Use Referrals To Grow Your Business by Elise Peek
How do you feel when you finally..
…find a product that resolves something you’ve been struggling with for years? If you are anything like me, you want to tell anyone who will listen because you want to save them the agony of wasting money on “those other products” that don’t work! I think it’s no secret word-of-mouth marketing is probably the most cost-effective marketing strategy available. When businesses create opportunities for customers to share this kind of word-of-mouth enthusiasm with friends and family, referrals become a regular part of customer acquisition which can be extremely profitable. Business from referrals convert four times higher than any other kind of marketing channel.
In spite of this amazing opportunity, businesses still want to know whether it’s necessary to create a formal referral program. After all, if you have an outstanding product or service and your business is already exceeding expectations, why should you spend more money on a program?
Today’s referrals happen more often online than in person primarily because that is where we do most of our sharing, within social media communities, messenger apps, and chat rooms.
Customers are regularly using images, videos, and links to offers from businesses to persuade and recommend products and services to their family and friends. Even when customers are talking about your business offline, people are more likely to take action if the process that lives where they are used to taking action on a website, email or social platform.
How can my business encourage online referrals?
One of the most common ways to encourage online referrals is by establishing an incentive program. The Harvard Business Review recently conducted a study to test whether a referral rewards system is a worthy investment. The research team reviewed 10,000 accounts in a large bank over a period of three years and found that customers obtained through referrals are both more loyal and more valuable than any other customers. On average, referred customers generate a life-time value of 16% more profit and a total return of about 60% on its referral reward.
If you do establish an incentive program, you’ll want to consider the following:
Keep it simple and make it easy to sign up. A rewards program doesn’t have to be complicated. An easy way to encourage sign-ups is to create a referral page on your website dedicated to explaining and signing up referrals. Clearly explain the benefit and use a short submission form.
Create a compelling incentive. Most customer programs fail when money and time is put into a customer incentive and the customers don’t actually take action. It is critical to test your incentives. Use deadlines to push customers to take action. Measure which one’s bring in more referrals and use more of those. Survey customers and choose a customer incentive they actually care about. Research from Wharton Business School found that creating an incentive for the receiver increases referrals by 86% primarily because customers making the referrals don’t appear to family and friends as self-serving.
Build a system to market the program using email & social media: Build consistent marketing into your business process. Customers should regularly hear updates. Create vibrant graphics and videos that can be easily shared with a consistent call-to-action. Highlight the benefits and exclusivity of the program and give customers a reason to check back for new incentives that expire.
Approach customers when they are at their happiest. Businesses who approach customers within 24 hours of providing an excellent review or within 24 hours of having a positive experience with a product are more likely to refer customers. To be able to build this into your business, appoint someone to track reviews and customer experience at the early stages. They can use that information to ensure those customers become aware of your incentive program and can easily take action either by email, social media messengers.
Programs that bring in referred customers are cost-effective because they require less marketing efforts and come into the buying decision already knowing what they want because certain aspects of a product or service have been validated by people they trust.
Hi, I’m Elise!
Elise is the Co-Owner & Chief Disruptor for the Digital Disruptors. She is a speaker, trainer, and marketing strategist who specializes in helping small businesses navigate the world of digital marketing. She is also a coffee connoisseur, a lover of automation, and you can find her writing in her blog The Digital Buzzer.