High Quality Leads 2: Leads from Referrals

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This is part 2 of a 2 part series on getting High Quality leads, see part 1 here.  In my role as VP of Sales at TradeGecko we found that leads that came from Referrals had higher significantly higher conversion rates. Our B2B SaaS customers at Advocately have echoed the exact same experience.

This is my second article on high quality leads on High Quality Leads that are acquired by your customers promoting your business.  The first being leads from Review Platforms, which can be found here.


Firstly, before we start, let’s get the terminology straight.

Referral Process – The process of getting your customers to recommend new customers

Referrer –  An existing customer who is introducing a new potential customer

Referee – The new potential customer introduced by the existing Customer

Referral – When a referrer introduces a referee

Referral code – Unique code belonging to your customer to indicate who referred who


Why do leads from Referrals have significantly higher conversion rates?


There are two main reasons why leads from Referrals have significantly higher conversion rates.  One is obvious, one is often overlooked.

  1. Obviously, what your customers say about your B2B SaaS product is more compelling to potential customers than what you say about yourself.  Potential customers trust your existing customers more than they trust you.
  2. Your customer knows what your product does, but also what your product does NOT do.

Let’s look at these reasons in a bit more detail.  

Obviously, what your customers say about your B2B SaaS product is more compelling that what you say about yourself.  Potential customers trust your existing customers more than they trust you.

I’m going to breeze through the obvious reason in bullet points:

  • Potential customers (Referees) trust their peers more than they trust vendors.
  • Your customers (referrers) will articulate the relevant benefits the specific referee could get from your product i.e. specific challenges their business / industry faces.  As opposed to website content, which will be for a much broader audience of up to 10s of thousands of visitors per month.
  • Having a friend who knows how to use the product can act as a first point of support.

Your customer knows what your product does, but also what your product does NOT do


To start with an example – let’s say there is a B2B SaaS company that provides an Inventory and Order Management solution.  Their product is perfect for people who manage finished inventory, but does not meet the needs of businesses that manufacture e.g. buying raw materials, managing the process of converting those stock levels to inventory of finished goods, and selling down that inventory.  


  • Do manufacturers have an inventory and order management problem?  Absolutely.
  • Could they potentially find this company and start a free trial Google search, app store, etc.?  Absolutely.
  • Will they convert to a paying customer?  No. Or, if they do convert to paying customers, they will be unhappy and churn – which is even worse.

Now let’s go back to what we said about Referrals – someone who loves your product and uses it every day knows what this company’s product does, but also what it does NOT do.  Someone who uses this product everyday will know that it is not suitable for a manufacturer.  This customer (referrer) will not refer a manufacturer.  Thus, leads from Referrals have a higher conversion rate as the Referees (potential customer introduced by an existing customer) are much more likely to be a fit for your product than other types of leads.

In Fred Reichheld’s book The Ulitmate Question 2.0 (that all B2B SaaS founders should buy) he explains:

‘We also realized that two conditions must satisfied before customers make a personal referral.  They must believe that the company offers superior value in term than an economist would understand: price, features, quality, functionality, ease of use and other such factors.  But they also must feel good about their relationship with the company.  They must believe the company  knows and understands them, values them, listens to them, and shares their principles.  On the first dimension, a company is engaging the customer’s head.  On the second, it is engaging the hear.  Only when both sides of the equation are fulfilled will a customer enthusiastically recommend a company to a friend.  The customer must believe that the friend will get good value-but he or she also must believe that the company will treat the friend right.’

The customer must satisfied both rationally and emotionally that the potential customer they are referring will benefit from the experience.

Measure, Measure, Measure!

It is imperative to measure the full funnel for Referrals.  It is only way you can iterate and optimize to get the best results.  Here is what the full funnel looks like:

  • Number of Promoters you ask for a Referral
  • Number of those Promoters who open the message – whether email or in app
  • Number of those who click to refer on the message
  • Number of Referrals that actually go out
  • Number of Referees that receive the Referrals
  • Number of Referees that click to accept the referral
  • Number of Referees that become leads
  • Number of Referees that become customers
  • Number of Referees that churn
  • NPS of referee
  • Number of Referees that refer
  • Totals
  • CAC of a referral – be sure to include any incentive you provide both customers
  • LTV of a referred customer
  • Average support load of a referral – measured through number of support tickets etc.
  • Virality of a customer
  • Virality of all customers

You also need to measure the conversion rate between each of these stages.

If that’s sounding like a difficult process to automate, measure and optimize – you’re right.  It is one of the main reasons we started Advocately.  You can start a free trial here to see if it works for you and can get you some new customers.  As always, I’m happy for anyone to get in touch with me directly – patrick @advocate.ly

Patrick is the CEO of Advocately, an Advocate Marketing software company.

patrick barnes

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