Is a customer referral program right for you? We’ll discuss customer referral program ideas and how to get started. First, we are going to cover some myths and realities, so you can set yourself up for the right expectations. Next, we’ll discuss customer referral ideas that any business can implement.
Debunking Some Myths
There are many myths out there, but most of them have to do with some crazy growth about some famous company after the fact. Albeit, I’m sure there were brilliant people at those companies and there was a crap ton more work to get them there than just a referral program. Referral programs aren’t some magic elixir that just makes businesses grow, they are part of an overall plan.
Myth #1 – Just like Dropbox and AirBnB
Sorry to break it to you, but you are not Dropbox, Paypal, Airbnb or Uber… As much as we’d like to say you will become one of them if you implement a customer referral program, we can’t. More than likely you are a small business/startup trying to see where a referral program makes sense for you.
Myth #2 – Viral Referral Growth
Forget the idea of the viral loop. We’re not saying it isn’t achievable, but a referral program alone isn’t going to put you on the highway to viral growth. Just because there is a “Refer a friend widget” or you ask your customer to “Refer a friend” it doesn’t mean they will and it doesn’t mean their friend will join. How good is your product market fit? How good is your customer service? Are your customers blown away? Does it make sense for them to tell their friends? All questions you should ask yourself to make a better product and/or service.
Myth #3 – Referral Marketing is all the marketing I need
A referral program isn’t a replacement for all other marketing. It’s not a silver bullet and isn’t for every business. A referral program is a piece of the marketing strategy. How big of a piece it? Well, that depends on a lot of factors. It could be a great channel for growth or it can be valuable and complementary to your other marketing strategies.
Realities with Referral Programs
Now that you are a little more grounded in a customer referral program. Let’s talk about when they are effective. Remember, we are talking about “customer referrals” not “partnership / b2b referrals/affiliates” that’s a different topic for another day.
Consumer Facing Businesses (More Effective)
B2C businesses have the most effective customer referral programs. If your business serves consumers, consumers share great experiences. Incentivizing consumers is an effective way to get them to share with their friends.
Business to Business (Less Effective)
B2B businesses are less effective with customer referral programs. Sharing happens on an individual person level. If your program rewards the business with a discount or credits, it doesn’t speak to the “employee” of that business. The exception is if it is for small businesses who are sole proprietors where they behave more like a consumer. The problem with that is if you are selling to a small business they may not know as many small businesses to share you with.
Service-Based Businesses (More Effective)
Service-based businesses that have recurring services are very good for customer referral programs. That opens up options like “invoice credits” and “coupons” to be used back with your business. If the service isn’t used that often, having an “invoice credit” does not seem that appealing to a customer doing the referring and you may look like you are more self-serving.
If it’s an infrequent or one-time use service, that can still be effective as a customer referral program. Your incentives have to line up in a way that makes sense for the customer. A gift card is a good option.
But if done right, referrals are a viable way to get more customers.
Customer Referral Program Ideas
The best advice for a customer referral program is putting yourself in your customer’s shoes. Does the referral program make sense? Would I refer if I were the customer? Would I signup/purchase/use the service if I was a friend?
Customer Referral Program Design
Key things to consider when designing a program
- Keep the offer simple – over complicating your program leads to a confused customer. You can specify details in your “terms and conditions” to protect yourself, but a customer doesn’t want to read a full paragraph about the complexities of your referral program
- Make the offer attainable – offers like “5 friends have to become customers for you to get your reward” don’t work well. It sets the bar to high and stops the referrer from even getting started.
- Use visuals – Customers like to see what they are getting, make it have a visual impact. Using visuals laying out how the program works make it easier for the customer to understand.
- Deal visibility – Transparency between referrer and the new customer is important. It is good to state what everyone gets in the deal so that the new customer doesn’t feel like they are being taken advantage of. Remember the new customer is a future referrer, so they will one day see behind the curtain.
Customer Referral Program Incentives
Choosing your incentives is an important part of your referral program design. Ask yourself these questions:
- Do the incentives make sense to my user/referrer? – Would it require they come back for a purchase? Is it something they can use and/or want?
- Will they want more than one of these rewards? – You don’t want them to just win one reward and stop right? Make your incentive stackable.
- What does the friend get? – When the referrer sends something to a friend, you are using their equity for your benefit. Most people are conscious of what they send their friends and how it reflects on them.
- Understand the pros and cons of incentives
Customer Referral Program Promotion
You have your program/campaign designed… great! Now you have to promote it. Remember these tips:
- Be Easy – Make it easy for them to get to and find your program
- Be Timely – Asking them to join your referral program too early before they feel good about your services seems a bit pushy
- Be Respectful – Don’t be overbearing about getting customers to join your referral program. Respect their time and their connections to their friends.
- Be Trustworthy – Having a system where they can track their rewards and see how their offer is being shared helps the customer know they aren’t just being used for their referrals. This is a relationship you should foster.
Active Promotion – Where the program is the focus of the user action.
Active promotion should be used sparingly. By following the tips above you can avoid being overbearing. Here are sometimes you can actively promote:
- Post Services/Purchase – After services are complete is a great time to promote. It is when the customer has likely had the best experience. Hand them a card, register them yourself (with their permission)
- Thank you card – If you follow up with customers weeks later as a “Thank you” this is a good time to tell them about your referral program. (Try not to overexpose the program, if you signed them up on checkout skip telling them in the thank you)
- Launch of the Program – An email/flyer/sign specifically for the referral campaign launch
- New offer – A change to your existing offer, like with a holiday or event special
Passive Promotion- Where the program is not the focus but more of a side item for them to find or be peripherally aware of.
- Email signature
- Back of a business card
- Website widget / side column
- Bottom of an invoice
- Menu item on your website
Balance all these customer referral program ideas to create your ideal program that fits your business. Beware of common failures that can leave your customers with a bad taste in their mouths.
Without a system, users don’t trust
If all you have is a form for a user to fill in their friend’s details and they don’t see a way they can track and see the results… they may feel like you are just going to contact your friends directly.
Failure to promote
What good is a referral program that no one knows about?
It’s up to you, but we would caution against having too many “active” in your face mentions of your referral program, so you don’t have overexposure and wear out any good equity you have built up with your customers.
We would suggest doing a couple active mentions of it but letting them know where they can otherwise find it. A good time would be once you know the customer is satisfied or happy with your product or service. We like to ask later down the road a bit (maybe 10 days), just so they don’t feel like everything you are doing is coming at them. Asking right away before they even know if they like you have a low probability of success.
For an in-depth lesson and understanding of referrals check out our Referral Programs 101: Everything You Need To Build a Program That Works post