A few ideas for a good lead referral program:
- Document the referral. Maybe you create an online form for lead submission, or a process whereby the sales person receiving the lead is expected to document the fact that it was a referral.
- You should probably have some kind of requirement about the depth of the referral. It would not “count” to have someone just provide a contact list or a bunch of possible prospects. A lead on which you want to pay a referral fee is usually based on a relationship and some personal history to give the referral credibility with the prospect. In addition, some limited amount of opportunity discovery work should be expected so that the lead is handed off with some information about the value of your offering to the prospect, the nature and size of the opportunity, key influencers for the decision to buy, etc.
- The payout amount should be enough to be worth the effort for the referrer, and also clearly affordable to the company. It could be (1) a flat amount per referral, or (2) a tiered payout scale with larger deals being paid at a higher rate, or (3) a small commission (a percent of the deal value). Something around 5% – 15% of what a regular sales person might earn on the deal is sometimes a reasonable starting place – though this would depend very much on the nature of your own internal comp plans. If the fee needs to be much more than 15%, of “normal” variable pay associated with a sale, you may have to consider reducing the payout to the sales person to help fund the referral fee to make it affordable – and this is certainly not going to help you sales people want to work those referral leads first.
- Only pay for closed deals – no payment just for the referral. You need top quality leads that don’t risk wasting the time of your sales people. If you pay for referrals, you’re likely to get a lot of them. If you pay for referrals that result in closed deals, that’s what you’ll get.
Referrals are vital to many businesses. Setting up a referral incentive can be a great way to reward those who help create real value for the company.
Donya Rose, CSCP, is Managing Principal of The Cygnal Group. She is a recognized expert in sales compensation plan design, regularly speaking at conferences and writing published articles. She serves clients from F500 to growth-stage businesses, and advises WorldatWork on sales compensation hot topics and best practices.