How to Build a Referral Partner Program That Drives Sales

You have loyal customers and you’re starting to see sales come in from their recommendations. A referral partner program takes that a step further: instead of waiting for organic referrals, you build formal relationships with people who actively recommend your business to people they know.

Referral partnerships work because they’re built on trust. Partners only refer people they have real relationships with, which means the leads they send are more qualified and close faster. Here’s how to build a program that makes the most of that.

What is a referral partner?

A referral partner is an individual, or a business, who willingly recommends your brand to the people they know. 

As a close associate of your business, a referral partner will recommend your products or services to people they’ve built relationships with in exchange for rewards.

A partner could be someone at a related but non-competing business who refers their own customers to you, someone who provides a value-added service that complements or an existing B2B customer who refers people at other businesses they’ve built a connection with.

Referral partnerships are a type of channel partnership. (Although the structure of referral partnerships may seem similar to a customer referral program structure, referral partnerships are more formal.)

Like most channel partnerships, referral partnerships typically start with a formalized and detailed agreement with another person or business. That person or business agrees to promote your products or services to potential customers.

Every time the referral partner generates a new sale for your business, they earn a commission – a referral fee – as a reward for the successful referral.

Why referral partnerships drive higher-quality leads

Referral partners already have experience with, or close knowledge of, your product or service. They’re either existing B2B customers turned strong advocates, or people at non-competing businesses who know their own customers could benefit from becoming your clients. Because they know your strengths firsthand, they can authentically communicate your selling points and identify the right people to refer.

Referral partners also only refer people they’ve already built a personal connection with. The referred party trusts the partner’s recommendation, making them more willing to investigate your product or service and ultimately make a purchase.

This pre-existing relationship leads to higher-quality leads who close faster, stay longer, and increase your average customer lifetime value. Even though the lead pool is smaller than what you’d get from affiliates, the quality and trust factor more than make up for it.

Referral partnerships vs. other channel partnerships

How do referral partnerships differ from similar types of channel partnerships? Here’s the lowdown for you to compare and figure out the best partnerships for your business. 

Of course, you can always engage in multiple types of channel partnerships, so don’t be afraid to combine approaches. 

Referral partnerships vs. affiliate partnerships

Affiliate marketing partnerships have a lot in common with referral partnerships because both types of partners help generate sales in exchange for cash commission.

However, affiliate partners are often content creators, such as bloggers or podcasters. Affiliates use their own channels (blogs, websites, or social media profiles) to promote your products or services to their large audiences of followers. 

In most cases, affiliates don’t personally know the members of their audience. So even though affiliate partners may speak to a wider audience than referral partners, they don’t usually have the personal relationships with leads that referral partners have.

Affiliate partners are focused on high-level sharing and casting a wide net, whereas referral partners have a closer-knit relationship with the leads they bring.

Because a referral partnership is relationship based, those partners do a lot more work either in the qualifying of the leads, or the actual selling on your business’ behalf. The volume of leads that referral partners bring in might be less than that of affiliates, but the quality is higher.

In addition, affiliates don’t often have an authentic experience with your brand, or close familiarity with it. This can result in leads that are lower in quality or take longer to close, compared to the potential new customers your referral partners bring in.

Which is best for you?

Are referral partners or affiliate partners a better fit for your business? It depends on your company type, longevity, and situation. Here’s a handy comparison.

Referral partnerships vs. distributors, resellers, and agents

Referral partners aren’t like distributors, wholesalers, or resellers because they don’t purchase quantities of your products to sell as a third party. They’re more similar to agents or brokers, but what sets them apart is that referral partners always build the relationship before the sale, and some have personally used the product themselves.

How to build a referral partner program

Now that you know the basics about referral partners, here’s how to build and maintain a successful referral partner program.

1. Make sure your business is worth referring

Before finding new referral partners, make sure your brand is worth recommending in the first place.

Think about what’s driving word of mouth for your business right now. It usually comes down to four things: your product (does it solve a problem in a way that stands out?), your service (how do you treat people, especially when something goes wrong?), your value (do customers feel like they got more than they paid for?), and your story (what’s the personality or belief system behind the brand?).

You don’t need all four firing. But you need at least one or two generating genuine enthusiasm. Are customers already recommending your brand to their friends and colleagues? Are you consistently earning positive reviews?

If so, you’re ready to move forward with a referral partnership program. But if not, focus on refining your offerings and your customer service first. You’ll get the most out of a referral partnership when your business is one partners are proud to recommend.

2. Look for potential referral partners

How do you build referral partnerships that bring you the best results?

It’s best to consider related but non-competing businesses whom you share an audience with. Which businesses have customers who could benefit from your services, or have products that work with yours to bring muutual value? And do any companies already naturally refer customers to you without the prospect of a reward?

Your best existing customers may also make solid referral partners, especially if they have recommended you to others or left a positive review. But make sure they have a strong network of relationships, especially within your brand’s target audience. 

It’s fine to promote your partner program publicly and have customers apply. But ultimately, you’ll need to vet and handpick the best referral partners. 

