Agency Referral Program: An Agency's Friend
There exists a treasure trove of marketing tactics — all of which can be integrated into a business development plan to reach your ideal prospects. For as many tactics as we can think up, each one generally falls into three buckets: lead generation, lead nurturing, and closing the sale. Based on your personality and strengths, each agency owner has go-to tactics to generate leads. Some of you channel your energy at speaking events, and others networking; but many of you focus on something else entirely. Many facets of your marketing toolkit are used deliberately and intentionally to drive new business.
But when I talk to many of you, one problem becomes apparent: agency referrals (which tend to be passive) are driving most of your new business leads.
What is an Agency Referral Program?
An agency referral program is a marketing tactic that encourages you and your colleagues to share new business opportunities. The program is built around the idea that you will provide a financial incentive when someone refers new business. This works vice versa — you will receive a financial incentive when you refer new business to your colleagues. With this type of program, you reward people for referring clients to you. While the reward can vary, it is often easiest to simply provide cash as opposed to a gift or something else.
Develop Referral Partnerships
Let’s say that you’ll be referring business to a potential partner on a regular basis. It could be that they provide a service you know your client wants/needs, or simply something you don’t have the bandwidth to fulfill. In this case, you should create a referral program that allows you to wet your beak whenever you pass business their way. This situation should also be set up in the reverse.
Experience has shown the best course of action is to create a referral system with folks who offer related but not similar services. Ensure that they are not in direct competition with you and have a positive brand image. A recommendation from a trusted brand will improve your brand perception and perceived authority.
As an example, let’s say you sell design services, and you often have clients who need SEO services. In this scenario, you can develop a referral partnership with trusted SEO agencies. When your clients need SEO help, you can refer them to your partners. And when your partners’ clients need design work, they’ll be sent your way in return.
I don’t recommend you develop referral partnerships with clients because it diminishes the value of your services. It is tough to give your client an incentive that makes sense. You can’t provide a financial incentive, because you never want to signal that there are situations where your price can be reduced.
Referral Fee Percentage
I generally see referral fee percentages in the 5–15% range of revenue. What’s more, I’ve seen some folks try to create a referral incentive off profit margin — but that’s an unwelcome invitation for someone to learn too much about the inner workings of your business. Another option to a referral fee percentage is to offer a fixed cash bonus for a referral. If you decide to go the percentage route, you will want to limit the fee to one year of revenue.
Referral Program Metrics
Like your other business development tactics, you want to measure the impact of your referral program efforts. Building such a program moves referrals from a passive activity to an activity that is deliberate and intentional. Tracking the following key metrics will give you a good sense of how impactful your referral system is on driving new business:
Total referrals coming in each month
Increase in monthly referrals (month-over-month)
Total unique referral sources
Increase in monthly referral sources (month-over-month)
Key Takeaway
When cultivating referral sources to drive new business, your efforts should be intentional. If approached correctly, referrals have shown themselves to be a great way to drive new business. Many agencies boast that most of their business comes from referrals. This is not what you want. Referrals are tough to scale, and should simply be viewed as a supplement to your other business development activities — not your only way of generating new business.