The Referral Trap That’s Killing Your B2B Growth

(0:00) James:  every business will plateau if they rely on referrals. 

(00:03) Craig:  you need to grow beyond referrals. Otherwise you do become. a bit of a basket case, 

(00:08) James:  know, ultimately what you what's happening when you're working with referrals is you're being led by the opportunity rather than a strategy. 

(00:14) Craig: it's not a predictable source of opportunity, but you can get more from them when you're more intentional. So welcome to today's episode. We're gonna talk about referrals. think it's fair to say that most companies see referrals as a critical growth driver, but don't have a formal plan in place to make the most of them. And I think there's many good reasons for that, which we're gonna get into today. So we're gonna go through what we consider some of the myths around referrals and some of the truths. really we're gonna focus on how to... help you think this through in terms of where it really fits in your overall growth strategy.

So James, the first perception, the most common perception I think of all of them is that the best referrals come from customers. So what are your thoughts?

(00:54) James: Well, it's certainly true that customers are one of the the primary sources of some of the best referrals, but it's certainly not true that they are the only. So I I I would say that's a lie. Now referrals can come from multiple sources, not just your customers, we're thinking things like partners, peers, different groups that you're in, and and they can all be equally as valid as those that come from your customers. So to say that customers are the best source of referrals in my book is definitely a lie.

(01:23) Craig: I think it really depends on how you define best. Customers that refer you organizations that have been through process with you. they've experienced your service.

They've experienced what you offer and therefore they're probably the best place to vouch for your outcomes. So from that perspective, arguably they could be perceived to be the best, but I think you're only probably going to get a very limited number of referrals over a long period of time from, from customers. So if you're looking for volume. you're more likely to get more referrals from partners and other sources where they're actively talking to other organizations like your customers and they're going to come across more opportunities. So I think that's probably

(02:04) James: Yeah and 

(02:05) Craig:  for me the biggest difference. 

(02:07) James: Yeah, th I mean there's another big difference as well, isn't there? That in in some scenarios, understandably, your customers aren't going to want to refer you. You know, sometimes you're you that customers feel like you're their best kept secret and that you provide them kept competitive advantage. there are there are good reasons why customers are also potentially not the best. and to extend that a little bit further, you know, we mentioned partners for us, for example, HubSpot is one. th they are often better because there's a mutual benefit.

No, for example, HubSpot refer us to one of their customers, we can help them stay with HubSpot for longer. So there's a there's a kind of mutual symbiotic relationship between the two. And that can often then encourage greater conversations, more conversations, and better outcomes as a result.

(02:54) Craig: I think related to that is the other perception that you can build a referral program that gives you consistent leads. And I think a lot of consultants that really focus on providing advice around referral programs. and I think they do overstate what is realistic from, from a referral program. So, things like the and MPS in place that, you know, you push out to customers, you get a rating from one to 10, anyone that suggests a nine or a 10, they're obviously advocates. They're getting a good experience from you. So they're probably going to refer you if the opportunity arises, but I think that that's what. makes scaling a referral program really, really difficult.

(03:36) James : Yeah, they're not going to refer you to someone that they know doesn't have a need for your services. The stars need to align basically, don't they? You they need to be happy with you. You need to prompt a referral from them, which is about all you can do. But they also need to have someone that they're thinking of or they're prompted to think of that could benefit from working with you. So unless that opportunity is there, that all all they can really offer you is a an introduction, which, you know, may or may not go anywhere, but certainly isn't you know, as as high quality or high value to to a business as an an actual referral where there's an opportunity behind it.

(04:09) Craig : Yeah, so I think it's very difficult for you to scale a program. I think you can certainly get more from referrals if you're more intentional and you've got a formal program in place, but they are still very unpredictable because as you say, the stars have got to align. Yes, you've probably got a customer that may be willing to refer you, unless they've got someone in the moment that's really in need of your services, it just isn't going to happen. So know, certain times where you probably better place to ask for them. Maybe at the end of a project where they've, you know, they've actually seen some real value. But even then, unless there's a need, you're just getting, you're just getting introductions. They're very different from an actual formal referral. So I think Whether you can build a referral program that gives you consistent leads, would say absolutely that's a lie. But you can get more from referrals if you're more intentional.

(04:58) James : Mm-hmm. I think that that brings on to the next perception, doesn't it? Which which is the fact that referrals are passive and there's nothing you can do to influence them. Obviously, we've given a big clue in that that section that we've just talked about that there absolutely are things that you can do to influence them. So from my perspective, whilst you can't necessarily always ensure consistency, there is lots you can do to influence the the creation of referrals. and the not necessarily the consistency but the frequency of them.

