In healthcare, referral marketing is a critical tool for organic growth for most providers. Orthopedic surgeons rely on referrals from primary care physicians. Physical therapists rely on referrals from Orthopedic surgeons. So on and so forth. And while most provider organizations dread the referral marketing need, evidence shows that an effective Referral Marketing Strategy can provide a 10-to-1 ROI while driving sustainable growth organically.
At Healthy Insights, we've worked with multiple organizations to design, build and deploy effective referral marketing strategies using data-driven insights at the foundation of those approaches. In doing so, we've learned a thing or two about where and why referral marketing fails. We thought we'd share a few of those reasons here.
Top 5 Reasons that Referral Marketing Strategies Fail
Too Many Targets: By far, the most common reason that referral marketing teams struggle to deliver growth is that they cover too many targets and their territories are too large. Often times, we find that the typical coverage level for a business development professional is 500 to 2,000 physicians. Time is spent heavily on a few key referrals sources while the vast majority of targets get interacted with only one or two times a year. Referral marketing is about repetition and having too many targets means you can't engage with those targets frequently enough.
Lack of a Consistent Process: Closely tied to target size is inconsistencies with process. A clearly defined process lays out the specific expectations around visit types, visit frequencies, movement within the relationship development stages, etc. Not defining a consistent process across the organization leaves each Business Development Professional on their own to design and build their process. (Resulting in targets that don't get much attention).
Not Enough Engagement: Our research shows that in order for a Referral Marketing Strategy to be successful, you need to have at least 7 visits per year per referral target. This means that a referral target should be engaged with at least every six weeks. Any less than that and the impact of business development is no different than pure chance. While most "high potential" referral targets are often interacted with far more than 7 times per year, we often find that up to 25% of the target lists is interacted with less than 3 times per year. Added up, this is a lot of lost productivity within the sales team that could be better served by focusing in on a more targeted list of referrers.
Limited Governance: Another key element that is closely tied to process is governance. This is not just the reporting and KPI dashboards that the team is looking at. Rather, it's the weekly, monthly and quarterly cadence of meetings, education, training and strategy refinement that happens in a targeting strategy. Governance should be closely tied to and reflective of the process you've designed. Without this tie, there is limited reinforcement and ability to improve the capability over time.
Lack of Data-Driven Prioritization: We'd be remised if we left this list without mentioning the use of data to drive prioritization. It's true that data-driven referral targeting is still in its infancy, so many organizations are still working through the best ways to use this data. We believe that data-driven targeting is critical for effective targeting, but it comes behind process and structure. Without those, data is irrelevant. However, with solid processes and structures in place, data does become important. Using insights around referral patterns, taxonomy structure, propensity to refer, etc. can help your Business Development team be more effective and efficient.
A Proven Framework for Referral Marketing Targeting
At Healthy Insights, we focus our referral marketing efforts on helping organizations manage the referral relationship lifecycle. As illustrated below, all targeting goes through a set of lifecycle stages - each with different expectations and strategies to progress. Unlike traditional, funnel-based sales - referral marketing is an ongoing process to build trust and rapport over time. The interactions and strategies you deploy help you progress relationships until you've reached a point where you can slow interactions down and reallocate that time to new referral targets.
Armed with this type of framework, a playbook to outline the key processes and expectations, a governance structure to support daily and weekly activities, and data to help prioritize targets, a Business Development team can be an effective solution for organic growth in healthcare.
If you'd like to learn more or discuss your referral marketing questions, please don't hesitate to reach out.