Referral Programs work when you have satisfied customers. When satisfied customers feel good about products or services they share them with their friends. There are a ton of reasons why referral programs are an awesome addition to your business.
Good referral programs are easy to find and easy to use. The easiest ones always churn more profit and bring in more customers. Referral programs can work really well when people actually know that they exist. Everyone knows that word of mouth is powerful. WOM can travel fast. So by making a referral program super accessible and easy to find you are well on the way to growing your business. Additionally, referral programs can be really easy to implement into your business.
So you’re trying to determine if a referral program will help your business. Just think about all the customers you have been missing out on. Existing customers have to be enticed to share your company with their friends. If they are not enticed they won’t share.
Yes, word of mouth happens on its own. Most people say they would share based off a good experience. Unfortunately, that’s not always the case. Even when customers enjoy your product and services they won’t always recommend them. According to Texas Tech, 83% of pleased consumers are willing to refer a product or service. Only 29% actually do. Referral Programs give customers that extra nudge in promoting your brand. When a customer is in a referral program – they are gently reminded every now and then to spread the love.
So here are a few reasons we love referral programs!
- They Build Trust – People trust their friends and family above all else. Meaning you will be receiving good leads (these referrals came to you because your customers believe in your product). It’s a win/win! Sure anyone can look up recommendations on the internet, but having someone you know actually give you recommendation surely beats anything else.
- They Create Better Customers – referred customers have been proven to yield higher profits. Plus they are more likely to remain a customer or be a repeat buyer. A study conducted by Goethe University Frankfurt and the University of Pennsylvania found that referred customers provided a 25% higher profit margin, and were 18% less likely to leave.
- They Can Be Fun – A lot of companies use gamification to create a fun referral program. They reward their customers for bringing in more business by the use of game strategies. If your customers are able to have fun or are able to work towards a goal because of your referral program (basically anything engaging), then the chances of them returning for future business is pretty high. There are a ton of ways to spin some fun into a referral program whether it be a game, a challenge or just the use of fun graphics. It really just depends on what suits your business best. Referral Programs are a great way of increasing customer engagement. Note: engagement leads to profit.
- Serves as Extra Advertisement – When someone has a great experience they are likely to ‘brag’ about it, whether it be online or to a group of friends. This word of mouth marketing is free! All you have to do is give exceptional customer service or provide fantastic products. Kudos if you can do both! Companies who have an online referral marketing presence reap the benefits, between the popularity of social media and email – word travels fast. Just think of how often you see a tweet about a sale or a new service available? Referral Programs can help create publicity for a business. In a study of 4000 people, “58 percent share positive experiences and seek advice from friends and family when they talk about brands on social media.” A study by SDL (follow them on Twitter).
- Creates Repeat Customers – When someone is constantly sending you referrals it means your business is on their mind. If you are already on their mind, that customer will probably make repeat purchases. It also helps build repeat customers when the member referring new customers gets some sort of incentive for their efforts. For example, if you are a clothing boutique that runs a referral program and you give your referral program members store credit, swag or coupons for every referral they send. That member would happily continue purchasing and referring to you. Referral programs help build relationships, and we all know that healthy relationships are good for business.
Once you establish a good customer following, success just from word of mouth will happen on its own. By adding a referral program, those customers who have already been spreading the word will feel like they are part of an exclusive club. When your customers feel happy and satisfied with your product your profits and customer base will surely increase.