How to Build An Effective Referral Program For Your Business

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Ralitsa IvanovaPR and Outreach Specialist at Fantastic Services Group

Tuesday, October 12, 2021

It’s been proven many times that customer retention is a lot cheaper and overall better for your business than customer acquisition. If you establish a strong relationship with your clients, they trust you and choose you over and over again. And even better than that, they recommend you to their friends and family.

Article 12 Minutes
How to Build An Effective Referral Program For Your Business

So if your customers need a bit of motivation to spread the word, referral programs are a great way to help them out. No matter how great your advertisements are and how much money you will put into various campaigns, people would always trust other people more than giant billboards around the city. 

In this article, we’ll explore the benefits of creating a referral campaign and how you can make one for your ecommerce business. 

What is a referral program? 

A referral program is a marketing strategy that uses existing customers to promote your business’s product or service, ultimately bringing in new leads. This word-of-mouth tactic encourages those loyal clients to share the experience with your brand with friends, family and colleagues that might also benefit from it. 

It’s a great way to help your sales and marketing teams since they have to work with customers who already know the company and its benefits. On the other hand, those new potential leads are more likely to convert into paying customers since they have a trustworthy source telling them it’s worth it. And in difficult times, nobody wants to take risks with the way they spend their money. 

For example, Fantastic Services Group has created a referral program where their existing clients have a code shared with their friends and family. Customers and potential clients can receive discounts on future services, preferential rates or yearly membership, depending on the campaign.

However, this can only work if the business has a strong connection with the existing clients, which can happen through social media and email marketing. Regular posts, newsletters, emails and overall high-quality content and communication maintain that relationship and show the customers that we genuinely care about them. 

All of these things combined will keep your existing clients happy and push them to recommend your business to their close friends, family, work colleagues and everyone else they know. 

Creating a custom referral program in 8 easy steps 

Since referral programs largely depend on the type of business, there are many different ways to do it. Still, there are specific mandatory steps that apply to every situation. Let’s take a look at the main tactics that can help you get referrals for your business. 

1. Set your goals and KPIs 

You can’t start if you don’t know where you’re going. And if you’ve been in the Marketing, IT and SEO sectors for a while, you know that every successful campaign starts with defining your primary goals

What do you want to achieve from this program? 

There are four main referral campaign goals: 

  • Increase leads and revenue 
  • Get more people to join a membership
  • Promote a new product or service 
  • Increase brand awareness

Once you have that figured out, you can easily continue to the next steps of the process.  

2. Create a buyer persona

You don’t want just any clients - you want those that will genuinely benefit from the services or products you’re offering so that they can become part of the loyal customer base just as the people that recommended your company in the first place. 

That’s why it’s essential to monitor your clients and their behavior and shift your attention towards the people who bring strong potential leads. Nobody wants tons of newsletter sign-ups or new accounts in your system that will never actually purchase anything or take an interest in your business. 

That buyer persona will help your marketing team create a relevant and successful campaign without wasting resources or too much time. 

3. Identify the channels 

Now that you know who your goal customers are, you know where to find them. If you have many active subscribers to a newsletter or a large social media following, take advantage of that successful channel and focus the campaign there. 

None of your research efforts will make sense if you can’t even get to the people you want referrals from. 

It also depends on whether you’re making personal referrals or a whole campaign for a considerable number of clients. For example, if you have a partnership with some influencers or bloggers, you might give them a personal referral code to provide to their followers. In return, they might get a free service or a discount, depending on the number of successful referrals. The success in question is measured according to your KPI’s and goals; for instance, it can be people signing up for a newsletter or purchasing a product. 

If you’re working with only certain people, your campaign is concentrated on them, and you don’t need to promote it through various channels to your “normal” customers. 

In case you’re reaching out to everyone, here’s a list of the most common referral promotion channels: 

  • Text messages 
  • Email campaigns 
  • Newsletters
  • Social media posts 
  • Confirmation emails
  • Banners on the website 
  • Scripts for your sales and customer service teams 
  • CTAs on email signatures
  • Product and service updates
  • Blog posts 
  • Guest posts 

4. Choose a relevant incentive 

Now that you know who your target audience is and where to find them, the next step is choosing the relevant incentive that will motivate your existing customers to promote your business and the potential clients to join. It needs to be relevant to that audience but also financially sustainable. Offering a ton of free services or products is not recommended because the outcome is often people getting the free stuff and never going back. 

You want something that will hook them up and will bring long-term value into their lives. You can try different ones at the same time to see which works best. Later in the article, we’ll go a little more in-depth, talking about various incentives you can offer to get referrals from clients. 

5. Set up a tracking method

The last thing you need to do before you start your campaign and let it out in the world is to decide how you track its success. As mentioned before, most tactics and goals will be specific to your business, but when it comes to tracking, there are three things that you always need to know: 

  1. Who was referred, and who was the person that referred them? 
  2. When did that happen, and through which channel (if you’re using multiple)? 
  3. Did they convert into a paying customer or only went halfway through? 

Questions like this are essential as they will help you better understand how your clients think and what is successful in that niche. For example, if you’re working with influencers and you have one that has 100 successful referrals, then maybe you should pay more attention to that person and make an effort to keep them by your side. 

