Let’s play a game: “Whose suggestion do you trust the most?”
That paid link at the top of search engine result pages? Your sister? Or that random comment on a YouTube video?
Your sister’s, of course
If she says she ordered a pair of shoes online, and they were the most comfortable she’s ever worn, chances are you’ll take her word for it and give the same site a try.
The YouTube comment?
Still better than a paid link but not nearly as trustworthy and effective as your sister’s suggestion. And that, ladies and gentlemen, is what referral marketing is all about – using actual customer recommendations to increase brand awareness and generate more sales.
It’s an age-old tactic used in almost every industry you can think of because it works — people are much more likely to believe a friend, family member, or even a stranger than they’re likely to trust a paid ad or brand promotion.
What’s Referral Marketing?
Simply put, referral marketing is a marketing tactic where brands get existing customers to refer their products or services to new people, and in return, the referrer gets a reward. That reward is usually a discount, commission, or some other incentive, like cashback.
Referral marketing can take many forms, but at its core, it’s about getting your biggest fans and supporters to put out a positive word about your business and encourage others to try it.
In other words, it’s about turning your customers into your greatest brand advocates.
Does Referral Marketing Work?
The short answer is yes — referral marketing works.
- Research conducted by WOMMA, one offline word-of-mouth recommendation drives at least five times more sales than one paid ad and much more (100 times more) for higher consideration categories such as financial services and insurance.
- Customers acquired through word-of-mouth spend twice more and make two times more referrals than those acquired through other channels.
- Referred leads convert 30% more often and have a 16% higher lifetime value than those acquired through other channels.
Word-of-mouth is the most trusted, powerful, and cost-effective marketing tool.
When customers have a good experience with a brand, their products, or service, they would be happy to — and frequently do — recommend it to their family, friends, and peers.
John Berger, in one of his bestsellers, “Contagious,” identifies six principles of sharing and word-of-mouth:
- Social Currency: Sharing makes us look good or as if we are ‘in the know.’
- Triggers: People share what’s at the top of their minds.
- Emotion: People share things they care about with emotion.
- Public: People imitate what they see those around them do. For example, if someone sees their friends sharing a product or service, they will share it.
- Practicability: People share things that are practically valuable or helpful to others. For example, if a product or service is solving someone’s problem and they are finding value in it, there’s a chance they will share it.
- Stories: People like to share stories, not information or outright messages.
Your referral marketing campaign should hit as many of these principles as possible.
You want to make sure your message is emotionally compelling, has practical value, and is presented in a way that makes it memorable.
Use Referral Marketing to Gain a Competitive Advantage
Numbers don’t lie.
Referral marketing can be a powerful weapon in your arsenal if used correctly.
With the right incentives, customers are more likely to advocate for your products or services by sharing them with their family, friends, and peers.
And since consumers actively seek recommendations and reviews from people they trust when making purchase decisions, referral marketing campaigns can be an excellent way to turn your customers into brand evangelists.
So if you’re looking to boost your marketing efforts, referral marketing is definitely an avenue worth exploring.
How to Create a Customer Referral Program
Now that we know what referral marketing is and why it works, it’s time to look at how to create a customer referral program:
#1. Creating Customer Referral Templates
Whether you’re a one-person customer referral program or have a team of customer service reps working on it, creating customer referral templates can help you start the process.
All you got to do is adjust the voice and tone of your content to match the customer’s needs and preferences, and you’re good to go.
These free customer referral templates can be used to create a bank of:
- Referral follow-up email: Send personalized follow-up emails to customers who have already shared your product or service with their friends.
- Referral Request email: Ask customers to refer your product or service to their family, friends, and peers.
- Referral thank-you email: Show appreciation to customers who refer your product or service.
- Reference requests email: Ask customers to leave a review and highlight their experience with your brand.
- Social copy about your referral program: Craft and share creative social media posts to raise awareness about your referral program.
Here’s an example of a referral request email template:
Hi [Customer’s Name],
We hope you’re enjoying your experience with our products and services. We appreciate your support and are glad you chose to work with us.
As a valued customer, we wanted to let you know about our referral program and how you can help us spread the word.
We’d love it if you could share your experience with friends and family. To make it easy, we’ve created a unique referral link to refer your contacts. Simply forward this link to anyone, and they’ll (or you’ll) get a special discount on their (your) purchase.
If you have any questions or need assistance, please get in touch with us.
Thank you for being part of our product family!
Your Company Name
#2. Set Your Goals
Ask yourself, what do you want to achieve with your referral program?
Do you want more sales? More customers? Higher customer loyalty?
