How to Set up a Customer Referral Program That Works

Word of mouth remains a valuable marketing tool, so you should learn how to set up a customer referral program that encourages loyal customers to recommend your business.

Studies report that up to 94% of satisfied customers would recommend your business to family, friends, and work contacts. That represents a lot of active promotion and extended reach. Don’t let that potential slip away!

Creating an active, robust referral program turns satisfied customers into amateur sales associates, bringing in new customers for your business at a fraction of the cost of other marketing strategies.

Referral Program Basics

A referral program offers incentives for loyal customers to bring in new business.  Happy customers know what your business offers and can easily demonstrate the benefits of your product or service, making them excellent advocates and walking testimonials to your business’s value.

Additionally, your satisfied customers understand who in their lives would benefit from your product or service, so the leads they bring in tend to be high-value and well-qualified. When the referred customer makes a purchase, the loyal customer receives a referral reward, which incentivizes them to refer again. A good referral program generates a feedback loop as new customers bring in their contacts and receive their rewards.

Starting a referral program produces results, both in the form of increased business and in securing ongoing loyalty and positive opinions from existing customers.

Referral Program Benefits

Using a referral program offers many powerful benefits, such as:

  • Standardizing the referral process sets up a clear and easy-to-follow roadmap that energizes active referrals.
  • Referral programs lead to higher conversion rates. Not only do 90% of consumers trust referrals from family and friends, but studies list referrals as a key motivator in almost half of all purchases.
  • Referred customers also have a 37% higher retention rate, bringing your business lifetime value from repeated patronage.
  • Supporting a robust referral program boosts consumer loyalty and retention by keeping your clients engaged. Your customers get positive feedback and feel stronger connections to your business through referral rewards and acts of appreciation which prove to them the value of the relationship.
  • A customer referral program costs your business very little, and well-managed programs carry proven track records of results.

Guide to Starting a Referral Program

Follow these steps to guide you through the process of how to set up a customer referral program.

Design a Referral Template

Templates provide structure for how to present, collect, and process referrals.

Lay Out Your Goals

Think about what you hope to get and what your measures for success look like.

Plan Your Best Practices by Researching the Path of Previous Referrals

Figuring out the recipe for successful referrals lets you adjust your plans and build from where you stand.

Identify the Referral Program Type That Suits Your Business Best and Incentivizes Your Customers

Fine-tune your program to the nature of your business and your customers and calibrate it to fit your optimal cost/benefit ratio.

Single Out Your Strongest Leads

Identify the customers that value your business the most and that move in the right circles to promote it most effectively. Start planning how to approach and engage these customers in your referral program.

Pinpoint the Platforms That Can Host Your Referral Program and Create Resources to Advertise

Develop a multilevel approach that informs, promotes, and updates customers. Create social posts and share the referral link throughout your web presence.

Also, prepare a system to track referrals, so you can manage your program effectively and take advantage of the valuable data it provides.

Set Standards to Thank Customers for Referring Others

A little bit of appreciation goes a long way! Even when the customer receives a direct benefit by doing so, they deserve to feel valued and respected for their efforts.

Set Up Quick Response

Neglected referrals grow cold and can backfire with poor attention. Be ready to move on referrals and fulfill the program terms swiftly. When people get fast results, they stay engaged to become loyal customers.

Never Stop Improving

Success takes trial and error sometimes, and even the most effective referral program can grow stale. Stay on top of changes in customer needs and values and take advantage of social trends and customer feedback to keep your program relevant and responsive.

Generate Renewed and Continual Interest in your Referral Program

Keep your referral program fresh with contests, fundraisers, social gifting campaigns, seasonal offerings, and customer loyalty incentives. These details take a successful referral program and make it better, avoiding the pitfalls of stagnation and loss of interest.

Referral Programs Work

A comprehensive customer referral program works to retain customers and incentivize word-of-mouth marketing. Forbes rates referral programs as one of the top customer loyalty strategies with the highest return on investment. Use this guide for how to set up a customer referral program to harness the power of word-of-mouth marketing.

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