Harnessing Trust that Turns Into Revenues: Implementing a High Impact Referral Strategy

Recently, one of our Fractional Executive colleagues, Wayne Carrigan, provided keen insights into the strategic, and increasing, role trust plays in helping organizations grow in today’s increasingly “messy” world.

I’d like to build on this critical topic by providing hands-on guidance on how the organizations we work with can “harness trust” effectively. Of course, to harness trust, we will need to allocate resources and have a specific/measurable objective. Let’s focus on one all clients face (at one time or another): growing by generating new sales revenues.

 

The Business Benefits of Harnessing Trust

Ask any successful executive, and they will undoubtedly claim, with great confidence, that leveraging referral sources – essentially “bearers of trust” – is absolutely critical to achieving sales goals. That certainly makes sense given the results from findings across industries which consistently conclude that leveraging referral sources systematically (i.e., via formalized referral programs) produces a host of sales-related benefits, particularly when compared with organizations without such programs. Among these benefits:

·       Referred leads convert at rates 3 to 5 times higher than non-referred leads^[1].

·       Referral-driven opportunities advance through pipeline stages 20 to 30% faster^[2].

·       Referred business generate 16–25% higher lifetime value^[3].

·       Referrals reduce customer acquisition costs by 30 to 60% relative to paid media^[4].

·       Structured referral programs report return on investment ranging from 3x to 10x^[5].

Given that our clients are always looking for ways to increase the number of high-quality prospects and accelerate them quickly through the sales funnel, it is possible to see these impressive results and conclude it’s time to redirect marketing and sales resources to programs that optimize referrals.

While the data strongly points to the unique power of referrals, before you do this, there is a harsh and overlooked reality upon which ALL successful referral programs are based: Not all referrals are created equal. With that said, three best practices need to be applied to effectively leverage referrals in ways that deliver top (and bottom) line results:

·       Best Practice #1: Only focus on the kinds of referrals that are most effective at generating profitable business – i.e., High Impact Referrals

·       Best Practice #2: Address the obstacles that prevent the organization from tapping into the most effective referrals

·       Best Practice #3: Take actions that have been proven effective at producing the referrals you actually want

Let’s unpack each of these three best practices.

Best Practice #1:

Focus on High Impact Referrals – i.e., Referrals That Mean Business

As a well-seasoned professional, you’ve seen a host of referral behaviors over the years. Those behaviors have produced a wide range of outcomes that have caused you to conclude, “That was a waste of time and expense” through to “Wow, that’s a game-changer for us”. What’s frustrating is that such outcomes appear to be unpredictable or random. However, the good news is you can identify, measure, and manage the specific kinds of referral behaviors, that lead to consistently acquiring new and profitable business – i.e., those behaviours that result in High Impact Referrals (HIR). By managing these referral behaviors, you can predict likely outcomes and refine your sales and marketing plans accordingly.

To begin, let’s recognize that underpinning all types of referral behaviours is trust, specifically two types of trust:

·       Type #1: The trust a referral source has in you, your product and/or your organization; and

·       Type #2 The trust your prospective customer (i.e., ICP) has in your referral source.

These two types of trust evolve independently. When they combine, they shape your referral sources’ referral behaviors – the result being the degree to which they are effective at successfully finding, qualifying, and converting a prospect into your next new customer.

To see how this plays out in day-to-day business interactions, let’s plot today’s most common referral behaviors along the Continuum of Two Trusts (see Figure 1).

  Figure 1: The Continuum of Two Trusts

Let’s consider one common referral behavior: introducing two people at a business function or, on a social media platform such as LinkedIn. This kind of referral behaviour can happen when both types of trust are low. That’s because for a referral source to initiate an introduction (or make a “connection” in social media), they don’t need to have a high level of trust in you. At the same time, a prospective customer knows how easy it is for a referral source to make a connection (or social ‘Like’ or re-tweet). So, the level of trust that accompanies the connector (that is, the trust in your referral source) is low. This type of referral behavior is at best spotty when it comes to consistently increasing the likelihood of gaining a profitable new customer or reducing the time (and cost) required to acquire a new customer. Other referral behaviors displayed when one or both types of trust is low include acting as reference on a proposal and making a recommendation in response to generic needs like, “We’d like to lower our HR admin costs. Do you know someone?’

Now, in contrast, consider these specific behaviours which referral sources display only when both types of trust are high:

·       Proactively identifying opportunities

·       BANT-qualifying opportunities and making sure they fit your Ideal Client Profile

·       Facilitating meaningful conversations between you and the prospect

·       Initiating opportunities when the time is right given the prospective customer’s unique conditions and constraints

·       Initiating opportunities when your company has the capacity to on-board and satisfy the unique needs of a specific prospective customer

·       Placing their personal and/or professional reputation on the line by providing a hearty endorsement for you (often in a public setting)

·       Endorsing you to prospective customers in ways that effectively “block out” your competitors from being considered

When your referral sources show these behaviours, you’re getting High Impact Referrals – which yield the impressive business benefits of harnessing trust identified earlier.

