Nobody likes working for free
If you want to make sure that your customers pass your name on to their network, offer them something valuable for their referral.
You can offer up Starbucks, Amazon gift card, Visa gift card, a subscription, or cash. The goal is for you to give something back to your customers for connecting you with warm leads — they deserve it.
You can setup a program that oversees your customer referral incentives by using referral agreements. Referral agreements can help your business continuously generate substantial amounts of new leads by creating a system that rewards influential customers.
What is a referral agreement?
A referral agreement is a contract between a company and an external party. The business agrees to reward the other party in exchange for the successful referral of new leads. Both parties agree on mutual terms for compensation then sign a referral agreement to solidify the deal. This creates an ongoing relationship that benefits both the company and their new partner.
What should a referral agreement include?
When drafting a referral agreement, you’ll want to include the following items:
.1. A header that includes the name of the business and the party involved as well as the date of the agreement.
.2. The relationship between the business and the party. This details that the business is the principal holder of equity, while the party is the external agent.
.3. The qualifications for a new lead. Do they have to convert to customers? Or, can they be potential leads? Customers are not always guaranteed from referral so it’s important to establish what makes a referable lead.
.4. How the external party will be compensated for their efforts. This can be a fixed payment per lead or it could be based on the lead’s quality. In some cases, the external party may not be rewarded until the lead converts.
.5. If there is a payout period or not. If the referral has to convert before payment is issued, be sure to specify how much time will be allotted for the lead to become a customer. If the lead converts during that time, then the external party is compensated for the conversion.
.6. Whether the agreement is exclusive or not. If you don’t want your customers making the same deals with competitors, make sure you clarify that in the agreement.
.7. A confidentiality or privacy statement. This restricts either party from oversharing any sensitive information during the agreement. It also can protect against any intellectual property theft that could potentially occur during exchanges.
When should you use a referral agreement?
Customer referral agreements are typically only used in dealings where significant amounts of money are being exchanged between parties. Having a referral agreement provides security for both sides and ensures the relationship is mutually profitable