Tracking the time when the referral happened is crucial as it will tell you whether this is a campaign that works quickly and for a short time or has a prolonged success and needs to be nurtured continuously. 

The last one is obvious. If a customer reaches only halfway, something fundamental is missing - that final push into the bottom of the funnel. It could be the incentive or the product itself, or something entirely different. You can target those people separately to see if you can convert them into clients or send out a survey to ask what changed their minds. 

The easiest way to track all of that data is through a CRM system. If you’re not already using one, you should consider it. 

6. Start contacting 

Finally, you’re ready to start your campaign! Release it through your chosen channels and start tracking the results. If you’re using unique codes with influencers, bloggers or business partners, I recommend going with a completely personalized approach. It can be email or a phone call, with the latter being the most personal one. 

Email also works. Just don’t use a generic template. After all, you need to be in a good relationship with this person and explain the rules of the campaign so they can follow through properly and not promise anything you haven’t agreed upon. 

Remember to follow up but don’t overdo it, so you don’t look too pushy or desperate. This kind of behavior is off-putting for customers. 

7. Track results, make notes and improve

Now you got the ball rolling, and you can start reaping the rewards. One thing that I have found very useful is to set deadlines. It makes it a lot easier to track the results and make changes. 

For example, you can set a campaign with discount referral codes for three months. After the period has ended, check the results, measure the success rate, number of responses and overall whether everything played out to your expectations. If you need to make some changes, implement them in the next campaign for the next three months. The period depends entirely on your needs and resources. 

With every campaign, you should be more successful, and if at one point you decide that it’s just not viable, you can just stop it. 

8. Customer referral campaign ideas 

Discounts for both parties

I will start with this one since it’s the most popular incentive businesses use. You invite people to refer a friend who will get a discount on their first purchase, and the first client will get the same or different percentage on their next one. It’s a simple system that is easy to implement and track since any new clients would have to register with that code to get the discount. 

Credit for future purchases 

Another option similar to discounts is giving them credits they can use in the future. The difference here is that the credit is a fixed amount - $20 or whatever you say; whereas the final amount after the discount depends on the price of the product or service. Make sure to set a minimum; for example, the credit can be applied only on orders above $50. To track this easily and see results right away, also ensure that the new clients register and make an account to use their credit. 

Free products or services 

This is naturally one of the most successful incentives. However, I recommend doing this only when you’re working with a small number of influencers. Give them a specific goal - 50 people booking a service with their code or whatever you think it’s best, and once they complete that goal, they can get a free service or a product. Don’t offer a free item for every single successful referral as it’s not viable. 

You must specify those conditions at the beginning of the campaign to maintain a good relationship with the client and set clear expectations of this collaboration. 

Giveaways or contests 

Create a contest or a giveaway exclusive to people who have successfully referred a certain number of people. For example, if an existing customer has motivated five people to register to your website and make a purchase, then they can enter into a special giveaway or a contest. This way, you don’t have to give a price to every person who uses a referral code but still make them feel a part of something more exclusive and motivate them for some word-of-mouth action. 

Seasonal promotions

Generally, this type of incentive is connected to discounts and credits, but it’s always in a set period of time connected to an event, holiday or season. It’s a great way to monitor success and behavior. For instance, you can create a Christmas campaign where people can refer new clients and get Christmas related promotions. Suppose the customer referral program has been successful. In that case, you can repeat it next year, and you’ll already have an established base of customers that are aware of your conditions and are probably waiting for it. 

Seasonal referral programs are incredibly successful around holidays related to gift-giving, such as Christmas, as I already mentioned, Valentine’s Day and Easter. Of course, you would have to make sure it’s relevant to your business. If you have a gardening company, there’s no point in setting such a program during the winter months - it’s best to do it when the weather is nice, and people are looking to tend to their garden. 

A tiered loyalty program

Here the incentive caters primarily to your existing customers. The more successful referrals they have, the more they level up. It works if you have an established membership or loyalty program that has different levels. For example, one way to get up the ladder is to purchase more products or participate in contests, but with referral programs, you give those loyal customers another way they can do this. 

Still, my advice is to think of something that will benefit the new clients, as well, so they can become as loyal and interested in your business as the people that recommended it to them. 

Conclusion 

Companies need to establish strong relationships with their clients and use them to their advantage. The more people you have onboard, the more you don’t have to worry about brand awareness and promoting your business. If you play your cards right, your clients will do it instead. Think of huge companies like Apple. They don’t need huge marketing campaigns every time a new product launches. They already have an established customer base waiting for that product and are even impatient to try it out and share it with their friends and family. 

Even if you’re not looking to scale on a global level, it’s an excellent tactic to aim high and think of ways to improve that relationship. 

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Ralitsa Ivanova

PR and Outreach Specialist at Fantastic Services Group

www.fantasticservicesgroup.com.au

Ralitsa is a Content Writer, PR specialist, and trainer for Fantastic Services Group, Australia. She is currently doing a Bachelor’s degree in Applied Linguistics and Business Communications, consulting on freelance projects and sharing her experience working in a diverse office environment.

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