need to succeed.

5 ways to determine your referral strategy for your registration process

Throughout the life of your referral program, you will need to collect different information from referral sources at different times. To figure out what information you need to collect at registration based on your referral program structure, answer these five questions.

  1. Are you using the referral program as your partner database?

If yes: Collect all required fields at registration, like email, address, and phone number.

If no: Connect your registration and program to your CRM/PRM with SSO and prefill this information.

  1. Are you paying your referral sources via electronic funds transfer?

If yes: Collect the appropriate bank information.

If no: Validate the address or email is correct for a check or electronic gift card.

  1. Do you want to approve referral sources before they join the program?

If yes: Collect the key information you are judging their approval on. This could be a check on access to your target buyer, a sample of existing clients, or the ability to commit to an SLA.

If no: No additional information is needed.

  1. Is a salesperson (direct or channel) involved in the relationship with the referral source?

If yes: Provide a way to select their salesperson during registration so that performance can be tracked and reported by salesperson.

If no: No additional information is needed.

  1. Do you expect that the majority of referral sources will earn the taxable limit of $600 during the calendar year?

If yes: Collect the tax information at registration. If the referral source is inside the U.S. this would be through a W-9. If the referral source is outside the U.S. this would be through a W-8.

If no: Establish a process where if they reach the taxable limit, the appropriate tax information is triggered for collection before further payments are made.

Once these decisions are made you can construct your registration form to collect this information.

To help guide you, download this worksheet, along with the five questions worksheet.

How to build a training plan for your referral program

Another important part of onboarding referral sources is training them. Depending on what type of referral source you’re enabling, this training may be as easy as providing content on your target buyer or as in-depth as laying out the different value propositions each type of buyer will respond to and how to identify them. Depending on your referral source’s knowledge of your business, you may want to just put the information in your referral program portal so they can access it whenever they might need a refresher.

When considering the different training you should provide, think about it in relation to who the trainer will be or if it would be self-taught, the delivery mechanism for the training, if there is a specific date(s) it should occur or if it is ongoing, and if the training is a requirement or optional.

Here are a few types of training you can consider offering:

  • Target buyer and buying personas
  • Referable product(s) and value props
  • How to make a 1-to-1 referral ask
  • What happens after you submit a referral – process and communication
  • How to earn incentives – criteria and payment

To help construct your training process, download the exercise or download the entirety of, The Referral Guidebook, to create an all-inclusive referral strategy.

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Referral strategy: Developing a sales engagement plan

Once you have identified your referral sources and developed a motivating recruitment strategy, you’ll need to start thinking about how to align your referral strategy with sales. The sales team has the potential to have a monumental impact on your referral strategy if they have the right tools. In fact, two recent referral benchmark studies found that sales enablement increased the conversion rate of partner referral lead to purchase from 31% to 41%, while the conversion rate for customer referral leads increased from 13% to 30%.

But how do you go about achieving this?

The first action you need to take is deciding whether your direct or indirect sales team needs to be enabled so you can then create a step-by-step plan for them to drive referrals. Remember, sales can play a massive role in recruiting referral sources and collecting referrals so this is a necessary step to increasing your revenue from referrals.

Should you involve direct or indirect sales in your referral strategy?

When trying to decide on whether to enable your direct or indirect sales team to drive referrals, think back to when you identified your referral sources and divided them into different individual programs.

Your different referral programs can fit into three different program structures. Determining what structure fits each program will help you decide what type of sales team you should enable as part of your referral strategy. Here are the three program structures to build your program around.

Direct to Individuals

Here an individual such as a customer, influencer, small agent, small business or employee would refer business directly to you.

Use case: A business services company targeting SMBs knew that small businesses referred locally. They created a program to enable customers to make referrals of other businesses and another program to allow small business accountants to refer their clientele. Direct sales manage these relationships on a local/territory level.

When you are trying to enable this type of program ask yourself this question:

referral strategy, referral sources, partner program, sales enablement

To and Through a Strategic Alliance

Here you create a program for a consultancy, system integrator, software vendor, bank, service provider, agency, association or another type of strategic partner, that is co-branded and co-managed by you and your strategic alliance to enables their employees to refer business to you.

Use case: A merchant payment systems provider had strategic alliances with large commercial banks so they created a dedicated referral program for each bank. Bank employees were in a position to recommend the merchant system to their SMB merchant customers. To ensure success, the programs needed to be branded and integrated into the bank’s systems. Marketing manages these relationships.

When you are trying to enable this type of program ask yourself this question:

referral sources, referral strategy, strategic partner program, referral partners, referral partner program

To and Through a Partner Network

Here a company has a platform that supports different programs for each managed partner such as consultancies, agents, system integrators, software vendors, software providers or agencies, where the managed partner can enable their employees to make referrals.

Use case: A B2B software provider had managed relationships with other software vendors and digital agencies who sold into their same customer base. They created a referral program that offers incentives to the corporate entity as well as the referring employees. These incentives varied from company to company based on their arrangement. Channel sales and marketing together manage these relationships.

