Megan Killion explains why MSP referral programs fail: incentives alone don't work. Instead, educate clients on your ideal prospects and pricing so they can actually sell for you. Enablement beats bribes, and referrals close faster than outbound leads.
My good friend Dean over at Well Everywhere, um, he mentioned that I should make a video about my hot take on this, um, which is that when you're building a referral program, it's actually more important to build out enablement than it is to build out incentive. What does that mean? Okay, so when you're building out a referral program, the typical way of doing that is you want your current clients to shout you out to their peers who could benefit from your services. Now, first and foremost, if you're not delivering excellent service, this program is just not going to work regardless of how you incentivize it. But second of all, the, the next piece is that you have to enable them to help you sell your services. If it's already hard for you as an MSP owner, as a person inside of an MSP, to sell your services How can you expect your clients to sell them for you when they don't even understand what you do? It is more important to help your clients understand what makes a good prospect, what those prospects care about, what they should be interested in buying, the benefits that your service provides, and how you price productize that than it is to build a system where you're incentivizing. Do I think that you should incentivize referrals? Yes, actually. I think that pretty much all labor should be paid labor, and even though they're your clients and they love the service that you provide for them, and maybe they're just doing this out of the goodness of their hearts, I still think you should compensate them for the work that they put in in helping you grow your business. That said, I don't think your incentive program should be built like a bribe. It actually decreases referrals if you are providing excellent service, for your clients to feel like they're being bribed by some sort of prize in order to bring you more business, especially when that bribe is insulting. For an example, right, I am a sales and marketing consultant. I bill $500 an hour. I cannot tell you the number of times I've gotten emails from my partners and my vendors Saying like, oh, we'll give you a $15 gift card. Fuck your $15 gift card. That's not the value of my time. You're insulting me. I would rather you just not offer me nothing than give me that $15 gift card. Or that gift card is given but not used to incentivize. What do you mean, Megan? What does it mean when it's given but it's not used to incentivize? Here's an example, okay? We use gift giving in our sales process. So after I meet with somebody, they give me their time for free and they show interest in my services, I send them a gift. I at no point send an email that says, if you meet with me for 15 minutes, I will give you this $25 gift. I say, hey, let's meet because I have something to offer you that's high value. Then we do that and then the gift just comes as a surprise. I love a referral program where what you're giving them in the end is actually a surprise. Like you just give them $100 Amazon gift card when the client signs, not you email them and harass them and tell them they can earn a $100 gift card by bringing you prospects. MSPs, do you know what your average cost of client acquisition is? Do you know what it costs you to get a meeting? Because I can tell you that I know that most lead gen agencies are billing $5,000 a month and sending you 4 or 5 meetings, most of which are not qualified. So you're paying $1,000 a meeting for unqualified meetings. And referrals, they close at an 80-85% rate, and outbound sales closes at a 25% rate. So let's just say that you pay $5,000 a month and you get 2 qualified meetings out of that. It's going to take you 2 months to close something. That means it's costing you $10,000 to close 1 deal. In a good referral program, you can way, way, way decrease that. So don't cheap out and be like, oh, it should be $15, $100, whatever. Actually look at your cost of client acquisition and compensate your referral or put that money into your referral program the same way you would put it into like a lead gen agency, to a marketing agency, to a salesperson. If you know that referrals are the absolute best way to grow your business, that they close faster, that they close at a higher rate, they're easier to sell, you should be reinvesting more money into that program than you are all these other bells and whistles programs that are being sold to you by outside people who don't really understand your business. I'm not saying that that money should necessarily be paid directly to your clients. I don't think it paints a pretty picture for it to be seen as a bribe, but what if you took that money and you put it into educating your clients, helping them to sell, and sort of co-selling with them? I'm almost out of time for a short LinkedIn video, so let me know in the comments if this is something you'd like to hear more about.