3. Reach out with an offer they’ll value

Once you’ve identified your ideal partners, it’s time to reach out to them.

Remember that you’ll first need to provide value to your potential partners before they agree to make referrals. Besides a commission on every successful referral, what’s in it for them?

Identify how you can help contribute to their business or career in return for the referrals. Could you help them accomplish their goals? Provide educational resources? Or even agree to send some referrals their way? Don’t be afraid to ask what would be valuable to them!

This is also the time to set expectations with a written referral partnership agreement. Cover what each party is responsible for, commission terms, how your brand should be represented, and expectations for how they can and cannot promote your product. A clear agreement holds both sides accountable from the start. (For a deeper look at what to include, see our guide on channel partner agreements.)

4. Onboard and train your partners

To help your referral partners be as successful as possible, you need a smooth onboarding process. These first few days or weeks set the tone for everything that follows. Focus on three things:

Your ideal customer. Train partners on key aspects of your buyer persona so they know when someone in their network might be a good fit. Cover demographics, key behaviors, obstacles to purchasing, and (if you’re a B2B) the ideal company profile. Put this in writing so partners can reference it anytime.

Your value proposition. What makes your product attractive to potential clients? Make your selling points clear and well-documented. Consider creating a PDF or video explainer that partners can share directly with their referrals.

Your competitive differentiation. How is your product different from, and better than, competing offerings? Even if partners have done their research, provide a clear list of what sets you apart and how those differences benefit referred leads.

You could deliver this training via webinars, Zoom calls, or a partner portal where partners can progress at their own pace.

5. Give them access to a portal

The easier (and more trackable!) the referral process is, the more success your referral partner program will have in generating leads and sales. 

Because a referral partnership is relationship based, they might not use a link sharing system that often (although it’s still a good practice to give them that option). Even within a partnership platform, they’ll tend to add referrals on their own.

So, it’s vital to give partners access to a portal to add new referrals, track the status of those referrals, see where people are in the sales process. This will give them a very detailed understanding of everything that’s going on with the leads that they referred.

PRM software will help you track sharing and set up a partner portal – more on why this software is so vital below.

6. Incentivize partners for every sale

Every time your referral partners bring in new clients, you should incentivize them with some sort of commission or reward. 

Usually, this commission will be in cash, either as a percentage of each sale or a fixed amount. But you can also incentivize partners with product credits, or with a motivating gift-type of reward that will be useful for their business. 

(If you’re a B2B with a longer sales process, you might also pay partners a smaller commission for qualified leads, and then a larger commission on sales made.)

No matter which reward you choose, it should be attractive and fair to your partners, but also sustainable enough for your business to pay immediately after each sale. 

Another idea is to offer bonuses for referral partners when the lifetime sales they bring exceeds a certain threshold. (This could be a one-time gift or cash reward, or a permanent commission increase.) In addition, consider retention bonuses if a partner’s referral makes a repeat purchase or renews their subscription. 

These articles on channel partner incentives and affiliate commissions may also help you set up the best commissions for referral partners. 

7. Stay in touch and support your partners

Intrinsic incentives are just as vital as commissions. A monthly spotlight on social media or in an email newsletter lets partners know they’re appreciated. You could also create partner-only educational sessions, treat partners to personal dinners, or send heartfelt thank-you notes (especially in print).

Keep an eye out for partners who might need extra support. If someone isn’t clear on your target audience, isn’t sure when to make a referral, or doesn’t know how to communicate your value proposition, they’ll struggle to bring in sales. Reaching out proactively smooths out hiccups and increases the chances of referrals converting.

Regardless of how well a partner is performing, keep the lines of communication open. Make sure partners know how to reach you through multiple channels, and regularly check in to set expectations. They’ll appreciate how much you care.

8. Use PRM software to track and reward referrals

The data and tasks involved in managing a referral partner program can be overwhelming – especially if you work with many partners.

To keep partners happy, you need to reward them as soon as they make a sale. And it’s nearly impossible to manually track the success of every single referral partners.

To start a successful referral partner relationship, consider having PRM software (partner relationship management software) at the ready. 

PRM software makes it much easier for your company to train, track, and manage relationships with your referral partners. It streamlines all the tasks associated with your partnership, which makes it a must for any successful partner program.

Some of the tasks PRM software can assist you with include:

• Onboarding and training partners
• Communicating with partners
• Sharing vital training documents with referral partners
• Sharing information for referral partners to share with their network
• Distributing unique referral links
• Tracking and measuring the success of each partnership in real time
• Allowing partners to keep tabs on the status of their referrals
• Rewarding your referral partners in an efficient manner

Start building your referral partner program

Referral partnerships work because they’re built on something you can’t manufacture: trust between real people. The partners who drive the most value aren’t the ones with the biggest networks. They’re the ones who know your product, believe in it, and have relationships with people who’d benefit from it.

Start with partners who are already recommending you. Give them the tools and information to do it well. And use PRM software to track results so you can see what’s working and double down on it.

Check out how our flexible referral marketing software can help you manage, track, and reward your referral partnerships.