Once you have a clear idea of what goals you’re trying to reach, you can tailor your referral program accordingly.
Does your industry require an exceptional amount of trust? Do customers need to research your product in-depth before buying it?
Answering these questions will help you determine the best incentive structure and ensure the program efficiently achieves the desired results.
#3. Find Out How Referrals Come to Your Business
You want to assess how many referrals your business receives and how they are coming to you.
How did they find out about your business? Is it through word of mouth, social media, or search engines?
Once you have this information, you can tailor your referral program to attract more customers from these channels.
For example, if most of your referrals come from social media, you can create a program that focuses on driving referrals through social media.
It helps to involve all the responsible departments: sales, marketing, and support. Assess how they have traditionally dealt with referrals and how they can be part of the referral program.
You also want to assess the value of an existing customer. What’s their worth? Compare the time you spend onboarding and managing onboarding programs.
How many referrals would you need to break even?
Do the math to see if the cost of running a referral program is worth it for your business.
#4. Create an Incentive Structure
Your referral program should have a clear set of incentives for customers and referrals to increase engagement and encourage more people to join.
You can offer discounts, rewards points, or exclusive products for customers and referrals that sign up.
Don’t forget to create incentives for customers who refer multiple people. It will encourage more referrals and help increase the ROI of your referral program.
We suggest you reward both the referrer and the referee for successful referrals.
We can all learn from Uber Eats. When a customer refers someone, they’re rewarded with a $15 credit, and when the customer signs up, they receive a $20 credit towards their first order.
#5. Determine What a “Good Fit” Customer Looks Like
Not every customer is a good fit for your referral program.
So before you send a referral request, take a few moments to see what makes a customer ideal for the program.
You can use customer satisfaction scores, purchase history, or even demographic data to determine who would make a great customer for your referral program.
You want to ensure the customer you request referrals from is genuinely interested in your product or services.
Write a brief description of what you feel makes a good fit customer. If there’s any criterion you deem necessary, add it to the list.
Remember, this description should also be placed on your referral page, right at the beginning or before a form the customer has to fill out.
For example, if you require that customers make at least two purchases before they can refer a friend, state this clearly.
In other words, give your customer a chance to earn your business’s trust before they can refer anyone. That way, you can be sure that the referrals are genuine and from customers who genuinely love your product.
#6. List All Your Possible Referral Sources
Your referrals are your advocates, and they can be anyone already connected to your business or connected to you in the past.
List everyone from your loyal customers to acquaintances, family, friends, industry leaders, or influencers you have previously connected with.
Don’t forget to include social networks like Facebook and Twitter, blog comment threads, discussion forums, and even email newsletters.
If someone is willing to refer your business, you want to ensure they know about the referral program and how to participate.
#7. Identify the Channels to Host Your Referral Program
Your referral program needs a communication platform to communicate and engage customers.
Choose a channel that best suits your referral program, whether a landing page on your website, a separate website, or through email.
Uber Eats, for instance, uses WhatsApp, text messages, and email to relay their referral program to customers.
Customers can send referral codes to their friends or family members using the platform of their choice.
When a customer refers a customer through any of these platforms, Uber Eats will be notified on their end, and they can track the progress of the referral program.
They can turn to their marketing and sales team to further engage the referred customer when the referral is successful.
Remember, they use discounts to entice customers to refer to their business.
While you don’t have to do the same, providing customers with a way to share your referral program with their circles is always helpful.
#8. Create a Plan to Reach Out
There are two types of referrals:
Organic and Manual.
Organic referrals happen naturally without you having to do anything.
Manual referrals, on the other hand, require you to reach out and ask customers to refer your business.
Organic referrals don’t need to be incentivized. They love your product or service enough to spread the word.
They’re your inner circle of customers, the most loyal and committed members of your customer base.
It’s your job to identify these customers, evaluate their loyalty to your brand and start building a relationship with them.
Remember, this process cannot be automated. You must manually single them out and segment them into a separate groups.
So, how do you ask these customers to join your referral program?
Timing is everything.
You have to identify the most appropriate time to ask them, such as after they have purchased or completed a specific task.
Here’s a simple email template you can use to ask them:
Thanks for always being a loyal customer. We noticed that you recently purchased (product/service).
We value your commitment to our brand, and we’d like to offer you an exclusive opportunity to join our referral program.
We’re offering (a discount/reward) in exchange for referring your friends and family to our product/service.
If you’re interested, please let us know so we can give you all the details.
Thank you for your continued support.
The (Company Name) Team
For Manual Referrals
Manual referrals need to be incentivized.