Now you mentioned one earlier, Craig, around the fact that you could link a direct request for referrals into an MPS process, or you can have a process whereby at the end of every project you ask for a referral. You can incentivise them to a degree, all of those things are are things that organizations in our world, B to B typically, should be doing. But the frequ you know, the the number of customers that we have and that we've kind of interacted with over the years that have a formal referral programme, I think is until we've helped them put one in place, is is been zero. No, it's such a neglected part of sales of marketing in the B2B world, that there's a massive opportunity for it as a result. Now, even things for asking asking asking for things like reviews. Now, the number of B2B organisations that don't ask their clients for reviews p p potentially because it's considered more of a B to B, B to C sorry, strategy is is a bit ridiculous because in a B to B buying process, organ organisations looking to work with you are still looking to go and get some of that proof that you're credible.

And reviews from your customers are one of the best ways to do that. So in in many respects, reviews are referrals too, albeit a little little less indirect. But there is absolutely stuff you can do to influence the generation of referrals. So that one's definitely a lie.

(06:51) Craig : Yeah, I think, there's an awkwardness for some people, for many people that stops them from asking for referrals. It comes, you know, they may be perceived that it comes across as a little bit desperate. maybe like the earlier point, there's a realism that you think, well, I may ask for a referral, but it's probably likely that it's going to be someone that the customer knows right at that point. When I ask, they would directly refer us to, so is it kind of. a wasted effort, is it worth me looking desperate when I'm not really confident much is going to come from it. But I think it's about sowing the seed. So if you, if you put on your customer's radar that you're actively looking for, for referrals, it just may prompt them at the right point to actually do it at the right point. so I think, yeah, it's, it's, can operate on the basis that referrals are passive and most companies do act that way, but I think you can do a lot more. not necessary to make them more predictable or scalable, but you can see it do a lot more to generate more referrals over time.

(07:56) James : you know, we talked earlier about the fact that there's not always going to be an opportunity there at the end of that referral. You know, they're not always gonna be someone that's gonna have someone that they want to introduce to you that has an opportunity. but that's where things like I've just mentioned, reviews, video testimonials, involvement in case studies, another neglected part of the B2B marketing cycle in in my view, are things that you can use as backup. You know, if you can say you're clearly happy with the service that we've delivered with for you. please refer us. Here's some reasons why you might want to do that. But if you don't want to do that, then why not why not complete a video testimonial? And we've used technology such as vocal video, et cetera, to make that process really happen, why not leave us a review? Really useful, particularly for organizations like us, you know, on the HubSpot, but on Google, on Trustpilot, et cetera. and again, if you don't want to do that, would you be willing to take part in a case to do this? You know, there's so many opportunities to effectively sweat your your hard work with a client to get them to that point where they're happy that simply sitting back and waiting for them to refer you on their own on their own kind of will is is a bit ridiculous really when you think about

(09:07) Craig : Hmm. Yeah. Okay. So we'll move on to another very common perception. And I think this is absolutely a nailed on truth. Referrals are the highest quality lead source that you're ever likely to get. And I think that that's absolutely right. There's no question. Any, any survey, any, any study that is done on where companies get their sources of opportunities, you know, referrals are always at the top of the list. but Again, going back to the earlier point, it still means that whilst they're and dad do the best source of leads, people don't really do an awful lot to generate more of them. but what, is it? Yeah.

(09:47) James : Now why is that? Yeah. Why is that from your perspective?

(09:50) Craig : I think it's just the reality of what you're going to get from it and when. I think predictability is essential if you're trying to drive growth, you know, you solely relying on referrals to drive growth, it's very difficult that it's a bit like waiting for a bus that you'll probably get a handful of referrals at a certain point altogether. And then you might be waiting two or three months to get the next one. It's really, really hard to, to really gauge when the next referral is going to come, which is very different to whether the growth strategies, maybe if you're looking at outbound or the more direct routes to market. So, but I think If we look at why referrals are the best source of leads, obviously it's all predicated on trust. You're skipping so many stages in the sales process if you're served up a new prospect that's come to you through a referral source because they're already assuming that they trust the source that has referred you. There's so many hoops you've already run through.

(10:50) James : And you know, obviously we get referrals from our clients, thankfully, and from our partners and groups that we're in. And often those processes are then non competitive, which is the obviously the biggest advantage. Because you know, if if some if if you've got a referral from someone that you trust, it's very, very unlikely that you'd ever go into a process and go, Okay, well, we need two other suppliers to come in and you'd go with them because You know, the best source of trust is that personal referral. And therefore, I think it'd be very hard as someone coming into that process that wasn't referred when a competitor was, to actually win that project. So they're often non competitive as well, which is obviously a massive reason why they're high quality.

