How to Launch a Successful Referral Program for Your Small Business

referral program for small business

If there is any “secret sauce” to hacking your small business growth, it is word-of-mouth aka referral marketing.


No matter what your business is about, you go above and beyond to land that first handful of clients — distribute flyers, send out text messages, set up a business profile on various social media platforms, and of course, ask friends and family to refer your business.


Finally, you start building a client base. But once you have a steady stream of clients to cater to, you don’t have the bandwidth to continue that level of marketing effort you did initially.


Enter referral marketing. While other marketing methods (such as search and social media) are extremely important and should also be continued in the long run, successful word-of-mouth marketing could make all the difference for your business.


Think about it — would you buy a product or service because you came across an ad on social media or because your best friend recommended it to you? Of course, the latter.


In the words of Mark Zuckerberg, "People influence people and there's no stronger influence than a recommendation from a trusted friend. A trustworthy referral influences your target audience more than the most powerful broadcast message. A loyal referral is the Holy Grail of marketing."


In fact, people are four times as likely to purchase from you if a friend referred them. But there's an obvious catch — what if your friend never referred that amazing product to you? Without an incentive, it’s very likely they wouldn’t. And then you may never hear about that brand.


So, you need a referral program. Here’s a step-by-step plan to build an effective referral program for your small business:


Step #1: Ensure Your Customer Experience is Sublime

Before you do anything, make sure your existing customers are delighted in doing business with you. They won’t recommend you if they don’t have an excellent experience with your products or services.


In other words, ensure your business is actually worth recommending if you wish to leverage word-of-mouth. Every part of the customer experience, starting from the product quality to website navigation and customer support, should be sublime.


Check your customer churn rate. If it’s high and you don’t have many loyal customers, then you shouldn’t proceed with the next steps. Work on this step before you even think about a referral program.


Step #2: Decide What Kind of Incentives to Give

In utopia, all your satisfied customers would champion your business even when there’s nothing in it for them. But here on earth, most people need a little extra nudge in the form of incentives.


Think about the best incentive that could motivate them to spread a good word about your business to their friends and family. Some companies offer a flat cashback in exchange for a referral, while others come up with contests that compel customers to compete in bringing more customers for your business.


Moreover, double-sided rewards are one of the most effective types of incentives for your customer referral program. Giants such as Uber, PayPal, Dropbox became giants by implementing this kind of referral program.


Essentially, a double-sided referral program not only rewards the person who successfully refers a new customer but also rewards the invited customer, typically in the form of discounts or cashback.


With the right incentive, not only will you gain a new customer, but your existing customer will be more likely to make more purchases and stick around with your brand. Just make sure to decide an incentive that your customers would actually want and which is cost-effective.


Step #3: Make the Referral Program as Seamless as Possible

Your next major focus should be to make the process of signing up, referring friends, and claiming rewards as easy as possible. After all, what’s the point of creating a referral program if the actual referral process is tedious.


Here are a couple of things to keep in mind to make your referral program buttery smooth:


  • Reduce friction: Fewer the barriers to receiving the reward, the better. Make it as straightforward as possible to receive that cashback, free products, discount, gift card, or what have you.
  • Make it shareable: Your audience is online. Make sure your program can be shared on social media with the click of a button.

Talking about sharing, the next step is to...


Step #4: Design the Delivery

Once you have the referral marketing program ready, it’s time to devise your delivery method. That is, how are you going to let your customers know that you have lucrative incentives in store for them?


There are several ways to go about this, such as:


  • Send an email newsletter to customers, crisply explaining the referral program and boldly highlighting what’s in it for them.
  • Create a landing page with a clear call-to-action.
  • Share the program all over your social media handles.
  • Use a small customer satisfaction survey to initiate a dialogue with them. Doing so will also help you understand your business’s strengths and weaknesses which you should improve on.

Once the word’s out, it’s time to make your life easier and measure the program’s effectiveness...


Step #5: Automate and Enable Analytics

Once everything’s in place, you must try to put as much as you can on autopilot. Because once your referral program starts bearing fruit, you’ll want to scale it and let it thrive without demanding much of your attention. That’s where automation helps.


Consider using a referral program software such as ReferralCandy or Referral Rock to automatically send out emails, create unique advocate codes, and more.


Furthermore, you need to track things like who referred to who, how much those referred customers spent, how many referrals are happening each day, and the overall effectiveness of the program. You’ll also need to see to it that customers aren’t abusing your referral program. And so, make sure to set up analytics for accurate tracking of all these key performance indicators.


Final Words

Follow these steps to launch a powerful referral program for your small business and expand your customer base. Do it well and you’ll quickly go from a small business to a well-known brand, with a loyal fanbase happily advocating your business.


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Tim Ferguson

Tim Ferguson is the Director of SEO at Right Mix Marketing, an SEO-focused link building services agency. His day-to-day role comprises writing & editing content for RMM blog, and helping clients with SEO, link building, guest posts and content marketing. When he's not working, he loves spending time reading all things psychology. You can connect with him on LinkedIn here.

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