Are You Struggling to Get More Referrals?


According to a study by Christophe Van den Bulte, a marketing professor at The Wharton School of Business, a referred customer is 25% more valuable than a customer that is not referred.

It’s also been proven by research that customers acquired by a referral are more loyal than ones who aren’t.

A sound referral program allows a business to mobilize rapid fans and brand ambassadors and leverage word of mouth to cut marketing costs while maximizing profits. Here are a few surprising stats about referral programs:

3 Surprising Stats About Referral Programs

65% of new business comes from referrals – New York Times

92% of respondents trusted referrals from people they knew – Nielsen

People are 4 times more likely when referred by a friend – Nielsen

The main takeaway here is that having a referral program in place is a great way to generate new business. Stop for a moment and think about how often you buy something because of a rave review by friend or family member. Even knowing that someone you know and trust does business with a particular store or brand can influence you to do the same.

What Is A Referral Program?

A referral program is system that allows a business to leverage word of mouth recommendations from current or past customers to attract more leads and eventually acquire more customers.

It works like this: A customers does business with you, you deliver (or over deliver) on the expected outcome and as a result, customer are delighted with your business. These customers then go on to tell friends and family how great your business is and they come and do business with you because they’ve heard great things.

To reward these customers and show your appreciation, you give an incentive of sorts. The current and referred customers get goodies, you get new business and word of mouth buzz, everybody wins.

Why You Need A Referral Program

If you’re trying to run a successful integrated marketing campaign, a referral program would be a great system to have in place to generate leads and acquire customers on the front end. The benefits of having an effective referral program in place a plenty.

For starters, all your incoming leads are going to be highly targeted. Think about how word of mouth works, we’re all social creature and have a need to communicate with others. We also have a strong desire to look as smart and cool as possible to others.

So part of that is having conversations that are not only relevant, but interesting to the person we’re conversing with. Your customers are going to telling other people who are qualified and very likely to be interested in whatever you offer, not only that but they’ll deliver this information at the right time (when they need a solution to a problem that you are likely to solve).

Now, you have a bunch of highly targeted prospective customers knocking at your door who are not only ready to buy right now, but they are motivated and looking forward to spending money with you because they’ve heard how you deliver results and solved their friends problem.

Since you’ve got customers coming to you, you’ll be saving plenty of money that you were spending on marketing to acquire new leads and customers. In the words of Charlie Sheen, “Winning”.

Again, referral programs are likely the least expensive, and most profitable way to acquire new customers. A referral program creates leverage and minimizes risk because your customers are doing the work of a sales team, bringing you highly targeted and motivated customers to your business.

Elements Of An Effective Referral Program

There are endless options for structuring your referral program. However, the most effective referral programs have certain key elements in common. It doesn’t matter if the referral request is being done in person, online, over the phone, or via direct mail. These are the key pieces to the referral puzzle:

Step 1: Express Your Gratitude To Your Customers

Let your customers and clients know that appreciate their business and that you enjoy having the opportunity to serve them. You want them to feel good about doing business with you, they should feel appreciated.

Step 2: Let Them Know That You Prefer Their Referrals

You want to let your best customers and clients that you enjoy doing business with people just like them. Let them know that there are other people just like them that they associate with who can benefit from doing business with you, just like they have.

Step 3: Tell Them Exactly Who You Want To Do Business With

Paint the picture for your ideal customer/client. Give them as much information as possible; what person or business you prefer, what they do, and where they are. You want to make this crystal clear.

Then, tell them exactly how these people or businesses would benefit from doing business with you. Remind them of the results and (hopefully) pleasant experience they’ve had with you. Let them know that other people they know could have the same experience and they could be at the “elbow” of such transactions.

Step 4: Extend A Risk-Free Offer Or Incentive With No Strings Attached

Remove any barriers, risk, or friction during the exchange. Make it super easy for customers to refer others and equally simple for those being referred to capture value from the exchange. It could be a monetary incentive, or additional product or an improved version of the service you render. The idea here is to always be viewed as a person of value. Build trust and influence by giving as much value as you can without losing money on the transaction.

Just think about how powerful this could be if every person you did business with was exposed to such a referral program, where all parties involved can benefit and receive something of value.

Referral Program Ideas

Now that we discussed the elements of a successful referral program, let’s take a look at some examples of in the wild and give you some concepts to think about and apply to your own referral program. If you want to check out a massive list of different referral programs then check out this list. Below are different types of referral programs. Check them out and see which ideas works best for your business:

Example #1: Referrer Incentive

This is probably the most obvious and simple referral program. In this example, a discount or other form of incentive is offered to a customer who successfully refers a new customer to your business. An incentive could look like 50% off the next purchase, or 20% of the transaction they referred, or even a flat fee like $100.

The most common example of this is what we see with affiliate programs in the internet marketing industry. Internet marketers create information products, then get affiliates to promote the product in exchange for a commission. There are plenty of SaaS companies out there with similar programs as well.

Again, this is very straight-forward. The message is, “bring us a new customers and you’ll get this shiny thing you like..”.

Example #2: Referee Incentive

This type of referral program is slightly different. Here, the person being referred receives the incentive. Your current customers refers a friend and as a result, that friend receives 30% off their purchase. The benefit here is that it makes the person making the referral look good, which is a form of social currency. Since people like to look good to other people, it’s a good motivator for those looking to build social capital.

A cool example here is something I’ve noticed with retail giants like Bloomingdales and Macy’s. Ever heard of “Friends and Family Sales”? It’s basically where the friends and family of an employee can get a discount on purchase during the sale. It’s very popular. Employees get to look like champions because their friends and family are getting deals they wouldn’t get otherwise. Remember what I said about social currency.

Example #3: Customer Clubs

Having a “preferred customer club” is probably one of the best types of referral programs out there. For starters, it makes members feel like insiders and plays on exclusivity, which is another form of social currency. It also allows you to have access to your customers in a very natural and relaxed environment, which will allow you go gain more insight into what they want and need.

Members of the club may receive an incentive, such as a 50% discount or rush delivery. As a result, members will spread the word to friends and family which will attract more members (a.k.a. customers). If you have face-to-face meetings, allow members to bring a friend who will now have insider access. Hopefully you get the idea here.

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