Small Business Advertising Series Part 3

word of mouth referrals


As a small business owner, manager, or marketer, you have a continuous goal to acquire new customers. In a recent study, Infusionsoft found that 55% of small business owners wanted more information about how to get their customers to refer their friends and 44% wanted help getting repeat business. The question is how?

Customer Referral Marketing is your answer.

Referral marketing campaigns, when well-planned and properly executed, allow you to:

  • Drive significant acquisition and revenue
  • Build stronger customer relationships
  • Gather vital data on your advocates
  • Know who your best customers are
  • Add more value to your customers
  • Focus on high-quality leads

Create a Reward System for Generating Referrals

Your best customers are also your best sales people, so the key to growth with referral marketing is keeping your customers happy. With referrals, you won’t exhaust your marketing budget trying to attract new customers. You will spend less money marketing to existing customers than attracting new ones. Even better,  the Journal of Marketing reported that a referred customer has a 16% to 25% higher life-time value.

How to Start a Referral Program

Make referrals available to everyone on multiple channels so that sharing can be done anywhere, any time. It’s easy to get started. Aside from simply asking for them, here are some clever ways to generate referrals:

  • Make it Easy: Provide tools that streamline the referral process, such as:
    • Referral forms enclosed with invoices
    • Prepaid referral postcards
    • A simple online form
  • Get Digital: Use smartphones, email and social media to your advantage:
    • Send text message referral invites for mobile acquisition
    • Set contests to reward a customer for the most referrals
    • Use hash tag campaigns to track referrals
  • Offer Rewards: Not just contests, general rewards help to motivate people as well:
    • Coupons for various discount percentages; ongoing subscription discounts
    • Promotional gift cards with a value appropriate for your business
    • A free product or service suitable to what you offer

Referral Gift Ideas

Using incentives to get referrals is a nice way to say thank you to your existing customers (the referrer). This is called a single-sided referral campaign. By choosing a double-sided referral program, you can use the campaign to convert the acquired customers (referees) into paying customers easily.

Single-sided Referral Programs

Gifts for referral sources may have incentives such as:

  • Third-party credit
  • In-store credit
  • Future discounts
  • Cash or a rebate

Double-sided Referral Programs

Offer special deals to referred customers so they will be more willing to try your business, but don’t overdo it. When rewarding both the referrer and referee, ideas might include:

  • A free product or service, similar to Dropbox’s offer for 500MB of storage space
  • Discounted add-ons relevant to your product
  • $25, $50, or $100 in-store credit
  • Ongoing subscription discounts

Be creative in your offer. Try to stay away from cash incentives when possible. A University of Chicago study revealed that non-cash incentives are 24% more effective at boosting performance than cash incentives. For more information on incentive values and how-to-execute details, watch this 3-minute video.

If you have trouble deciding on a reward, survey your advocates to ensure you create a reward system that is relevant to their needs. Figure out what your customers want.

See Part 1 of the Small Business Advertising Series

See Part 2 of the Small Business Advertising Series


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