You don’t have to be as big as Dropbox, Uber, or Airbnb to benefit from referral marketing.
A small business can already start reaping great benefits from a referral program as well. In fact, it’s one of the most effective ways to convert leads and increase your customer base.
What exactly do we mean when we say “referral programs for small businesses?” We’re not talking about a punch-card program or printed referral cards for your customers to share with friends.
We’re talking about an official way for your customers to spread the word about your business get rewarded for their efforts.
Setting up this type of program can be fairly easy using referral software for small businesses, so we also included a helpful list of the best business referral software below.
So why do small business referral programs work, and how can they help your business? Let’s explore.
How successful are small business referral programs?
Generally speaking, referral programs work because people trust recommendations from their friends and family more than any other source of information. Yes, people also look for reviews online, but they’re far more inclined to believe a friend than a review from a complete stranger.
These recommendations can happen without prompting, which makes them hard to control. Why not formalize this word-of-mouth marketing with a referral program that gives your customers an easier way to share and rewards them in the process?
A referral program streamlines the entire process, gives customers multiple ways to refer others, and can automatically send out rewards whenever a referral turns into a sale.
But when you start a referral program, how can you increase the rate of customers sending referrals to your business? Customer service and experience is key. When you go above and beyond to satisfy your customers, they’ll be more than happy to spread the word about you.
How does a referral program benefit small businesses?
Referral programs can help your small business in many ways. Here are the top four we find to be the most effective:
Referral programs for small businesses build better customer relationships.
Having strong customer relationships for any business is important – but for a small business, it can mean everything. Loyal customers refer their friends because they trust your small business, are valued as individuals (rather than just being a number), and feel like they’re part of your community.
Once customers hear about your referral program, many of them will likely share your business with friends who also enjoy what you have to offer.
Referral programs also help create better relationships because customers who refer friends to you will feel like they’ve played a part in your business success.
A small business referral program creates loyal customers.
Referred customers are 18% more likely to remain your customers. After all, they were referred by someone who already knows them, so the odds of referrals liking and staying loyal to your small business are much higher.
In addition, if you offer the right referral incentives (for example, discounts or store credit), you’re also giving both customers and referrals a reason to keep coming back.
Small business referral programs are cost-effective.
A small business needs to use its resources wisely. Referral programs are much easier and more affordable compared to other forms of advertising. Customers who spread the word to friends and family provide advertising money can’t buy!
With a referral program, you’re not spending as much money (and valuable time) on customer acquisition, and you’re not targeting complete strangers with traditional ads. Rather, you’re targeting your existing customers, who’ve already developed a positive relationship with your brand. These loyal customers will promote your business for you at little to no cost.
And since every referral message is sent from a customer – not directly from your brand – referral programs are highly targeted and more trustworthy than a traditional ad.
Referral programs create a viral loop for your business.
Word of mouth travels fast, especially on social media. Since a referral program makes sharing easier, this cycle will go even faster.
When a customer shares your referral program on social media, their friends will instantly become aware of your brand. And if a few of these friends become new customers, there’s a strong possibility they’ll also share the referral program with their own friends. Thus, the cycle will keep going and going. This is referred to as a viral loop, a powerful element that helps boost your referral marketing program.
5 best practices for small business referral programs
Now that you know how your small business can benefit from a referral program, let’s review some of the best practices for how building your own referral program.
✅ Keep it simple.
- Make sure your customers can quickly understand what you want them to do (refer) and what’s in it for them (your incentive).
- Keep your explanation concise, but include all the necessary terms and conditions (What requirements must customers meet to receive the reward? Are rewards cumulative? For more information, read our article that breaks down all the different referral reward incentives.)
✅ Display a clear, enticing call to action (CTA).
- Your call to actions (CTAs) must be easy to find. Always put a headline at the top of your referral landing page. Display it in the biggest font, and consider making it bold or highlighted. Then, follow it with an easy-to- find CTA button.
- The most effective CTAs catch a customer’s eyes, concisely invite customers to refer, and let them know about the incentive.
✅ Offer valuable but cost-effective incentives that relate to your business.
- Consider double-sided incentives (incentives for both referrer and friend) and cumulative incentives (stacking credits that referrals can all use at once). This includes store credits, gift cards, and discounts.
- Offer free (or deeply discounted) products or services, but only after a customer has brought in several successful referrals. If you choose this route, gamifying the experience through a point system can pay dividends because it shows customers how close they are to the exclusive perk.
- Another gamified route is to hold a raffle, where every referral enters a customer to win a larger gift card, amount of store credit, or another big prize from your business.
- Charitable giving can also work as a referral incentive, especially when it involves a donation to a charity in your community. For example, your business might donate a set amount to your local food pantry for each referral.
- As a small business, you can also highlight the basic, intrinsic reward of friends helping friends!
✅ Make social sharing easy for customers.
- Why focus on social? Because it’s where your customers naturally share with many friends at once. Integrating social sharing into your referral program means you’ll increase your impact with less time and effort.
- Make it as simple as possible for customers to share your referral program on social media. Do this by adding buttons with pre-filled message template that can be customized by each customer and shared with the click of a button.