This means the customer needs to be offered something in exchange for referring your business.
That could be a discount, free product/service, or a reward for their efforts.
Whatever you decide, set expectations with the customer before they start referring your business.
Ensure they know what the program entails and what kind of reward awaits them.
Note: you have to be super-picky with whoever you choose to add to your Referral Program, including those in your inner circle.
Make sure the referral has what it takes to market your business right.
The last thing you want is for your program to be filled with people who don’t have the know-how or motivation to refer.
For your inner circle, you want to make sure you have a stellar, working relationship with them.
The better the relationship, the more likely they will market your business right.
#9. Create Resources to Alert Your Customers
After developing a referral program, create resources that will alert your customers about the program.
These resources can be anything from emails, blog posts, and social media campaigns to posters and flyers.
More importantly, promote these resources across all other channels to ensure everyone is up to speed with the program.
Ensure you have multiple promotion avenues beyond the time-limited offers, so your customers can learn about the referral program.
Here’re some resources you can use to spread the word:
- Social media posts
- Email campaigns
- Flyers & Posters
- Display ads
- Web banners
- Referral cards or eCards
- In-store displays
Once you’ve outlined your referral program, you want to work on the needed resources.
Here are a few resources you might need:
- Email each contract informing them about the referral program
- Craft a message highlighting what types of customers fit the referral program
- Create an FAQ page to answer any questions customers may have about the referral program
- Design a landing page with more details and resources about the referral program
- Write a blog post highlighting the success stories of customers who have used the referral program
- Create a workflow that leads contacts through the referral program and alerts your sales team of when to call
- Set up automated emails to send out when referrals sign up
- Create an online form for customers to fill out when they want to join the referral program
- Scripts that your sales and support team can follow when guiding or explaining the referral program
- A referral kit with case studies, eBooks, videos, and other resources to help customers learn more about the referral program
#10. Set Up Tracking and Measure Results
Once you have your referral program, it’s time to start tracking and measuring the results.
That will ensure you’re not missing any details. It will also help you adjust your program as needed.
Your tracking plan should include the following:
- Who’s referred and by who (customers, influencers, etc.)
- When were the referrals made
- Did the referral convert or not
- How are you going to nurture them or follow up
If you haven’t already created a CRM, then it’s time you did so.
Maintaining customer relationships and keeping track of your referral program is simpler when you have an organized system.
Your ability to segment customers and individualize each account and relationship will make each customer feel valued and like they’re a unique part of your business.
By tracking and measuring your referral program, you can adjust it as needed and make any necessary changes.
#11. Thank the Referrer and the Referred Customer
You’re not entitled to anything when it comes to referrals.
So, if someone takes the time to refer your business, you should thank them and show gratitude.
This can be done through a simple thank you note or by sending them a small token of appreciation, such as a gift card.
First, thank them for joining your program and for every new customer they refer.
You should also thank the new customer for signing up and give them something extra as a reward, such as a discount on their next purchase or a gift.
Here’s a simple “thank you” template you can use:
Thank you for referring ____ to our business. We truly appreciate your efforts and are grateful that they have joined us. As a token of our gratitude, we’d like to offer you a ____. Thank you again for being such an amazing customer.”
#12. Follow Up on Every Referral quickly Enough
When you land a referral, take advantage of the opportunity and follow up quickly.
You don’t want to wait too long, or you may miss the opportunity to convert the referral into a customer.
Remember, while your customer might have referred this lead to your business, they might have been referred to other businesses as well.
You don’t know how much research the customer may have done independently.
That’s why acting fast and immediately contacting the customer may help you secure the customer.
In your follow-up message, thank them for their interest and give them more information about your business.
Be sure to highlight the benefits of choosing your company over other options and keep the conversation on track.
Finally, offer them a special deal or discount for being referred, so they know you value their business.
#13. Constantly Work on Improving Your Referral Program
Your referral program will always be a work in progress.
You might have created it with the best intentions, but chances are you’ll stumble upon a few issues.
Plus, the best referral program for your business must be unique and tailored to suit your customers based on their needs and preferences.
So, take your time to figure out what works and doesn’t.
It would be best to keep an eye out for new trends and technology regarding referral programs, as this will help you stay ahead of the competition.
Regularly review your program and update it if necessary to ensure maximum customer satisfaction.
Here’re some suggestions on how to improve your program:
- Send feedback surveys to your customers to get their opinion
- Offer incentives for referring more than one person
- Make it easier for customers to refer their friends
- Award customers point for each successful referral
- Allow customers to track their referrals and view the progress of their referrals.