When you are trying to enable this type of program ask yourself this question:

referral strategy, referral sources, referral partners, referral partner programs

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

Now that you have figured out what sales team you need to enable, you’ll need to develop your referral strategy in more depth to engage them.

A 10-step checklist for building your sales engagement plan

Using this 10-step checklist, you can get your sales team the tools and structure they need to be successful in making referrals part of the go-to-market strategy.

  1. Meet with your head of sales to determine the level of involvement.
  • Your deliverable – Commitment from sales leaders for driving recruitment and referrals.
  1. Work with sales leadership to set activity goals.
  • Your deliverable – Create objectives by the salesperson. Have them be accountable for a specific number of referral sources and referrals per month/quarter/year.
  1. Work with sales leadership to determine any changes to the sales incentive structure.
  • Your deliverable – Make any changes to sales compensation based on if they meet recruitment and referral goals.
  1. Work with sales operations to enable sales with tools to drive recruitment.
  • Your deliverable – Add the ability to invite CRM contacts with pre-filled registration.
  1. Work with sales operations to enable sales with tools to collect referrals.
  • Your deliverable – Add the ability to input verbal referrals in the CRM and to “own” referral sources for reporting.
  1. Work with sales operations to provide referral status transparency.
  • Your deliverable – Add the ability to see who made the referral on each lead record and to click into the referral history of that partner.
  1. If you’re using a direct sales team: Work with sales operations on lead routing rules.
  • Your deliverable – Change lead routing so that any referral lead that comes from a source that a salesperson “owns” gets routed to that salesperson.
  1. Work with sales operations to get sales leadership reporting.
  • Your deliverable – Create dashboards in your CRM that track recruitment, referral leads, referral opportunities and successful referrals by salesperson/territory/etc.
  1. Run a pilot rollout with one sales group.
  • Your deliverable – Get feedback to improve the process as well as data and testimonials to show the success of the program.
  1. Rollout the referral program to your full sales team with training and an internal campaign.
  • Your deliverable – Train the sales team who is actively recruiting and collecting referrals.

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

After looking through your checklist, if you need help enabling sales with any of these functions, see how a sales enabled referral program can help.

Lastly, to see how referral sales enablement 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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Referral strategy: Ideas to recruit and motivate referral sources

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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Referral strategy: Create a plan for enabling your referral sources

Now that you have identified your referral sources, developed your recruitment strategy and created a sales enablement plan, it’s time to create a referral strategy for enabling your referral sources.

Once a referral source has registered, they need to have access to a portal that not only gives them the functionality to refer, but provides them with all the information they need to make an informed referral.

To do this, start by developing your target buyer profile if you haven’t already.

Developing a target buyer profile for your referral strategy

A key component in enabling your referral sources is ensuring they understand your target buyer profile. Creating this kind of content means first breaking down the traits of your target company into straightforward categories. Let’s start with these six steps.

Step-1: Layout how big your target company normally is. This involves listing the typical revenue range of your target company and the number of employees they normally have.

Step-2: List the industries you most commonly target.

Step-3: Name the type of offering your target companies normally have. This could be:

  • Simple products
  • Simple services
  • Complex products
  • Complex services

Step-4: Figure out what your target company’s typical go-to-market model is. For instance:

  • Brick & mortar
  • eCommerce
  • Direct Sales
  • Resellers/distributors

Step-5: Figure out if there are any key technologies a target company uses or offers.

Step-6: Evaluate your different target companies’ presence relative to competitors. Are they small, medium or large? And are the companies you’re targeting experiencing declining, sustaining or growing revenue?

Once these questions are answered, you can move on to breaking down the key traits that define the buying unit or department of your target companies.

For this, focus in on who the buying department is and ask yourself these six questions about that department:

  1. What are their key needs and challenges?
  2. What are their goals?
  3. What situation/behavior is a signal of need/intent to buy your solution?
  4. What alternative solution are they using today?
  5. What is the value your solution offers relative to the status quo?
  6. Who are the key titles involved in the purchase and the role they play?

Answering these question will help to ensure that you are enabling your referral sources with all the information they need. If you need further help, try downloading and filling out the full interactive worksheet to construct your in-depth target buyer profile.

