Referrals — they often make or break a business. That’s why a referral program is vital for those seeking business growth.
While you may be asking customers to recommend you on social media or leave you a review, formalizing your referral program will lead to more consistent results and greater word-of-mouth.
But when is the right time to start a referral program, and how do you create a beneficial one? We’ll start with the basics before we dive into leveraging technology to create a truly standout program.
What Is a Referral Program?
Referral programs work like this: You have a happy customer who loves your products and services. To make them an advocate for your business to their friends, family and colleagues, offer them a reward for bringing in new customers.
By incentivizing word-of-mouth, you can increase your business’s growth exponentially. In fact, referred customers are 4 times more likely to refer more customers to your brand. The growth just keeps on coming!
The problem is, it’s hard to track just how successful your program is. Plus, giving a discount to everyone who makes a purchase might not be good business sense. Knowing when to start a formal referral program is key to taking advantage of more effective word-of-mouth.
When to Start a Referral Program
A great referral program follows the formula. First, identify a common trend among customers who are currently referring their friends and family without rewards. They will form the backbone of your program.
Customers usually refer others to your business for a few reasons: Either because of the value your services provide, the customer service experience or the lack of competitors offering your services.
Quite frankly, it could be a combination of the three, so let’s examine it further.
- Value: If customers view your services as valuable, be sure to keep that high standard going as you implement the referral program. Do your discounted service packages bring in customers? Offer additional products or services in your bundles to referring customers. This will tip others over the edge to ensure they, too, are talking about your business.
- Customer Experience: Connecting with customers in a way that your competition doesn’t will help take your business to the top. Personalized service is often an overlooked facet of a referral program. Consider that customers who are able to refer others to a specific staff member will help create the feeling of being looked after “personally” by your business.
- Lack of Competitors: “We’ve been looking for something like this for a while!” is often a sign that you’ve hit a sweet spot in your area. If so, establishing a loyalty program early can help retain those customers when a competitor does spring up.
Once you’ve identified the key reason customers are referring people to your business, you’re ready to create a “cycle.” This “referral cycle” loops a customer from purchase to referral, and then back to further purchases.
How to Start a Referral Program
- Step 1 — Customer Identification: Which customers are most likely to refer people to your business? The happy ones! Offering a customer referral plan is best done after a completed purchase, and usually only after you know they’ve had a great experience. For example, after a customer has left you a 5-star review.
- Step 2 — Incentive: Looking to get the best response? Make it worth the effort by offering a discount. A flat percentage off a future purchase is simple but be sure you’re keeping track of it (so it can’t be abused). Offers like additional services at no cost, or increased warranties are also a good solution.
- Step 3 — Re-purchase: How does a customer “cash in” their reward? The goal is to make the redeeming process as frictionless as possible so they are excited to work with you in the future and continue the cycle.
Of course, it’s hard to keep track of who has redeemed their rewards in your head, and paper vouchers can easily get lost. Technology can help, and yes, we’ll get to that in just a little bit.
Building a Great Program
Here are a few examples of referral program ideas:
- A salon could offer a special “mani-pedi” session for any customer that books a $150+ service with a friend.
- A roofing business can offer a free inspection for every third referral.
- A heating installation and repair business could offer an additional year extended warranty for customers who refer a friend.
- A landscaping business could offer a free irrigation maintenance service for customers who refer five people.
In these instances, the friend would need to mention the referrer’s name for credit to be given. Keep in mind, like other business owners, you don’t have the time to memorize who referred who.
This is why technology is crucial in keeping referral programs working seamlessly.
Thryv users have the option of creating tags and notes. Monitoring who gave referrals is as simple as attaching a detailed tag to the account when a name is mentioned.
For an example, check out Allen’s referral tags below.
A good Customer Relationship Management (CRM) tool can also identify customers who are ripe for joining a referral program.
Setting up an automated post-service thank you with a promo code is a quick process full of benefits. By creating tags, you can segment customer email lists and create triggers based on past services.
Once created, you’re good to go. Keep in mind, you’ll want to tweak your rewards program to suit evolving customer trends.
Overall, referrals are an undeniable way to grow your business and retain customers. By continuously creating advocates for your company, you will keep the referral cycle spinning.