Mid-Missouri Marketing Resource Blog

Why Your Business Should Have a Referral Program

Posted by Rebecca Milner on July 20, 2017 at 9:01 AM

Referral-Programs

It’s a proverb dating back to biblical times: “You must give in order to receive.” And as time has gone by, this principle of reciprocity has proven to remain relevant throughout the centuries. 

This giving-and-receiving relationship has even carried over into the modern-day business world. One of the most effective ways for companies to receive new customers is by offering to give a “reward” to any current customer who refers this new business. These types of referral programs are extremely useful tools for businesses looking for new clientele. If your business does not currently utilize this method of capturing new customers, you are undoubtedly missing a highly profitable opportunity.

Today’s post will explore the specific benefits to referral programs and will introduce you to some practical ideas that your business can begin implementing immediately.

Why Have a Referral Program?

Every current customer is a direct link to a new customer. Once a business fully embraces this mindset, it only makes sense to develop a referral program, and a great one at that!

Here are the top reasons that your business should implement a referral program.

  • Referrals are trusted. The Internet is a huge resource for all sorts of recommendations; however, most people value the personal recommendation of a friend or a family member so much more. There is no close second to a solid referral from a trustworthy friend. This means that when a current customer recommends your business to someone they know, the chances of gaining new customers through these interactions are significantly high.
  • Referrals are exclusive. Coupon offers have their place, but there is nothing overly special about them since they are extended to everyone. In contrast, referrals are earned. Not just everyone can partake in the incentive attached to a referral; therefore, they make people feel special. They invoke a sense of accomplishment in those individuals who understand that they did something to deserve them. These feelings of exclusivity also lead to increased loyalty from these current customers.
  • Referral programs are easy to execute. As the examples to follow will demonstrate, referral programs do not require an intense amount of time or effort on the part of the business. Asking your current customers to refer new business in exchange for an incentive can either be done in person at your business’ location or through social media, email marketing, or some other digital platform. Each of these methods simply requires the diligence and determination to ask for a referral (or two).
  • Referral programs drive repeat purchase behavior. Having some type of consistent referral program in place causes businesses to increase their overall number of repeat customers. This is because customers are loyal when they know that their efforts are noticed and appreciated. The existence of a referral program gives customers some form of an internal drive to see your business succeed.

Referral programs constantly allow businesses new opportunities to “WOW” the friends and family members of current customers, eventually creating more avid fans who will refer others in return. This never-ending cycle could set your business up perfectly for sustained success. 

Practical Ideas For Your Referral Program

We’re going to be honest here: There are some offers that just don’t cut it. For example, offering $5 off of a service that typically costs upwards of $100 is just downright unappealing. When determining what your business is willing to give away, you must put yourself in your customers’ shoes: “Is this offer good enough to make people go out of their way to tell their friends about us?” If it is, get ready for new customers!

If your business wants its customers to feel compelled to act, consider implementing one (or more!) of these ideas for your referral program.

  • Offer a free service. Sure, it can seem intimidating to give a larger ticket item away free of charge, but if your business can afford to test this out, you should! Not only can your business be sure that an offer like this will cause people to act, but it will also cause there to be a positive impression of your business in the community. Allow your current customers the chance to really reap the reward of telling others about you.
  • Create referral contests. If the thought of giving away a free service is a pill too big for your business to currently swallow, there are several other quality referral program options. For example, referral contests are an excellent way to create a friendly competition amongst your current customers. A typical referral contest would go something like this: Every current customer who refers someone new within a certain timeframe will receive $10 off their next service. The person who sends in the most referrals within this given time period will receive $100 off their next service, some type of cash prize, or another enticing incentive. There can even be second and third place prizes awarded to sweeten the offer even more.
  • Utilize user-friendly referral widgets. Let’s face it: When something is easy, it’s more likely to get done. Referral widgets are a dream come true to businesses who want to make referrals as easy as possible for their current customers. These widgets allow current customers to simply input a friend’s or family member’s email into a quick referral form located within your business’ emails or on your company’s website. Your business can then gather these emails and immediately contact these new referrals. These easy-to-use referral widgets can include an incentive offer, but due to their simplistic nature, this is not necessarily required. This article provides illustrative examples of what these referral widgets look like. 
  • Capitalize on events and holidays. In today’s world, most people know that when events and holidays roll around, they can expect sale offers from their favorite businesses. Why not use these opportune times to aim to gather new referrals for your business? For example, run a special referral offer around Christmastime. Tell people that from December 1 – 25, they can receive $25 off any one item for each new customer that they refer to you. This practice can be utilized for any holiday or national (or even local) event.
  • Use social media. Social media is a casual setting, full of millions of people who regularly share beneficial videos, advice, and their own life stories. Most users are usually open and ready to accept helpful tips. This is the perfect environment for your business to extend an offer to any current customer who refers someone else to you. For example, you could create some type of post on your business’ Facebook page, asking your current customers to tag three friends who should “try you out.” You can offer to give a prize away to one person who comments, or even offer something to each person who participates.
  • Offer surprises. Mystery invokes interest. When people hear that referring a new customer to your business could land them a surprise gift, they are likely to test this out in order to find out what the surprise is. It may seem unconventional, but curiosity consistently causes people to act.
  • Incentive ideas. Need a few ideas on what to offer to your current customers who refer someone? Here are a few thoughts, all completely customizable to your business’ needs: cash, store credit, a free month trial, a free product or service, upgrades, gift cards, etc.
  • No incentive required? Above we briefly mentioned that in certain instances, an incentive may not even be necessary to obtain new referrals. People love to look like experts. They love to share their helpful discoveries and life hacks with others. If your business has enhanced the life of your current customers, then these people are most likely ready to tell others about you. Speed up this process by extending to your current customers the opportunity to “gift” something to their friends. For example, offer a code for a free trial that any new, referred customer can use to “test” out your business free of charge.

So, test some of these referral program ideas out! If one works for your business, keep with it. Or, combine a couple of these ideas together for a more integrated approach. Either way, remember this: If your business does not currently utilize referral programs to capture new customers, you are undoubtedly missing a highly profitable opportunity. More often than not, you truly do have to give in order to receive.

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Topics: Marketing Strategy

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