Create training content for your referral sources

Once you have created your target buyer profile for your referral sources, there are still a variety of different enablement resources that you can provide through your referral software portal. This will ensure your referral sources can communicate the right message to a target buyer and make proper use of your referral program. Here are the different types of content you can create:

  • Product description – Write a description of the product or service you want your referral sources to refer.
  • Value proposition – Develop content that will help a referral source communicate the specific value of the product or service that applies to each individual target buyer.
  • Customer-facing product info – Offer content that the referral source can share with target buyers to grow their interest and get them to agree to a meeting.
  • Incentive rules – Create incentive information that informs referral sources on how they can earn incentives and grow their incentive.
  • How to make a one-to-one referral ask – Not all referral sources will know the best ways and time to ask for a referral. If you are including social media in your program, it is especially important to reinforce the ways it can be used to make a one-to-one introduction versus an awareness blast.
  • How to ensure the referral gets entered – To avoid any lost referrals, provide information that reinforces the different ways referrals can be entered into the system and tracked.
  • What happens to a referral lead – Referral sources want visibility into what happens after they make a referral. Provide them with an overview of the process – who the lead gets routed to, how it’s handled, what happens if it is unqualified, the various points at which they will receive updates on the sales process progress and what happens when the referral makes a purchase. This includes how and when they are going to get paid.
  • How a referral source can access their data – Referral sources need transparency into the status of their referrals and rewards earned/paid. Let them know how they can access this information so you don’t get calls wondering what happened to a referral.

To help guide you through this portion of referral source enablement, download the full worksheet or download the all 20 exercises from, The Referral Guidebook, to create a revenue generating referral channel.

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Referral Strategy: Identifying potential referral sources in 2 steps

Referrals have evolved from a simple approach to a strategic channel used by companies to dramatically increase revenue. New data from companies running these types of referral programs show that an average 13% of customer referral leads and 31% of partner referral leads make a purchase. As a result of the increased complexity of referrals and the potential to drive greater revenue from them, many more considerations must be taken into account when designing a referral strategy. As you start to design your referral strategy, before brainstorming any other referral program ideas, consider the referral sources that could be a part of the program.

While you might already have an idea of one referral source who could drive or is currently driving referrals to your company, there may be some that you are missing.

“With 65 percent of b-to-b organizations including indirect channels and partners in their go-to-marketing strategy and an additional percentage looking to the channel for additional revenue growth, the channel is critical to the future success of a growing majority of b-to-b organizations across multiple industries,” said Kathy Contreras, Senior Research Director of Channel Marketing Strategies at SiriusDecisions. “The ability to leverage referral partners for that growth offers a great opportunity, especially as referral programs offer expansion beyond the typically targeted partners; this can offer many organizations a new or expanded route-to-market.”

Along with partner types like strategic partners, ISVs, integrators and many more, partners can be any influencer of your business. These influencer could include agencies and consultants that are able to identify a need for your product or service in others. In order to not miss out on generating revenue from any referral source, gather your sales, marketing and channel teams, and use these two steps to pinpoint who your referral sources are.

Step 1: Referral ideas to identify new referral sources

To identify all of your possible referral sources, get input and referral ideas from the different departments inside your company. Use these nine question to get direction:

1. What companies have a complimentary product that sells into your same target buyers?

  • Referral strategy tip: This could be integration partners or just companies selling into your same group of buyers.

2. Who do your target buyers interact with professionally?

  • Referral strategy tip: If you are selling to SMBs, there are many trusted advisers to consider, such as their accountants and bankers.

3. What associations do your target buyers belong to or trust?

  • Referral strategy tip: Local associations and chamber groups are often a key way that small businesses network.

4. Are there any purchases that typically happen in coordination with yours? If so, what are they?

  • Referral strategy tip: When someone buys marketing automation, they may buy a webinar platform. Or when someone buys VOIP telephony they may buy a video conferencing platform.

5. Are there any consultant groups or agencies that are typically engaged in advising on a purchase decision in your area or a process that is complementary to your offering?

  • Referral strategy tip: From niche consultants to goliaths, there may be players that are influencing your target buyers.

6. Are your target buyers part of a franchise model?

  • Referral strategy tip: If so, the franchisors have direct access and significant influence worth pursuing.

7. Do you have existing resellers that are struggling with performance?

  • Referral strategy tip: These resellers could be transition to referral partners.

8. Do you spend a lot of effort certifying new resellers only to have them underperform?

  • Referral strategy tip: A referral program can be a qualifying step for a reseller. This ensures they produce quality leads before the time is spent to make them a reseller.

9. Do your customers have access to your target buyers in other companies?

  • Referral strategy tip: Customers can be partners too.

To help guide you, try downloading and filling out this worksheet along with the necessary departments.

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

Step 2: Group your referral sources into programs

Following the identification of all your potential referral sources you will need to group them into programs. This will be based on whether or not your referral sources are individuals or companies where employees will be the referral source. It is very important to think about the language and incentives that will drive each referral source. If a referral source needs a unique incentive or branding, this might justify creating a separate program for that referral source.

For instance, a customer might be incentivized by a flat bounty such as a gift card while a partner may expect a percentage of revenue paid through electronic transfer. By grouping referral sources by their messaging and incentive, you ensure the creation of a program that will deliver the most ROI.

If you can’t take on more than one program at a time prioritize your programs by:

  • Whether or not you have an existing relationship with the referral source
  • How fast it would be to get the program to market
  • The potential impact on revenue

Download the worksheet to help with this step or download the complete Referral Guidebook with all 20 exercises to help you build a revenue generating referral channel.