During the Summer of 2019 Impartner, one of the leading Partner Relationship Management vendors, acquired a company called Amplifinity. Amplifinity offers a platform to manage Referral Partner Programs. There’s a view that Referral Partner Programs will become increasingly important to vendors, as they engage more and more businesses in their channel ecosystem who do not want to resell. For many vendors for example, developers and consulting partners are close to the customer and generate sales opportunities, but are unlikely to want to sign up as resellers.
Here we take a closer look at Referral Partner Programs, what flavours they come in, and why they might be right or wrong for your go to market model.
LEAD REFERRAL VERSUS OPPORTUNITY REFERRAL
The classic sales funnel process will manage a customer opportunity through a series of sales opportunity stages. A Marketing Qualified Lead (MQL) is typically the product of a marketing campaign, and will be a contact who has expressed an interest in knowing more. Once a sales person has qualified the MQL and identified that it represents a sales opportunity then it will become a Sales Qualified Lead (SQL). SQL’s usually require BANT qualification, which means that the potential opportunity has known budget (B), the client contact has authority (A), and there is a clear need (N) with a defined timeline (T).
Modern Referral Partner Programs incentivise partners to pass on SQL, not MQL. And this means that a ‘gate’ is needed when a partner refers an opportunity, which allows the vendor to check that the opportunity meets their SQL criteria. Systems like Amplifinity streamline this opportunity submission process, and provide tracking at the back end.
Tracking is important because vendors won’t normally pay a partner for a referral until the deal is closed. Payment is normally as a percentage of the closed deal value. There are normally caps on the potential payment for very large deals.
Modern Referral Partner Programs are not about ‘buying marketing qualified leads’. Plenty of marketing agencies will offer MQL lead generation as a service, and will charge per lead. Here we’re looking at something more sophisticated which rewards hand off of qualified SQL.
THE BENEFITS OF REFERRAL PARTNER PROGRAMS
Why would a vendor offer a Referral Partner Program? There’s no doubt that Referral Partner Programs have become more mainstream with the increased importance of non-resell partners, often referred to as the ‘shadow channel’. These are developers, consultants and services specialists who are close to your customers, who create opportunity for themselves and for your solution, but who do not want to sign up to resell. Impartner tells us that revenue growth of 30% can be driven by these partners if a structured Referral Partner Program is offered.
Referral Partner Programs are now offered as part of the engagement model for large channel partners. Some years back referral programs where associated mostly with employee incentives (pay for a lead) and with ‘lower tier’ partner engagement, a ‘catch all’ to stay relevant with sales agents who did not have the capability to resell. Not the case these days. We see Referral Partner Programs offered as part of sophisticated alliance relationships, and as mainstream partnering tracks in largescale partner programs.
CHALLENGES WITH REFERRAL PARTNER PROGRAMS
The number one challenge with Referral Partner Programs is the commercial model: the fee that you pay the partner for a closed deal as a result of an opportunity referral. It’s all too common that Referral Partner Programs are launched, plenty of partners sign up, but few generate significant numbers of opportunities. Why? It’s simply not worth it. Vendors set the ‘referral fee’ - the payment for a closed deal - as a percentage of revenue. The vendor still has to pay their sales people for closing the deal. And it might be an annuity deal, so it has monthly billing, with no big up front revenue. Employees and sole agents might have been influenced by the offer of a few hundred dollars for a lead referral, but sophisticated channel partners are not. Only larger deals are worth referring, and they are few and far between, so the program gets forgotten.
For this reason the communication and promotional aspects of Referral Partner Programs are often important, to keep the process top of mind.
The number two challenge with Referral Partner Programs is the SQL approval ‘gate’. Many vendors use complex sales pipeline management processes which require extensive information about a customer opportunity before it can be approved as an SQL. The temptation is to apply the same rules to opportunities referred by partners as you use for your direct sales team. And that’s usually a barrier for the partner which reduces program usage.
For this reason many vendors running Referral Partner Programs simplify the initial requirements for opportunity registration submission.
NEXT STEPS
Referral Partner Programs are more mainstream in partner programs than they have ever been, but that doesn’t make them appropriate for all vendors in a call cases. If you’re considering a Referral Partner Program then outside best-practice insight can really avoid the pitfalls.
Take time to challenge the economic model for partners when you set the fee levels, and don’t over-complicate the opportunity registration process.
There are plenty of highly successful Referral Partner Program examples emerging with leading vendors. If it’s done right then it can genuinely impact channel sales.