Are you relying on referral marketing, aka word-of-mouth to grow your business?
As a business owner, happy customers are your secret weapon. Referral marketing is a low-cost (or even no-cost) way to get more business from your existing customers.They can help you sell your product or service, build trust with new leads, open doors to new opportunities, give you meaningful feedback, and point out areas of improvement.
You might think that if you exceed customer expectations, your happy customers will automatically return the favor by singing your praises to their friends—but unfortunately, it doesn’t usually work that way in reality. In fact, according to a study, while 83 percent of customers say they're willing to provide referrals after a positive experience, only 29 percent actually do.
In this guide, we’ll share some ideas and tips you can use to start a customer referral program and different ways you can request customer referrals to win more sales and grow your business.
First, let’s start off with setting up a successful customer referral program.
7 steps to setting up a customer referral program
Step 1: Know what type of referral you’re looking for
There are different levels of referrals. On the most basic level, you might ask a customer to give you the name and email address or phone number of someone who might be interested in doing business with you. This is a fairly low-value referral. The mid-range level referral might be a customer who discusses your business with the potential referral and can attest that he or she is interested in learning more. Finally, the highest level, and most valuable referral is a customer who actually introduces you to the referral or arranges a meeting between the two (or three) of you. Depending on your industry, you might seek one or all of these levels of referrals.
Step 2: Develop a system
The most important step in the referral process is making sure that asking for referrals isn’t just an afterthought, but something that’s built into your sales cycle. For example, you may want to ask for a referral when you are invoicing a customer for completing the job or do it later as part of your post-sale follow-up. When you have a system in place, like Keapyou can create reminders so you never forget to ask your customer for a referral.
Step 3: Time it right
Figure out the best time to ask for a referral and make it part of your sales and customer service process. It’s important to ask for a referral when your customer is feeling positive about your company. If you unwittingly ask a frustrated or angry customer for a referral, your efforts can backfire—so make sure the time is right.
Step 4: Pick a reward for customers that matter
Before you set up your program, you need to understand what motivates your users to give you a referral, and then design your program to provide rewards addressing their motivation. Discount programs are a great way to reward your customers who refer others to you. For example, you can provide a reward simply for giving a referral, like a 15 percent discount off the next purchase for providing a few names and emails, or make it contingent on the referral actually purchasing (a free month’s worth of services if you refer someone who becomes a customer).
Step 5: Create a referral program page
It’s vital that your existing customers, as well as the potential customers they refer, know the benefits of your referral program.
The best way to let your customers know about your program is by creating a page specifically for the referral program. In this page, you can clearly explain the benefits of joining the program.
Step 6: Create customer awareness of the program
You can't get referrals from people who don't know about your referral program. Make sure you’re putting forth the effort to promote your program so all your customers know it exists.
Here are a few ways:
Feature it on your website: Feature your referral program page prominently on your website and marketing channels. Make it visible in your main navigation menu, so it gets the attention it deserves.Capitalize on “happy moments”: In referral programs, a happy moment is when a customer is most likely to give you a referral due to a recent good experience while using your product or service. This could be directly after a purchase, or after they leave a good review. Invite your customers: You can directly invite your existing customers to your referral program emailing your happy customers. They’re the best source of initial referrals because they’re already loyal users of your products or services.
Step 7: Follow up in a timely fashion
The biggest mistake small business owners make with referrals (besides not asking for them) is getting them and then not following up. Build a timeline into your customer referral program so you follow up within two weeks of getting the referral. Otherwise, the prospect could forget about you, could buy what you sell somewhere else or could simply turn from a hot lead into a cold case.
Asking for the referral
After you’ve set up your customer referral program, the next thing you’ll want to do is start asking for referrals.
Let’s be honest, asking a customer for a referral is the business equivalent of asking someone out on a date. It’s high risk, high reward. It’s a little awkward. And it involves two possible answers: yes or no.
The thought of hearing “no” inhibits some business owners and sales teams from asking in the first place. Even worse than the feeling of rejection is the possibility of further alienating a customer who was already dissatisfied with your business. But by not asking for referrals, businesses are leaving opportunities on the table.
To get customer referrals, you have to ask for them. But to prevent getting rejected, you have to ask the right way. Don’t worry, we have some customer referral ideas to share with you. Let’s get started …
Make it easy
Make the referral process easy for your customers by placing a link at the top of your website that says: “Refer a Friend." That link will direct your customers to a landing page where they can quickly enter the referral info. If you’re using marketing automation, you can then automatically send an email to the customer thanking them for their referral while giving them an easy way to refer friends and family. This is also great because you may have prospects who aren’t a good fit for what you do, but they have someone in mind who they could refer over to you. This gives them an easy way to do that.
