We all love the experience of having a customer recommend our services or products to their friends or family. Even better is when those recommendations turn into new customers. In today’s marketing landscape, referral programs are an essential element of a well-balanced marketing strategy, to both acquire new customers, and reward those who are helping boost the business.
Did you know that 94% of customers trust referrals from their friends and family? This means referral and word of mouth marketing can be tremendous opportunities for your business. Let’s explore the power of referral programs and help you determine if they are a good fit for your company.
First, it’s important to know that referral programs come in different shapes and sizes including:
Customer referral programs (which we were alluding to above) in which the customers are the ones referring your company to their friends, family, and co-workers, often in exchange for a reward or other perk.
Affiliate referral programs in which another, aligned business helps to sell your products or services to their audience, and in return, they receive a portion of the sale.
Additionally, we’re seeing a rising trend on social media in which influencers online are sharing their favorite products and services and thus generating referrals for a company, either for a reward or just because. (Learn more about influencer marketing.)
When it comes to the key benefits of executing a referral program, it’s really about the trust and the reach.
Building trust with a company can take years in some cases. This is why many big brands have a long-term lead nurturing process so that a lead can slowly build trust with the brand and eventually, hopefully, make a purchase. It’s a different story when it comes to referrals though. Hearing positive feedback about a particular product or service from someone you trust automatically builds trust with the company they are recommending, no nurturing required.
Additionally, when it comes to the reach of your company, implementing a referral program can grow your reach exponentially. You have to think of each customer or affiliate as being connected to his or her own network. Behind each referrer stands hundreds of potential new customers. Throw in a perk or incentive, and you can see just how quickly referral marketing can snowball.
Think you’re ready to set up a referral program for your business? There are a few tips to keep in mind if this is new territory.
Tip 1: Choose the right incentives
There are different rewards and perks that you can offer your customers or affiliates including:
Non-cash rewards: When a customer or affiliate brings in a new sale, he or she can be rewarded with free product, points to use towards a purchase, or some other non-cash exchange. Dropbox is an excellent example of a company offering a non-cash reward as part of their referral program. For every existing customer who refers a new customer, Dropbox gives both the existing and the new customer extra storage space for their Dropbox account. No cash is exchanged and there is no discount, yet the value feels very high!
Cash rewards: Alternatively, you can offer cash-based rewards like a portion of the sale, gift cards, discounts, or other cash valued incentives that will encourage customers and affiliates to help spread awareness of your brand. For many companies, cash rewards are a big motivator.
Tip 2: Don’t push the sale
Timing is a significant factor in referral programs, and this goes for both you and your referral partners (customers, affiliates, etc.). You do not want to push your products and services onto people and create an awkward exchange or bad taste. It’s important to set the guidelines as to how often customers or affiliates should be promoting, how frequently they should be following up with leads, and any other guidelines that best align to your company’s existing sales process.
Tip 3: Take care of your team
Remember, those who are referring your business are now a part of your team. You want to be sure that the incentives are high quality, and everyone is feeling excited to be an advocate for your brand as this only encourages more referrals. Maybe there are additional bonuses, referral contests, or personalized emails from the company president to keep the energy high and referrals flowing into your doors.
Tip 4: Find a good tracking system
Depending on the size and nature of your company, your referral program will likely be tracked differently. For large companies or multi-faceted affiliate programs, you might want to have an online platform in place that tracks unique links and tags each sale to the referrer. These types of systems often include the functionality to generate discounts, deliver any bonuses, and track all of the sales in one hub. There are dozens of different platforms to help move your referral program forward. Capterra has developed a great list of different platforms including their key features as well as customer reviews.
Alternatively, smaller companies, or simple customer referral programs could be easily tracked through forms on your website that ask the customer who referred them, social media posts where you would tag friends and family to try out a product or service, or the referral can even be collected by phone simply by having a customer service representative ask how they heard about the company. Not every referral program needs to be robust in nature and sometimes, simple is the way to go.
If you’re ready to embark in the world of referral marketing, be sure to reach out to our team of marketing strategists to find the best solution to reach your goals.