Why You Need a Referral Program

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Why you need a referral program

Do you have a referral program? If you don’t, or you have an informal system in place, I want to talk about why it might be a good time to get a formal program in place AND publicize it.  Let’s dig in.

Why You Need A Referral Program

Word of Mouth

Word of mouth is one of the oldest and best forms of advertising.  People like to support businesses that their friends use.  When someone else has used a company and had a good experience, it’s a lot easier for customers to feel confident about working with that business.

The best part about word of mouth is it’s pretty much free…BUT you can use a referral program to encourage word of mouth.

I had someone say to me and I quote, “I don’t need a referral program.  My customers refer me because they know I’m going to do a good job and they don’t expect anything in return.”

That’s great but the truth is, many people are reward driven.  A lot of people are driven by the “what’s in it for me (WIIFM)” mentality.  Sure, there will always be people that pass on your name just because you do a great job but think about how many MORE referrals you could get if you motivated the WIIFM tribe?

Paid Advertising

Turning your existing customers in to walking advertisements for your business is one of the smartest forms of paid advertising you can invest in (besides buying space on Fun 4 Kids of course).    I encourage business owners to think of a referral program as part of their advertising budget.

Even if you give a loyal client $20, even $50 or $100 off their next purchase with you for introducing another paying client you are getting guaranteed advertising results. Where else can you spend $20 and get guaranteed results?

Customer Retention

Referral programs can also be great for client retention.  Customers like to know that you value their business and a referral program is a great way to showcase that.

Plus, we’ve all heard the old saying, birds of a feather flock together, right?  If one of your loyal customers refers you, it’s likely the person they are referring will be similar to them which means you’re probably getting your ideal client delivered right to you!

How to Start a Referral Program

Create the Offer

A referral program doesn’t have to be complex, and you don’t need fancy software to manage it…if you don’t want it.  To start, create something that rewards BOTH the referrer and the person referred.  How you structure your referral program is completely up to you. I’ve seen things like get a:

  • Discount on registration.
  • BOGO deal.
  • Value add of their choice.
  • Dollar amount off their next purchase.

In my opinion, flat dollar amount works best. People love coupons and knowing they are getting a specific amount off, is good way to entice them!  If you have higher priced services, don’t be shy with the dollar amount your customer will get off.

Promote Your Referral Program

Once you create your offer, now you’ve got to promote it.  I suggest creating a marketing communications plan, similar to what you’d do if you were launching a new product or service.  Your plan should include:

  • Emailing clients
  • Posting to social
  • Creating content on your website about your referral program
  • In-studio signage
  • Referral cards (I’ll dig in to this in the next section)

Now, here’s the mistake many businesses make.  They come up with this awesome program, they launch it, promote it and then never talk about it again.  You have to consistently talk about your referral program or your clients will forget about it.  If you truly want to use it to grow your business, you’ve got to keep reminding people they can essentially get paid for talking about you.

Track and Manage It

One of the easiest ways I’ve found to track and manage a referral program is to use referral cards.  They are physical handouts that are normally business card size.  On the card, there is a place for the referrer to write their name.  The referrer writes their name in, then hands the card to the person he/she is referring and that person brings the card to you when they’re ready to redeem it.  It’s basically like passing a coupon to a friend.  I realize this is a little “old school” but it keeps things simple to start.

Be sure to let the referrer know you received a card with their name on it, thank them and encourage them to come and use their credit!

It doesn’t have to be complicated to start.  If your referral program takes off and you need to find ways to automate it, there are certainly more sophisticated systems you can put in place.  Many CRMs and/or booking software now come with referral resources too.

If you start a referral program, let me know how it goes!