Tell customers to bring a friend
Bringing a friend is an idea that typically offers a plethora of bargains and discounts to someone for bringing in a new customer and usually a little something-something for the friend, too. Don't just tell a friend, bring them in!
Whatever the promotion includes, be it a discount, a contest entry, a candy bar, whatever, it really seems to work. In fact, people who appreciate shopping together—much like moms, gaggles of teens and people who use the mall as a primo dating spot - probably have a treasure trove of contacts they could introduce to a business if it's worth their time.
Ideas from a couple of business owners
But don’t just take our word for it. We also talked to a couple businesses that rarely hear “no” when they ask for referrals—and have grown substantially as a result. Here’s a look at how they do it.
They ask customers to help other people, not their company
Customers won’t necessarily give referrals to help your company make more money. But they might be inspired to help other people like them.
King LASIK’s request for reviews and referrals speak to helping friends and family members get optimal results from eye surgery. In asking for a referral, Keeping Current Matters asks customers to spread the company’s mission: “to change the way real estate professionals educate and serve their clients.”
Keeping Current Matters CEO Bill Harney says the message of a better-informed community resonates with real estate agents. “The more educated we can make the entire industry, the better it is for every consumer and every agent,” he said. “There’s plenty of business out there to go around. It’s about how can they get a bigger piece of the pie, and if transactions go more smoothly, they can do more transactions.”
They incentivize customers to take action
In giving a referral, customers may want to help your company and help other people, but they also want to help themselves. In a survey by the consultancy Software Advice, 39 percent of people said a financial incentive would make them “much more likely” to refer someone to a brand they love.
Both King LASIK and Keeping Current Matters use rewards to show their appreciation for customers who give referrals. For King LASIK, the incentives grow over time: The company offers a $50 gift card for the first referral, $100 for a second, and a pair of Maui Jim sunglasses for the third.
Keeping Current Matters members receive a free month of membership for every customer who joins using the member’s referral link. Saving the monthly fee of $19.95 is enough to motivate referrals.
Now that you know how to ask, what should you ask for?
Extra credit: 3 more things you should ask for from happy customers
Aside from referrals, here are three more things you can ask your happy customers to give you.
Testimonials from appreciative customers serve as clear social proof on your website, landing pages, and in marketing materials that your solution works. Rather than shouting about how great you are, employing your existing customers to explain the benefits they’ve experienced on your behalf is much more relatable to leads. These stories and words of praise are one of the most compelling signals of trust and can be crucial in convincing skeptics to sign up and give your business a try.
The most effective testimonials, case studies, and customer stories communicate a very clear, significant, positive impact on the metric you aim to help customers improve on. If your solution is designed to help other business owners increase their revenue with your marketing software, highlight testimonials from customers that lean on a specific dollar amount or percentage increases in sales that can be attributed to your solution.
Reach out personally and check in with your customers to start these conversations and land winning testimonials. Ask if they’d like to answer a couple of questions about their experience working with you and get a feel for the impact of your solution. Get real numbers and figures, then inquire about what those changes have meant for their business. Tell an interesting story about what you’ve helped customers achieve.
2. Feedback on new products, services, and features
To stay relevant in today’s competitive landscape, most businesses must continually experiment, adapt, and change—which creates a serious risk of failure when introducing a new offering to the market.
Your happiest customers are your best prospects to test and validate new products, services, or features without investing in fully building them out, rushing to market, and shelling out for an expensive launch. When you consider new ideas, services, or a shift of focus to expand your business, talk your most engaged customers first and get their feedback on whether they’d find it valuable or not.
If you involve those that express interest in your new ideas and get them to try out your proof of concept, they’ll naturally become personally invested in what you’re creating. That will also make them ideal targets for becoming the first paying customers with your new product, service, or feature, which gives you an added measure of social proof before a more public launch as well.
3. Information on what they like about your competitors
Your goal as a business owner is to continue providing valuable solutions for your most loyal customers, which includes keeping a close pulse on what’s happening with other competitors in your industry. It’s not enough to just monitor competitors yourself, though.
The customers you work with are often just as up to date or even more informed than you are when it comes to the advantages and disadvantages, new features and services offered by your competition. Your best customers are likely on the mailing lists of several providers in your industry, being courted with new specials, offers, and marketing messages daily.
If you proactively start a dialogue with your customers around what they like most about competing products or services, it will give you insights about where your business can improve, what might be worth investing more in and how you can better position yourself in the marketplace. To make this conversation most effective, ask your customers if they’ve ever thought about leaving and moving to a competitor. Uncover what they identified as strong value propositions with your competition and ultimately what made them stay. Both answers will be incredibly illuminating.
Creating a referral program is a low budget high-impact marketing strategy for your business. All businesses should use it, no matter how big or small.