✅ Use your position as a small business to your advantage.
- Your small business has a unique personality that big-box businesses can’t duplicate. Inject some of this personality into your referral program!
- Emphasize being part of a community in your referral program messaging.
- Use feel-good messaging that focuses on helping friends and your business. (i.e., “Share the love.”)
- Include a few friendship- or community-focused images.
11 examples of small business referral programs
We’ve rounded up 11 successful referral programs for small businesses that serve as awesome examples of the best practices listed above. Read on to see how you can apply them in your own small business referral program.
PA Fitness
About the small business PA Fitness operates fitness centers in Marysville, Washington and Arlington, Washington.
What we love about their referral program:
- Feel-good, friend-oriented CTA: “Working out is always more fun with a buddy!”
- A welcoming image of women working out together.
- Concise referral text emphasizing the “why” behind referring (still friend-oriented): “From the hottest new group exercise classes to one-on-one personal training, the latest fitness equipment, and top-notch facilities – we have you covered. Now, help us cover someone close to you.”
- Below the CTA button, there’s also the text that reads, “Your friends will thank you.”
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There’s no extrinsic incentive here. Instead, the program highlights the intrinsic incentive of helping a friend.
- Easy-to-find long blue CTA button: “Invite my friend”
Tomlinson Bomberger
About the small business: Tomlinson Bomberger offers landscaping, lawn care, and pest control services to the Lancaster, PA area.
What we love about their referral program:
- Community-minded, feel-good referral messaging: “Our business has grown over the decades from all the great referrals from our clients!”
- Friendship-focused image emphasizing how referring the landscaping business will help friends out.
- Enticing CTA: “Referrals | Want to make an easy $50?”
- Incentives tied to the company: $50 company credit.
- Cumulative credit: Every time a referred friend makes a qualifying purchase, Tomlinson Bomberger rewards the referrer with another $50.
- An easy-to-find CTA button.
- Clear referral terms and conditions to explain how to earn referral rewards.
Dave’s Cooling & Heating
About the small business: Dave’s Cooling & Heating is an HVAC business based in Frederick, MD.
What we love about their referral program:
- Focus on community: “The best way you can reward us for a job well done is to tell a friend… If the person you referred ends up becoming one of our customers, we’ll even give you a gift as a thank you. It’s a win-win-win!”
- Enticing, dual-sided referral reward: Both referrer and friend receive $50 when the friend becomes a new Dave’s customer.
- Easy-to-understand terms explaining the HVAC referral program mechanic in two sentences. Customers know exactly what it takes to earn the reward.
Dragon Gym
About the small business: Dragon Gym is a martial arts and fitness center located in Exton, PA.
What we love about their referral program:
- Feel-good, community-minded messaging: The description for this small business referral program is a personal letter to students from the gym’s president, which emphasizes the importance of word-of-mouth to the gym.
- The sender thanks the students at multiple points, both at the beginning and end of the letter.
- Enticing, tiered referral rewards encourage students to keep referring.
- The reward ties back to the business, with the student receiving “$100 of the next month’s tuition or CASH” whenever someone they refer decides to join the gym after their Quick Start Course.
- Clear description of the program mechanics makes referring simple: “Referring a friend is as easy as 1-2-3!”
- An easy-to-find red CTA button for submitting the form.
No Place Like Home Pet Sitting
About the small business: No Place Like Home Pet Sitting offers pet sitting services to the Lithia, Florida area.
What we love about their referral program:
- Community-minded messaging: “We love our clients and want to thank you for trusting us with your precious pets. There is no greater compliment than when our valued clients refer us to their family, friends, and neighbors. To show our appreciation, we are proud to announce our new referral program.”
- Enticing referral reward that connects to the company: “Whenever you refer someone to No Place Like Home Pet Sitting and they become a new client, you’ll receive 10% of their invoice off your next invoice.”
- This small business referral program offers clear terms and conditions: Clients must be new, and must complete their first service.
- Incentives are cumulative and unlimited, which motivates customers to keep on referring.
- Charitable element: “If you are a 501(c) 3 charity and you refer clients to us after a client completes their first sitting, you’ll receive 20% of their first bill as a thank you and to help in your rescue efforts!”
- Easy social sharing through Facebook’s Share button, which lets customers share the business right from the referral page.
Borst Landscape & Design
About the small business: Borst Landscape & Design offers landscaping design and maintenance services to Allendale, NJ and the surrounding area.
What we love about their referral program:
- Feel-good referral messaging emphasizes how referrals help friends and Borst: “We very much appreciate your business and as our company grows we would like you to be part of our success!!”
- A warm invitation to join the small business referral program: “As a way of thanking our valued customers for referring us to their friends, family, neighbors, and others, we would like to reward you with a credit on your current invoice.”
- Enticing, company-connected incentive: $125 credit towards any future services from Borst.
- Cumulative incentive: “This is not a ‘one time only’ credit, but instead applies for every new client that you refer who signs with us.”
- Concise offer text with clear terms and conditions: “For every new client that signs a contract with Borst Landscape & Design and mentions the name of the client that referred them, we will be issuing you an immediate $125 credit.”
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