Customer Referral ProgramShould Your Business Offer a Refer-a-Friend Program?

No matter how much you invest in marketing and how good your messaging is, nothing you say will ever be as convincing to prospective customers as hearing from happy customers themselves.

An enthusiastic recommendation from someone who’s like them and has already had direct experience with your company is powerful.

Word-of-mouth or referral marketing isn’t the easiest type of marketing to do. It’s not something you can simply pay for, since happy customers have to be earned.

But if you can find a way to encourage your current customers to help promote your brand and products to other people in your audience – you pretty much hit the marketing jackpot.

What is a Customer Referral Program?

One of the best options you have for looping your customers into your marketing and promotion efforts is with a customer referral program. Customer referral programs encourage and incentivize customers to spread the word of a product or service they already use to their friends, acquaintances and social media networks.

Friends and followers trust that a person they know wouldn’t promote a product unless they believed it was worth it, so they’re more likely to give it a try – especially if their friend’s promotion includes a discount for them as well.

It’s a win-win for all involved. You get a new customer, and both the referrer and person referred get a good deal.

3 Benefits of Starting a Customer Referral Program

Customer referral programs are powerful for a few key reasons.

1. People trust recommendations from friends.

Nielsen research has found that people trust recommendations from friends more than any other source.

That confirms what most of us already intuitively feel. We know our friends have no reason to lead us astray. If they say their experience with a product or company is good, we have no reason to suspect ours will be any different.

2. Referral programs are naturally targeted.

Marketers spend a lot of time trying to figure out how to reach our target audience where they are.

Chances are, a lot of the people in our target audience are hanging out with other people in our target audience. Each new customer your marketing earns you gives you a way in to reaching their contacts, which is likely to include a number of other people with similar likes and interests to them.

3.When referral marketing works, it’s exponential.

This might be the best thing about customer referral programs. All that hard work you did to attract one customer with ads, SEO, and content marketing doesn’t just pay off in them buying the product. When they see that you have a referral program that rewards them for spreading the word, they tell all their friends.

If even just a few of those friends decide to give you a try, love the product, and respond the same way to your referral program, then you have several new customers promoting your product to all their friends. Your reach will grow and grow.

How to Start a Customer Referral Program

In order to get a customer referral program going, there are a few key steps you need to take.

1. Create a plan.

Before moving forward, you need to sit down and work out the basics of how you want your customer referral plan to work.

In this step, consider who your audience is, what their habits are, and what drives them. For instance, you’d be best off considering a different approach to a referral program for middle aged moms who are most likely to make recommendations to friends in person than you would for teenagers that spend a lot of time on social media.

Determine what reward you should offer that you’re confident will incentivize your customers. If you sell the kind of product that inspires a lot of repeat customers, then a discount on a future purchase can benefit both them and you. If you sell the kind of big-ticket item a person’s not likely to buy again for a while, then something like a gift card or a discount at a partner business may make more sense.

In addition to rewarding the customer that sends referrals your way, you should also plan on offering something to incentivize their friends and followers to take the step of signing up. Offer a discount, a longer trial, or something else that makes it a better value for them to sign up through their friend’s referral link.

2. Pick your software.

Setting up and implementing a referral program will be much easier if you invest in the right software for doing so.

Referral software can help you organize and streamline the process of promoting your referral program and providing customers with what they need to participate. Take some time to review your options and get some quotes for those that look like the best fit. How much work you have to put into the process and how good of an experience your customers have will have a lot to do with the type of software you use.

3. Develop all the marketing materials you need.

Like any other marketing campaign, a customer referral campaign will require creating a variety of marketing materials. You’ll need to call in your usual team to design and write emails, landing pages, graphics for the campaign and anything else you’ll need to promote your referral program.

Your program won’t get far unless your customers learn it exists and are convinced it’s worth it to them to get involved. This is the step where you make that happen.

5 Best Practices for Running a Successful Customer Referral Program

First things first, this only works if you have a good product and stellar customer service. Hopefully you already have those things under control.

If you’re providing your customers with the kind of experience they’ll want to share with others, then go a little bit further with these best practices.

1. Promote your referral program to all your customers.

Anyone who buys a product from you has the potential to be a valued member of your referral program. Make sure you take every opportunity you can (without becoming a nuisance) to let your customers know about the program and urge them to get involved.

Rover regularly emails their current sitters urging them to recommend the service to other sitters in exchange for gift cards and/or the ability to be entered into a contest. This periodic reminder, coupled with an attractive incentive, makes current sitters that much more likely to think to mention Rover when they encounter friends likely to be a good fit for the service.

rover customer referral program

2. Promote it on your website.

In addition to emails, hit them with a reminder every time they come to your website. Every time a customer visits the Naturebox website, they see the promise of FREE SNACKS displayed in orange in the top menu. That menu item leads to a page touting their referral program. That means any time someone’s browsing the site hungrily, they get a reminder of how easy it is to save money by looping their friends in on the deal.

nature box refer a friend program

3. Make sure the reward is worth it.

Your referral program isn’t likely to go far if you’re not offering something people will want – on both ends of the deal. Gift cards and credits are a pretty tried and true method – people like free money. But you can find other ways to incentivize people as well. For example, Dropbox offers free storage to people who participate in their referral program.

dropbox refer a friend program

4. Make it easy for them to share.

Many social media plug-ins exist because of one, simple truth. People are more likely to do the thing you want them to (in this case, share their referral link) if you remove all friction and make it totally painless.  To that effect, Rover provides pre-filled copy for email, Twitter, and Facebook that people can use if they don’t want to bother writing their own message.

rover refer a friend program

5. Make it easy for them to claim their reward.

The customers that refer their friends are some of your most valuable customers. You want to keep them happy so they keep spreading the word about you. So don’t make them jump through any hoops to claim the reward they’ve earned. Make it automatic.

When someone comes to you through a customer’s referral link, have it set up so your customer automatically receives the discount, credit, gift card or other reward you’ve promised as soon as possible. If it’s an easy and rewarding experience for them, there’s a good chance they’ll keep it up and send more people your way.

The customers that love you are more valuable to your company than anything else. They can make and break your success. Customer referral programs give you a way to actively nurture those connections and gain new customers at the same time. When done well, they’re beneficial to all involved and can be a boon to both your customer relationships and your bottom line.

Kristen Hicks is an Austin-based freelance content writer and lifelong learner with an ongoing curiosity to learn new things. She uses that curiosity, combined with her experience as a freelance business owner, to write about subjects valuable to small business owners on the HostGator blog. You can find her on Twitter at @atxcopywriter.