You think your business is ready for a referral program, but how can you be sure? Fortunately, there are some pretty clear indicators out there to help you decide.

So, if you’re wondering whether or not you should start a referral program, this article may assist you. But first, you need to take a long hard look at what you’ve got going on. If your business has seen better days, you might want to first rethink your business strategy before implementing a referral program

Referral programs work best for businesses that are already doing well. That said, there are some existing referral program myths that might make you think a program will turn your business around, but in reality, they are not intended to be a saving grace to mend a broken business. We’re not saying miracles can’t possibly occur, we’re just saying that generally speaking, referral programs are usually more of a supplement to a steady or flourishing business. Think of it as a vitamin or an afternoon cup of coffee.

You already have organic referrals coming in

If people are willing to refer you without an incentive then it’s a pretty clear indicator that you have a referable business.

word of mouth about a business can lead to organic referrals

Word of mouth often contributes to organic referrals. The idea is based on the concept that customers will share your business with others if they have a positive experience. This can be done online or in-person depending on who they’re sharing with, or how they’re sharing. Typically, customers are not shy when it comes to tagging their favorite businesses online. And, when customers share, they are essentially referring your business.

Bonus points if you’re already online because you’re making it a lot easier for them to share. Things like Facebook recommendations have made it very easy to share and refer businesses. Recommendations from friends, especially on Facebook, have really become a fundamental part of searching for local services and businesses. People want their friends tried and true input, especially when it comes to paying money for a new service. Which is why review sites are very influential to incoming new customers.

What does it mean to have organic referrals?

1. You are on review sites If you’re on a few review and listing sites, like Yelp, Capterra, or even Angie’s List, you probably understand how important these recommendations are for your business. These review sites set you up for referrals. By having your business listed, you build up your credibility. This naturally helps to bring in new customers.  

If you have good reviews, you'll probably have successful referral program

But how do these review sites help with referrals? You can assume the following: even if a customer personally invites a friend to your business, that person will do their research. If they see an influx of good reviews, you’re golden, no questions asked. Even if you have some negative reviews, it doesn’t necessarily equate to a loss of business because prospects will likely consider if or how you respond to those negative comments. If you’re able to provide a resolution, even better. It can help to establish trust in your business. Everyone likes to see how businesses handle themselves when it comes to negative reviews.

2. New customers are “sent” in You may find that some new customers say your business was recommended to them by a friend. These are also organic referrals. Customers will send friends for many reasons. It could be that they simply like your business. It could be that you have a specific service that they know their friend needs. Or it could be because you offered great customer service.  

You might even come across an avid customer who will tell you that they told all their friends to come in. These people are your influencers. Influencers “influence” their friends to try you out. You can call that a referral.

You already provide great customer service

Most people know that great customer service is a vital part of any business. It allows you stand out from competitors, and it keeps customers coming back again and again. It’s a huge factor when it comes to retention (more on that later).

What does providing good customer service have to do with a referral program? Well, everything. Chances are if you’re providing good customer service, you probably have a big pool of happy customers. Happy customers are more likely to refer your business and will do so gladly.

If you’re doing these three things, you probably have excellent customer service. Remember, there usually are other options on the market for your customers, so be sure you’re giving them such a positive and memorable experience that they’ll want to come back to you.

1. You give each customer the same great experience – You may have great relationships with a few select customers. But, the goal is to make ALL customers feel good about choosing you over a competitor. Consistency is king. So whether you learn everyone’s name, remember their favorite orders, packages, or service requests, be sure to provide a reliably personalized experience to everyone across the board

when customers are happy with you, you are ready for a referral program

2. Your customers praise you for your customer service – Your online reviews reflect that too. People will let you and everyone else know when you are exceeding expectations or doing something horribly wrong. If you have a ton of pleasant reviews online and your customer satisfaction surveys reveal happy customers, you’re probably ready for a referral program. In fact, sharing these positive reviews can make asking for a referral even easier. 

3. You have an easy time building up your customer/partner relationships – Partners notice your relationships with customers and customers also notice your relationships with partners too. But if you have an easy time building those relationships, your business is probably quite referable. There are many ways to build your customer and partner relationships. Communication and customer service goes a long way.

Your customer retention is soaring

Having a good customer retention rate is the epitome of a sustainable business. Chances are if you are able to get paying customers to come back time and time again, you have a solid chance at getting those customers to refer.

Customer retention often means customer loyalty. Loyal customers not only choose you, but they rave about you to friends. The best part is, they keep choosing you over everyone else.

Customer retention is an indicator of referral program success

1. You reduce their pain points – Your customers are thankful that you help them solve a problem or concern in their life. People typically buy things because they want or need them. If you can provide something that people need, you’re offering them a solution to one of their pain points. By addressing customer pain points, you become the fix or solution. This then provides a reason for the customer to continually choose you.

2. You reciprocate the love – You make your customers want to come back. Coupons, sales, or giving them a little reassurance, can increase your retention. If customers know you appreciate them, they will do what they can to help your business succeed.

You have traffic coming in and don’t know where it’s from

These people may or may not be referrals. But, somehow your business has entered the vortex of word of mouth travel. This is great because it means people know about you and you hardly had to do anything to earn that. Well, nothing other than providing a great business, value, product, customer, etc. You get the point.

an influx of new customers could mean you're ready to start a referral program

If you have a good amount of new people coming in, there is a good chance you have a rockin’ product. Which means you have a high chance of running a successful referral program.

Let’s say you have an influx of new traffic or a boost of social media followers. Even if you’re not sure where people are coming from, an influx is good. It means people actually like your business and believe in what you stand for. This is a positive sign, especially if you want to start a referral program. And the good news is, once you do implement a referral program, customers will be inclined to continue referring.

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Posted by Megan Mosley

Megan Mosley is a writer for Referral Rock. You can find her poking around online or tweeting about marketing, small businesses, SEO, or even sharing funny memes. She is addicted to coffee and uses it as a fuel to keep her going through the day.