How to Build a Referral Program – Part 1

Many of us get most of our business referrals through word-of-mouth advertising. But what we usually miss is the idea that word-of-mouth advertising isn’t something that always has to happen completely organically. With a little strategy, you can encourage customers and clients to spread the good word about your business.

If you create a successful referral program, you can track brand advocates, incentivize happy customers to promote your product, and increase customer acquisition and retention.

But how do you do this? How do you take an idea like “word of mouth” and turn it into a successful, manageable program that includes dashboards, analytics, and results? This post, will explore how and why you should build a referral program for your business.

The Benefits of a Referral Program

If you are thinking to yourself “I don’t have time to set up a referral program because I need to focus exclusively on leads,” you should start by reading this Nielsen study that demonstrates how referrals and word of mouth is the most trusted form of advertising. And certainly referrals build your leads because you are rewarding people who are helping find leads for you.

What are the specific benefits of a referral program?

• The leads you acquire will trust you more.
• The leads you acquire are more likely to hire you.
• The leads you acquire are more likely to remain loyal customers.
• Loyal customers are more likely to refer you to new leads.

How to Set Up a Referral Program for your Business

The first step in setting up a referral program is to decide on your offer. Referral programs are all about rewarding (giving) in exchange for referrals. You have to come up with an offer that works with your brand. Put yourself in your customer’s shoes. What are they looking for? What kind of incentive will actually motivate them to show off your product to a friend or confidant? Some businesses create contests, while others simply announce that if customers refer a friend, they get a flat payment.

Create a System That Puts Your Customer In Charge

If there’s one thing I’ve learned in my business it’s this – never make things difficult for your customers. Or at the very least – always try your best to make things easy for your customers. That’s also true for referrals. Your goal is to make the process of referring new customers and earning their rewards as easy as possible.

For now, focus on these two concepts to put your customers in charge:

Social Sharing: You want to make sure your referral program is shareable. If you’ve created a substantial incentive for your customers, you’ll give them reason to spread the word. Make sure that your referral tool makes it easy for them to share. Stitch Fix makes it easy for customers to refer their friends by including a social sharing widget right in the dashboard.

Seamless Integration: Don’t make your customer jump through hoops. Even your most loyal customers won’t want to participate if they sign up for your referral program and then find out there are three more steps they have to complete before collecting their referral reward.

Promote Your Program

Unfortunately life and business isn’t really like the movie Field of Dreams. You have to do more than just create a referral program. Like the product itself, you have to get the word out before you can expect anyone to participate. One of the most common ways to do this is through triggered or time-based email campaigns. A few days after someone makes a purchase, you can encourage them to share a referral link to give them and a friend further discounts.

The tools recommended in the next post on referral marketing will feature some ways to do this, including creating contests through social media, posting directly to social media, or creating emails so you can announce to your list that the referral program is in place.

Make sure to integrate your referral program with new purchases of your product or service. I recommend including a mention of the referral program on your post-purchase confirmation page. This is an ideal time to capture your customer when they’re feeling good about their purchase and want to spread the word.