4 Steps to Create a Successful Customer Referral Program for your Small Business


Customer referral programs can be a huge source of revenue for your small business.  Odds are your business is already generating new leads through referrals from existing customers. For example, according to Deloitte, businesses get, on average, 1 of every 3 leads through recommendations from loyal customers, further, word of mouth is a contributing factor in as much as half of all purchasing decisions.

You might be thinking, “That’s great—but it’s also pretty much outside my control.” The truth is, there are specific strategies you can employ to increase the number of referrals your business gets, and it’s well worth your time:  leads generated through referrals are as much as 10 times more valuable than regular leads, resulting in shorter sales cycles, higher conversion rates and larger purchases.

So, What’s the Plan?

Given the high value of referral-based leads, it’s surprising more businesses don’t have a documented strategy to generate more of them. As Sara Holtz writing for the Balance notes:

“Referrals are a great source of new business. And yet, most businesses don’t actively seek them, It’s a shame because asking for referrals is one of the most efficient and effective business development activities.”

What’s more, unlike the increasingly complex and sophisticated strategies associated with other lead generation development, a sound referral strategy is relatively simple and straightforward to implement. Here are 4 steps you need to take to generate more (and better) referrals for your business:

  1. Identify your brand advocates. When you’re especially satisfied with a business that sells you products or services, you tell other people about it. You can expect your customers to do the same when they have a great experience with your business. To leverage this good will, however, you need to know who these “brand advocates” are.

To find your brand advocates, visit prominent review sites like Quora, Yelp and Reddit and looks for strongly positive reviews. Also, if your business uses a net promoter score, add those customers who tell you they would recommend your company to others to your list. Finally, follow the conversations about your business on social media sites and make note of those customers who regularly talk up your business.

You should also target your top-performing customers, a simple task when you utilize a CRM platform like Act!, to convert like-minded businesses into profitable new customers.

  1. Decide what’s in it for them. DirecTV has had great success offering current customers a $10 discount for every new customer they refer. Another great example, but with a slightly different approach is the HubSpot customer referral program, which has gotten traction by offering free tickets to its annual INBOUND events. Of course, every business is different, and only you can determine what kind of incentive is most likely to resonate with your customers.

Remember – the most successful incentive programs, according to Referral Saasquatch, are those which reward both the brand advocate and their referral (that’s what DirecTV does, for example).  You don’t necessarily need to offer cash incentives to get results:  some of the strongest referral programs appeal to their customers’ genuine desire to help others solve their problems.

  1. Create your promotional plan. After you’ve identified your advocates, set goals and decided on incentives, the next step is to decide how you’ll spread the word about your referral program to current customers. A good way to start is with an email marketing campaign.

In addition, you can insert mention of your program and associated incentives in your blog, on lead-generating landing pages (when referrals also get incentives), in company newsletters, on social media sites and in product and service updates. The important thing is that, because your customers go to different places to get their news, you need to promote your referral program in as many places as possible to maximize results.

  1. Measure your results. You’ll need to monitor key metrics to see what’s working (and what isn’t) and make the necessary tweaks to continually improve your program. You’ll need to know, for example, how many referrals were generated per advocate, which components of your promotional strategy produced the best results (e.g., email vs. blogs or newsletters), how many referrals became buying customers, how long that process took, and how much revenue your program is generating (after subtracting the cost of incentives).

Customers don’t become brand advocates, eager to refer others to your business, by accident—and chances are, there’s no single interaction which makes them move from liking your business to loving it. The positive interactions you have with customers are cumulative, whether the touch point is an email, a customer service call, a friendly return policy or a great experience on your website. That’s why you need to be determined to make every interaction count and enhance your relationship with your customer base.

The SmallBizRising Blog is designed to be an educational content hub pulling information, best practices and practical advice for the small business owner and features topics including accountingmarketingtechnology and more.  Be sure to subscribe to stay up to date with new content as it is posted.

This article presented by:
Swiftpage, the maker of Act!, is a leading provider of software and services that help small and mid-sized businesses grow.
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