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Turbo-Charging Referral Marketing

A trend has emerged recently in business marketing. You might call it referral marketing on steroids. It involves a deliberate, structured program of soliciting and rewarding referrals from current customers.

Referral marketing has long been a mainstay of business marketing. Who is a better source of new prospects than satisfied current customers? As a prospect, a referral is likely to be highly qualified, predisposed to appreciate your product or service and thus easy to convert. The result is an enviably low acquisition cost and a high ROI.

The only problem with referrals has been: how to get more of them? Referrals are so profitable, companies will pounce on any chance to increase their volume.

So along comes the Internet, which, with its viral ability to enable pass-along messaging, has been a boon to referral generation. Business marketers were quick to see the benefit of adding a pass-along request at the bottom of their current-customer e-mails, and of building forms to their Web sites asking for e-mail addresses of “who else should get this white paper.”

Day-to-day referral management can be a pain, so the Internet also has been harnessed to ease the burden of tracking, analysis and follow-up of referral solicitation. A few companies, like Takira and Kefta, arose to help with software tools.

But referral marketing has risen to a new level. Some companies are applying the power of points-based loyalty programs to the task of persuading customers to take an active role in introductions to new prospective buyers.

Consider Stellent, a Minneapolis-based provider of knowledge management software and services. Stellent recently introduced its “Steller Rewards” program, a way for its customers to earn rewards points for testimonials and referrals.

Stellent gives 500 points, for example, if a customer agrees to serve as the subject of an internal case study; 750 points for hosting a site visit by a Stellent prospect to check out how the tools are being used; 1,000 points for participating in a press release; and 2,500 points, plus expenses, for speaking on Stellent’s behalf at an industry event.

The points are redeemable, at a value of $1 per point, toward deductions against the customer’s Stellent bill. This approach neatly sidesteps the perennial problem of points programs: namely, corporate policies limiting the size of gifts. Here, the benefit accrues directly to the company itself.

On the referral front, the Stellent program offers 250 points outright for an introduction to an ordinary prospect, and a 500-point bounty for a “C-level” introduction, meaning a CEO, CIO, CFO or someone similarly titled. But wait, there’s more. If the introduction converts to a sale, that earns another 5,000 points.

One Stellent customer enthusiastic about the program is DoubleClick. Says Susan Sachatello, DoubleClick’s chief marketing officer, “I love this idea. Usually there’s no benefit in helping out a vendor, but for $1,000, we have a different level of motivation.”

With this kind of reaction, it’s no wonder that business marketers are looking at rewards programs for referrals. Sachatello is investigating instituting a similar program for DoubleClick and its customers.

As they evaluate the opportunity, marketers will need to proceed with care. A backlash is possible. In the industry-event arena, for example, any whiff of a paid testimonial is likely to raise serious questions about objectivity.

Dan Goldstein, director of conference program development at the Direct Marketing Association, states flatly that he would reject a speaking proposal if he knew it involved a payment by a vendor to a client. “This practice is not illegal, but it’s not necessarily honest, either. It reeks of a sales pitch. We recognize that companies want to get their names out there, but they have to do it in the right way.” However, Goldstein added, the for-profit conference management community might be more tolerant of the idea than is his organization.

On the other hand, the value of referrals is so high, it behooves business marketers to do everything possible to reward customers for introductions. Give referral awards a look.

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