Marketing is vital to almost any business. It’s your way of attracting new customers and ensuring the loyalty of existing ones. There are many different marketing strategies you can use, and referral programs are one of the most effective.
This article will examine the various steps involved in creating a referral program and why your business might need one. The topics we’ll cover include:
- Definition of a referral program
- How can referral programs can help your business
- How to create a referral program for your business
- How Countingup can help you manage income from referred customers
Definition of a referral program
A referral program is a marketing strategy that relies on your existing customers recommending your business to new customers through word-of-mouth referrals. Instead of writing a review on your company website or completing a feedback form, a referral program has customers tell their friends or family about their good experiences with your business.
Referrals are very common in any business. When you let your friends know about your new business and describe its various positive features, that’s a kind of referral. A referral program is a way of organising and encouraging these referrals in order to attract new customers.
A central feature of most referral programs is the reward that customers receive when they make a referral. This is usually a small discount or voucher of some sort that people can use to buy your products at a reduced price.
How referral programs can help your business
Attracts new customers
Referrals are one of the best ways to attract new customers. Not only are referrals cheap (in fact, they’re often free) they also instill more trust in your business than direct advertising might.
This increased trust comes from the fact that if someone recommends a company without actually being an employee, the recommendation comes off as more genuine and sincere than if it came from the company. This sincerity is attractive to new customers, as it indicates that they don’t have to worry about things going wrong when they interact with a referred business.
Helps measure the success of your business
A business can measure its success with a referral program, as consistent referrals tend to mean you’re doing something right. Even if your referral program is an enormous part of your marketing and you consistently request referrals from customers, you’ll only get them if your business provides a great customer experience.
This means that by tracking the number of referrals your program creates, you can get an idea of how well your business is fulfilling its purpose. For example, if you make a change to your product and the number of referrals increase, you know that the change was a good idea.
Reinforces the loyalty of existing customers
A key part of a referral program is the reward it provides to people who make referrals. This reward tends to be a discount for your products or services. Adding a reward to your program has two benefits: firstly, it encourages referrals by providing a benefit for doing so. Secondly, it
enhances the loyalty of your customers as it shows that you are grateful to them for creating and sending referrals.
How to create a referral program for your business
Identify referral targets
First, it’s a good idea to think of the sort of person that would be convinced by a referral to your business. This is similar to identifying your target market, which is the group of people that may be interested in buying your products.
Identifying referral targets is an important first step because it’s wise to describe to your existing customers the sort of person that might be interested in your business. If your customers send referrals to everyone they know, it’s unlikely that many will be accepted.
Keep track of referrals and new customers
Since referrals can happen naturally, it’s vital that part of your program involves tracking who is making referrals. It’s also important to discover if referrals are the source of any new customers or something else is.
Since there are many different marketing campaigns you could be using, you want to make sure that you can easily measure the success of this particular kind of marketing campaign. Tracking referrals helps with that.
Decide on a delivery method
You need to know exactly how to contact customers to ask for referrals, or your program may not be as successful as you’d like. A good way to pick the best delivery method for your referral program — whether it’s through emails, texts or social media — is to ask yourself a few questions:
- What communications methods do my customers use often?
- What communications methods does my business use already?
- Am I able to use multiple channels of communication for my program?
- Can I use this method to send my referral requests to large groups at the same time?
Decide on a reward
The reward is a crucial feature of a good referral program. Ensure that the reward you offer is enough to encourage referrals, but not so large that it costs your business greatly.
It’s also a good idea to pick a reward that encourages people to spend money on your business again, like a discount code exclusively for your website.