(11:31) Craig : And trust is absolutely critical, particularly nowadays, know, buyers have become increasingly skeptical of vendor claims and tired of you know, being bombarded through various different forms of outreach. So I think the first place most buyers will go to is their, their own network to seek out referrals. And, that's pretty commonplace. So, so yeah, I think, without doubt this one referrals being the highest quality of lead source, absolutely nailed on truth.

(12:01) James : So yeah, I think another one of those perceptions is that you don't get to pick the work. And that is absolutely true because you know, ultimately what you what's happening when you're working with referrals is you're being led by the opportunity rather than a strategy. you know, you used to do social media and you did it well for a client before and you don't anymore.

Now, those clients are going to refer you based upon their own experience. So they they're going to tell their friends, colleagues, peers that you're excellent social media. They're going to come to you and go, okay, well, we really need a social strategy putting together. And most organizations, particularly in the early stages, are going to go, absolutely sign me up. regardless of whether that's currently aligned with your strategy or not. and what that leads into is a really difficult kind of position because you end up doing such a broad spectrum of different projects that it's very hard to do them profitably. It's very hard to resource them in the team. It's very hard to have proper processes in place to ensure that you can do them. and you end up with a, you know, ultimately a like a patchwork quilt of different projects that aren't very well aligned with each other.

(13:06) Craig : Yeah, I think in most organisations when they're starting out in their growth journey, referrals are, they're everything. They're the first thing that you rely on through your network, through the people that you've worked with. That's where you get your growth. And if you're tapping up your existing network, you may have worked with some of those people in a previous life.

And they may know you for certain thing, but that may be a little bit different to the actual service you provide as a business. You'll still probably get referrals then from that network, but there might not be in the right shape in terms of what the need is, what the services that they're looking for. And it might not be the right type of client as well. So this is why think many organisations, when they start out and they're relying on referrals, they end up, obviously you're keen to generate revenue in any way.

You can say you'll pretty much take on anything that comes your way. And that's why you particularly end up with different types of clients, different industries, and an array of different services that make it very difficult to standardize and scale. ultimately as you grow, you need to grow beyond referrals. Otherwise you do become. a bit of a basket case,

(14:21) James : Or you've got to have the discipline when a referral comes along that says we want you to do X, Y, and Z, which is something that you you might be able to do but isn't aligned with your strategy to say no. Which is the hardest thing in the world to do, obviously. But no, that's the only other way to combat that challenge.

(14:34) Craig : It is at that growth stage.

(14:35) James : Absolutely.

(14:37) Craig : Yeah, that early stage of growth, then you literally are looking for any type of revenue that you can generate to keep, you know, keep yourself going. But that can mean that you take it on wrong for clients that won't sort of set you up for the longterm, which I think leads us to the third and final perception we're going to talk about, which is that you will ultimately outgrow referrals.

And, again, an absolute truth and we can speak from our own personal experience and from lots of clients that we work with. and I don't think there's a necessary. Obvious plateau that's consistent. Every company is different. think in our world, many agencies tend to plateau from referrals around the million mark, and find it challenging to grow beyond that. but with types of clients that we work with, it can vary from a 5 million pound business to a 30 or 40 million pound business. If those referrals are coming from maybe partners, which is we talked about earlier, probably more consistent and probably greater in volume. We've known clients that have grown to a really big size solely through partner referrals, because maybe they work with a software company where they do the implementations, much like ourselves with HubSpot. And if you're in early with one of those software companies that do well, you're going to be that preferred partner that gets most of the opportunities early on. But if you're not building around that, if you haven't got other growth levers, you haven't got other growth strategies in place, then ultimately, even then you're still going to plateau and then you might be.

(16:11) James : Yeah, but it's understandable, isn't it? You know, it it's it's easy to see why an organization, particularly in that early growth stage, when business is coming in, it's enough business to s you know, to see twenty, thirty, forty, fifty percent growth year on year that they're gonna sit back and think, Okay, well, you know, this this is going well. We don't we we don't necessarily need to have a demand gen program, an SEO program, a really shit hot website and everything else to pump a load of money into because we're getting plenty enough coming in from referrals. the problem is is when when it dries up and you're left with nothing, no foundation to then go and generate your own leads, your own opportunities, that you're then starting from scratch. So you you've then got met potentially what, twelve, eighteen, twenty four months you to to really invest and build your own demand generation programme or you'll your growth strategy more broadly, when you could have been building it even at a lower level, whilst all those referrals are coming in. So you didn't have that cliff edge of, you know, we need to grow twenty percent, but our referrals have plateaued to plateaued to where they are. So I think that's the major problem with that.

