Referral programs are one of the most effective ways to increase revenue for your business. This article is a guide outlining some simple strategies that you can use to get more referrals and grow your customer base.
Referral programs can be very beneficial for many businesses, but it all depends on how they are implemented.
In this blog post we will outline specific tactics that have shown success in generating more referrals over time, and it’s easy to see why many businesses choose this method. So this article is aims to explore this often under utilised method of generating revenues
The key things we will look at are
- The benefits of a referral program include:
- What to do before launching a referral programme
- Common types of referral programs to use
- How to maximise a referral programme once launched
The Benefits of a referral program
- Increase in sales – Companies that implement referral programs are able to acquire new customers and increase overall sales while simultaneously helping people earn rewards. Customers also tend to be more loyal because they feel valued by the business.
- Decrease in costs associated with marketing – Employing a referral program in order to get new customers can help businesses reach a greater number of people without having to spend more money on an advertising campaign.
- Increased social media presence – Businesses that have referral programs are also better able to increase their social media marketing, especially if they employ one of the three types of programs listed above. Customers who participate are likely to talk about their experience, presenting a good opportunity for the business to utilize social media.
- More customers are reached – Businesses that launch referral programs gain an advantage in reaching more customers than those who do not. In fact, businesses that have referral programs are able to generate new leads even if they already have established marketing channels in place.
- Improve the public image of a company – When there are more people talking about a business, it becomes seen as valuable. In fact, according to Time Magazine, “referral programs increase favorability ratings by 30% and decrease criticism by 10%.”
What To Do Before Launching A Referral Program
- Determine the value of a customer – Companies that want to launch their own referral program need to figure out how much they are worth. This is important in helping them implement pricing for these types of programs, including what type(s) of rewards/incentives to offer.
- Set a monetary goal – After determining the value of a customer and what incentives to offer, businesses should set a monetary goal. This will help them understand how much they need to spend in order to reach their desired amount of new customers/referrals.
- Determine your budget – Once the business has decided on what type(s) of incentives they are going to provide, they need to figure out how much money they are going to allocate for these programs. Depending on what the company wants their incentives to be, this could involve paying people directly or giving them discounts/credits that they can use in the future.
- Decide on a referral program type – There are different types of rewards that businesses can offer, and they need to choose one that will work best for them.
The Common Types of referral programmes
Referral program type 1 – Rewards
The business offers a reward to someone who refers someone else to them, such as cash. Businesses usually offer this type of reward to customers that have purchased from them already and are willing to share their experiences with the business. The award is based on how many people they refer, so businesses try to encourage customers to send them more leads.
– Benefits of this type of program:
– Easy to implement – As long as the business doesn’t have to spend a lot of money in order to get the word out about their program, they can get started right away.
Referral program type 2 – Benefits
Businesses that want to add a little loyalty to their referral programs can offer benefits instead of a monetary or product reward. Benefits could include free shipping, an extra year added onto a warranty, or gaining special access for non-customers. Benefits often work well because they are not figured into the initial purchase, so customers can see the value of receiving them.
– Benefits of this type of program:
– Easy to implement – Benefits are sometimes easier to offer than a monetary reward, particularly if the business already has special offers in place for their customers.
Referral program type 3 – Random Rewards
Businesses don’t always need to make their referral programs predictable. There is an advantage to offering both monetary and product rewards, but businesses can also consider offering a random reward. This involves setting up the program so that it is not entirely clear when a reward/incentive will be sent, or to which customers specifically.
– Benefits of this type of program:
– Will be noticed – There are different ways that a company can make their referral program more noticeable, including offering premiums when customers make referrals. Referral programs don’t need to be static, but they can also be a part of established special offers from the business.
– Benefits are not predictable – Not everyone is looking for a certain type of reward in order to refer people to businesses or brands that
How to maximise a referral programme once launched
Offer a signup process
Potential referrers will not participate in the program if they don’t know what is expected of them or how to do it. The business needs to create a signup process that is easy for customers and work with influencers in order to spread this information throughout their platform.
Provide customer support
Businesses should make sure that referrers can contact customer service whenever they want/need to. Their goal is for these people to be happy with their referral program and want to spread the information about it, so they need to address any potential problems that could arise promptly.
Companies should reevaluate their programs on a regular basis in order to see if they are still accomplishing what they set out to do. There could be certain areas that they want to improve, such as adding more incentives or changing the way their referral program works.
Measure your results
Referral programs are effective when businesses can measure their results and track them over time. Businesses should use analytics to help them see what is working well for them and where they need to make improvements with their new customer referrals.
* List of the top five companies that use referral marketing [to read as a knowledge piece, not to be copied verbatim] : 1. Airbnb 2. Uber 3. Amazon 4. Dropbox 5. Netflix
- A referred customer is 2-10x more valuable than a new customer – Word-of-mouth marketing has become one of the most effective ways to get new customers. An article by Social Media Examiner reports that 91% of consumers trust recommendations from friends and family over any other form of advertising.
- It’s scalable – Businesses can make limited-time offers to get new customers quickly. They can also create campaigns that generate referrals on their own and reach people who wouldn’t normally hear about them.
- It’s less expensive than other marketing channels – Referrals are very cost-effective, since they don’t need ad dollars or a lot of resources to operate. Businesses just have to come up with ideas and implement them, which they can do without spending a lot of time or money.
If you are looking for more customers, it may be time to consider offering a referral program. Referral programs can help your company gain exposure and grow exponentially by rewarding current customers who refer others to the business. You might wonder why this is so valuable when there are other ways of advertising or marketing that cost less money than an ongoing program like a referral system. The answer lies in the psychology behind how people think about their own networks. Generally speaking, they do not want to feel as if they’re promoting something because someone else told them but rather from personal experience and benefits received themselves which is what makes referrals so powerful!