Best Practice #2:

Address the Obstacles to High Impact Referral Behaviour

Having pinpointed what High Impact Referral behaviours looks like, let’s focus on the obstacles preventing organizations from enabling, and realizing the benefits of, these types of referral behaviors.

These obstacles fall into two broad “buckets” (see Figure 2 below). The first set of obstacles are misaligned attitudes about referrals which give rise to the second set of obstacles, a lack of organizational support. The former prevents initiating structured referral programs, and the latter hampers their implementation.

Figure 2:

Obstacles to Leveraging High Impact Referrals

Misaligned Attitude About Referrals	Resulting Lack of Organizational Support
Your company’s reputation will produce referrals by itself (i.e. organically) and that ANY referred business is worthwhile.	Absence of processes for evaluating the contribution to your top and bottom lines of referred business.
Referral sources are limited to your existing and “satisfied” customers.	Restriction of tapping into referrals until after completion of successful customer engagements.
Referrals will only happen consistently when there is a financial benefit for your referral sources.	Development of reward programs that fail to factor in the “cluster of motivations” that referral sources have for referring AND not referring your company.
Referral sources just need to know more about your products or services to be successful.	Absence of initial and/or on-going assessment of referral sources’ evolving skills and opportunities to refer your company.
Relationship management is not scalable compared to online demand-generation and lead nurturing.	Absence of any referral targets and limited emphasis on relationship-building skills in the marketing of your product or service.

Best Practice #3:

Take Actions That Haven Proven to Produce High Impact Referrals

While overcoming these obstacles requires a concerted effort, doing so can be part of a growth strategy that catapults companies in highly competitive markets. After all, the number of companies that are adopting structured referral programs has been growing over the last few years⁶ – unsurprisingly given a recent study showed 74% of companies concluded leveraging referrals is the least expensive way of acquiring new customers⁷.

Here’s are five steps to overcome the obstacles preventing you from harnessing high impact referral behavior and achieving the benefits of High Impact Referrals.

·       Step 1: Ask your Sales (or Marketing) Department to identify how much revenue your business received over the last 12 months that can be attributed to referrals.

·       Step 2: Ask your Sales (or Marketing) Department to review the profitability of the business that originated through the five to ten referral sources that have brought you the greatest number of opportunities in the last 12 months.

·       Step 3: Along with your Sales (or Marketing) Department leader, speak with the three referral sources who have brought you the most profitable business opportunities to you in the last 12 months so that you can gain an understanding of why they consistently bring you profitable business.

·       Step 4: Assign responsibility for identifying the reasons why referral sources bring you opportunities that are/are not profitable – and why people you thought would be great referral sources are choosing not to refer profitable business.

·       Step 5: Set initial benchmarking referral targets for a sample of your referral sources – just as you would for your sales efforts, your proposal response efforts, and your demand-generation campaigns.

By following these five steps, you can outline personalized action plans that address the strengths and weaknesses of each of your chosen referral sources. In so doing, you will be able to assess the organizations and industries in which your referral sources have the two types of trust they need to bring you profitable business. As a result, you will be able to facilitate, and measure, high impact referral behaviors and achieve the business benefits from leveraging referral sources systematically.

Andrew Brown is the President of Bridgemaker Referral Programs and author of the Amazon #1 Best Seller, “Get Referred: How to Increase Sales Velocity, Volume, and Value.”

You can find out more about Bridgemaker Referral Programs in the Fractional Executives Partner page.

You can reach Andrew at him at GetReferred.Biz.

1 SaaSquatch (2022). Referral Marketing Benchmark Report; HubSpot (2023/2024). State of Marketing & Sales Strategy Report.

2 Heinz Marketing (2020/2023). Pipeline Velocity Research & The State of B2B Referral Marketing; Influitive & IDC (2022). The Power of Social Proximity in B2B Buying.

3 Kumar, V., et al. (Wharton School). Research on Customer Referral Value.

4 Impact.com (2023). The Partnership Economy Report; Referral Rock (2023). Referral Program Benchmark Report.

5 Referral Rock (2023). Referral Program Benchmark Report; Influitive & IDC (2022). Immediate ROI of Referral Marketing.

6 What You Should Know About B2B Referrals. Benchmarking B2B Referral Program Adoption and Results. (Heinz Marketing and Influitive).

7 The State of Referral Marketing in 2017 (Web Profits).