(17:19) Craig : Yeah, I think we're talking, you know, from experience with many companies that we work within the IT services space that may, maybe they rely on Microsoft or maybe they rely on SAP or other software companies that, I mean, we've talked, they're probably more the established ones, but there's others that maybe are on that growth trajectory themselves that are fast growing and they have a partner channel. Once they become established, They may be not as favorable as a referral source because they've probably got a lot more partners. They start to look at ways to make more profit because at the early stages, a lot of software companies will try and scale and they aren't profitable. They're almost giving it away so they can get as many users as possible. If you're a partner that starts that journey early on, you're going to get the benefit. But at some point, those software partners We've seen it many, many times. They will always get to the point where they change their partner program. They

(18:24) James : Flip the script, don't they?

(18:26) Craig : ask you to start sourcing opportunities. They change the model. And if you're really reliant on that, that can really catch you out. And we've seen that a few times with clients. So yeah, think no doubt you will outgrow referrals and therefore you do need to have other strings to your bow when it comes to your overall growth strategy.

(18:45) James : But importantly, and a very good way to end a thing is that that doesn't mean that you can't influence them. You know, the the the more proactive a referral program you have in place, the earlier you do that, the longer it'll take for you to plateau from your referrals. You know, that gives you more time to develop a program alongside it. It keeps you going for longer with less investment. And of course we would we would advocate for investing heavily in demand generation from the off. But you know, for those that are at an earlier stage, Investing in your referral strategy will keep you on kind of trajectory for longer,

(19:18) Craig : Yeah, you want to look at them as like a runway. know, referrals are going to give you the ability to take off, but ultimately you need other things that are going to start to come into play to make it, make that sort of journey more seamless so that you don't, as you say, fall off a cliff at a certain point in plateau. Okay, so let's wrap up then. So I think the first key takeaway for me is that your best referral source isn't necessarily your customer. And I think, you know, define best. Are you looking for high quality, trusted sources of opportunity, or are you looking for a volume of opportunities? And I think it really depends on those two things as to what type of referral is best. think for what I've seen over the years, a partner network or other companies that provide complimentary services to you will probably provide more volume of referrals. Whereas customers that have experienced the outcomes that you claim to provide are going to be a better source for providing opportunities where those prospects are going to be more trusting of what you can deliver.

(20:26) James : Hm. Well, a key takeaway from me is is that point around predictability. You know, if you're building a referral program to generate your predictable leads ever every month, you it just doesn't work that way. So it doesn't mean that you shouldn't invest in a referral program, but as we talked about earlier, the stars really do have to align for you to get that kind of nailed on referral with an opportunity behind it. So still do it, but don't rely on it as a as your only source.

(20:54) Craig : Yeah, just to add, think referrals aren't passive. You don't treat them that way. You absolutely can influence them. There's many things as we talked about earlier that can be done to get more from referrals, but I think you just got to caveat that it's not a predictable source of opportunity, but you can get more from them when you're more intentional.

(21:15) James : Hm. Another from me is that despite what we just talked about, referrals are still likely to be your high highest quality source of leads. So for for the reasons we talked about, you know, it it enables you to skip several steps in the sales process because you've got that in in imparted trust from what your partner, your customer, whoever has referred you, enables you to skip that trust building stage in the sales process.

(21:38) Craig : Yep. And you can't choose who you get from a referral perspective. And that may have an influence on how you scale or how restricted you are from scaling. if you're getting a mix of different types of customers, different types of need, and you end up in a situation where you're delivering lots of different types of services to a broad range of different customers. that's going to make it very hard to scale from. you have to be disciplined, you know, in terms of maybe turning down work where it isn't a fit, even though it has been referred to you and you kind of think it's easy, easy revenue to generate, you still have to have that discipline to be more strategic with referrals.

(22:23) James : And last point from me, I think, and a good place to end is that every every business will plateau if they rely on referrals. You know, they will dry up eventually and therefore you really do need to build demand generation and marketing strategies more broadly alongside them to ensure c consistent and long term growth.

(22:42) Craig : Great. Well, if you've enjoyed that episode and got some value from it, then we'd love to see any comments or any likes. And if you really liked it, then we'd love to see you subscribe to our channel.

You can get podcasts on Spotify, Apple, and obviously YouTube. And we've got plenty more content that focuses on B2B growth. So hopefully we'll see you next time. Bye for now.