Building a Referral-Based Sales Funnel

The Achilles heel of many IT service providers is sales and marketing. For quite a while, providers have been able to grow organically through word-of-mouth referrals mostly due to the lack of coordinated marketing efforts in the IT sector. However, as more entrepreneurs enter the market with dedicated marketing staff, getting referrals has become more difficult.

So how does the average managed service provider (MSP) still leverage referrals in a more competitive marketing environment?

Referrals have always worked well for IT service providers because the main qualification is technical prowess—a good technician gets referred in any industry.  When a market matures and attracts non-technicians to the business model, though, things change—and your potential customers get bombarded with materials from providers run by business people, not technicians. We must find a way to supercharge the effectiveness of referral-based sales for the MSP.

Here are three elements to focus on:

1/ Ensure your customers remember to refer you 

Your customers are a wealth of referrals. You just need to get them to share. In the past, this happened organically; today it takes a little more effort. If you want to get customers to refer you more often, you need to stay top of mind. Use newsletters or emails to frequently remind customers of what you do for them, everything you offer, and a call to action to refer you to their peers. You can offer incentives in your call to action—but make sure you are direct—if you want referrals, ask for them, do not hint at it. Other business owners understand you are in business to make money, so you need not to be shy about asking for referrals.

2/ Access the networks of parallel vendors 

Many MSPs have relationships with other vendors that have similar customers to the demographics of your customer. Use joint venture (JV) marketing to access these prospects. There is a price to pay for this, and there may be legal requirements you need to meet in order to share your customer list with a third party, so consult your legal professional when considering JV marketing. The most effective way I have seen this work is when the third-party vendor sends a letter, from you, to their customers. When we did it, the other vendor included a yellow sticky note simply saying they thought the customer might be interested in our services.

3/ Run a referral campaign 

The third option is to run a referral campaign. On a schedule, send out a series of emails asking your customers for referrals. This is different than staying top of mind with customers for when they are asked for an IT service provider (you immediately come to mind). This is a purpose-driven, multi-touch operation to drive referrals. The key components of this type of campaign are:

• Give them a reason to refer you
• Arm them with the information to refer you
• Reward them for referring you

In any marketing effort, it is important to start with why. You want customers to refer you because you want to grow, again do not be bashful about this. A customer who refers a good vendor to their network is delivering value to that network. They are giving access to you, a superior vendor, to the business owners they interact with regularly. Make sure you arm them with information and make sure they know exactly what you do and what you offer. Provide them with business cards or brochures to share. And, lastly, reward them. Gift cards to local coffee shops worked well for me. The more you personalize the reward, the more effective it will be.

These methods should be used consistently to generate a predictable amount of referral-based leads into your sales funnel. Sales funnels only operate effectively when they have a steady flow of prospects, and the only way to achieve that is to plan and execute regularly.

One final thought. Referral-based marketing only works when customers feel safe referring you to their colleagues. If you are not sure about how your customers feel about referring you, your first step should be to ask. There is an effective methodology that I will not go into here except to say that it is called an NPS or Net Promoter Score (if you want to know more, then check out this blog How Net Promoter Score Can Be the Key to Closing the Loop on Churn). There are tools out there to help poll your customers to generate your NPS but it boils down to asking one simple question, “How likely would you be to refer us to a friend or colleague?” If you do not have a positive NPS, spend your money and effort on improving your NPS before starting your referral marketing actions.

Eric Anthony is principal of customer experience at SolarWinds MSP. Before joining SolarWinds, Eric ran his own managed services provider business for over six years.

You can follow Eric on Twitter at @EricAnthonyMSP