A customer referral program can assist in adhering to one of the fundamental principles of customer success, which is to generate advocates for your business through the utilization of your service.
Referral marketing can be advantageous even for smaller businesses that are not as large as Dropbox, Uber, or Airbnb.
A referral program can bring significant advantages to a small business from the very beginning. In fact, it is considered one of the most efficient methods to convert leads and expand your customer base.
When we mention “referral programs for small businesses,” what specifically do we refer to? We are not referring to punch-card programs or referral cards that are printed for customers to distribute among friends.
We are discussing a formal method for your customers to share information about your business and receive incentives for their actions.
Let’s explore the reasons behind the effectiveness of small business referral programs and how they can benefit your business.
How valuable is a referral?
Customer referrals are of great value because acquiring them does not require significant costs, if any at all. The value of a referral differs depending on the type of business, but it is generally equivalent to the lifetime value of a customer and the cost incurred to acquire that customer. This value can subsequently be utilized to acquire more customers.
What is a referral program?
Referral programs serve as a word-of-mouth marketing strategy aimed at motivating customers to promote your brand. Instead of posting online reviews or filling out customer feedback surveys, these programs allow customers to communicate their brand encounter to partners, colleagues, and friends.
How successful are small business referral programs?
Referral programs are effective because individuals tend to trust recommendations from their friends and family members more than any other source of information. Although online reviews are also sought after, there is a greater inclination to believe a friend’s opinion compared to a review provided by an unfamiliar individual.
Without any prompting, these recommendations can occur, making them difficult to regulate. Therefore, why not establish an official referral program that provides your customers with a simpler means to share and also compensates them as a result?
A referral program simplifies the entire process, offers customers multiple options to refer others, and can automatically distribute rewards when a referral results in a sale.
How to Create a Customer Referral Program
1. Start with customer referral templates.
Templates are a great aid in the referral process, whether you work alone as a customer referral machine or as part of a referral team consisting of multiple individuals.
The text can be rephrased as follows: These step-by-step instructions can be customized to align with your brand’s voice and tone, and they can be utilized by any employee within the company who needs them. Please ensure that the information is neither added nor removed while adapting them for your use.
2. Set your goals.
What is the outcome you aim to achieve from this referral program?
Is your focus primarily on growth and revenue when it comes to your goals? Are you interested in incorporating retention into that equation? Does your industry necessitate a significant emphasis on building trust?
Once you have determined your goals and clearly articulated them, the subsequent steps will automatically become apparent.
3. Research how referrals are coming to your business.
To initiate the process, it is advisable to evaluate the sources and methods through which your business receives referrals, or if there are any referrals at all reaching your business.
In this stage, it is important to include individuals from marketing, sales management, and support teams who are accountable for establishing customer relationships. Their traditional approaches in handling referrals need to be evaluated.
By rephrasing the text while maintaining the same meaning, you will be able to understand your current position.
In terms of monitoring and managing onboarding programs, it is important to understand the value of an existing customer. To reach a point of breaking even, a certain number of referrals is required.
4. Determine what a ‘Good Fit’ customer is for your company.
Before instructing customers to search for referrals, it is essential to first determine the characteristics of an ideal customer.
In order to ensure that the customers you already have refer potential customers who will make actual purchases from your business, rather than simply providing names to receive the program’s reward, it is important to think in a systematic manner.
Place these descriptions right at the forefront of your customer referral program.
5. List your possible referral sources.
We will refer to these supporters as advocates, and they can be individuals whom you are currently or previously connected to.
Start by creating a list which should encompass various individuals and groups such as existing customers, former customers, potential customers who have not made a purchase yet, influential figures in the industry, and your suppliers and partners.
By thinking step by step, you can rephrase the given text while preserving the same meaning, without introducing new information or omitting any existing information. Following this approach will provide you with a strong basis to commence with.
6. Make a plan to reach out.
Next, refine the list of advocates and sources to only include “inner circle” contacts.
These individuals are aware of the worth of your business and would recommend you without any external motivation. Discovering your close-knit group cannot be mechanized; you will gain greater advantages by manually selecting and categorizing these contacts.
7. Identify your incentives.
There are two choices available for a referral program: a program with incentives and a program without incentives.
During this stage, you should categorize your contacts based on their levels and determine which offers are suitable for each group.
Ensure that you consider each step thoroughly and rephrase the given text without altering the meaning. Additionally, remember to prioritize the referrer’s benefit, ensuring they receive something advantageous from the agreement.
8. Create resources to alert your customers.
After establishing a referral program, develop resources that you believe will be effective and inform your customers. Afterwards, engage in thorough promotion.
It is important to think in a step-by-step manner and consider different approaches for promoting the program, apart from relying solely on a time-limited email campaign to remind customers about its existence.
9. Say “Thank You.”
Express your gratitude to the person who referred you for their assistance (incentives can be effective here, but also consider acknowledging their specific contribution) and express appreciation to the person who was referred for joining.
Once you have thought through each step, proceed to start working as you have customers who need to be satisfied.
10. Follow up on your referrals quickly.
Once you have successfully acquired a reliable lead, ensure that you promptly seize the opportunity.
If you let your referrals sit around for too long, there’s a chance you could miss out on securing these new customers.
Even though your customer may have recommended this individual to your business, it is possible that they have also recommended them to other companies.
In addition, you are unaware of the extent of research conducted by the potential customer and may need to convince them to choose your company instead of a competitor they have been contemplating for a while.
If you can make your impression sooner, you’ll be more likely to close the deal at the end of the day.
Summary
Small business referral programs have been shown to be an effective method of encouraging customers to share word-of-mouth recommendations with others. This type of promotional strategy is also more cost-effective compared to other marketing endeavors.
In general, implementing a customer referral program can effectively help in retaining customers and encouraging word-of-mouth marketing. By generating supporters for your company, you ensure a continuous momentum.
