One of the most effective ways to learn about a new business is through word-of-mouth, and a successful referral program can help you achieve this.
According to ReferralCandy, 49% of consumers believe their friends and family are their primary sources of brand awareness. Similarly, a consumer is 50 times more likely to purchase a product that close friends or family have recommended.
These figures demonstrate that referrals can significantly impact your small business. While referrals can happen naturally, creating a referral program can help you grow your customer base.
What exactly is a referral program?
A referral program encourages brand advocates to refer others.
Participants can receive freebies, discounts, or coupons for a successful referral.
Love Wellness' referral program, for example, provides brand advocates and their referred friends with a $20 store credit. Brands motivate brand advocates to spread the word about their company by incentivizing them to make referrals.
How can referral programs help your business?
Referral programs for small businesses are an effective marketing strategy, but what are the long-term benefits? Here are the benefits that you need to know.
1. Customers who have been referred to you are more loyal.
Surprisingly, referred customers are more loyal than repeat customers.
According to one study, referred customers spend 200% more than the average customer and make twice as many referrals. Despite similar demographics and acquisition times, on average, referred customers have a 16% higher lifetime value.
Because their friends have a favorable opinion of your company, they are more likely to follow in their footsteps. Similarly, if their friends continue to patronize your establishment, they are more likely to make repeat purchases.
2. Referral programs can increase customer retention.
People enjoy discussing their favorite brands and products. We do it unconsciously when we meet up with friends or post on social media. As a result, the possibility of receiving rewards for sharing a business we frequent may compel us to stay in the long run.
Discounts and store credit from referrals can also encourage us to return to our favorite e-commerce stores and make a purchase. However, referral programs do more than improving e-commerce brand retention.
3. Referral programs can increase customer acquisition.
Would you believe a sponsored ad or a recommendation from a friend? Of course, the answer is self-evident.
A referral from a friend or family can easily persuade a new customer to convert. It's far more efficient than sending sponsored posts or branded content and waiting for these leads to convert.
How To Design A Referral Scheme
A methodical strategy is needed to generate referrals. You'll need to create the referral program, decide on your incentives, and set goals.
Step 1: Set Goals
Your referral program's goals will decide its direction and concentration and the resources you'll require.
Only 3% of respondents to a poll conducted before the pandemic believed that customer referrals might yield the best return on investment. However, 49% of respondents to COVID-19 felt that client referrals are their most successful strategy.
These figures indicate that you shouldn't fall behind. Create SMART (specific, measurable, achievable, relevant, and time-bound) goals for your referral program by holding brainstorming meetings with your core staff.
Step 2: Understand your customers
Have you regularly get feedback from customers?
Feedback offers priceless knowledge about what clients want from your company and referral program.
When developing a referral program, you can come up with incentive ideas by speaking with and polling your most devoted clients. Then, you can ask for their comments on the benefits you want to consider.
You may imagine yourself in the position of your clients. Consider the rewards that encourage them to sign up for the program and keep recommending your company.
Step 3: Select the Reward System
An incentive can be either one-sided or two-sided in a referral program.
A one-sided incentive only benefits the buddy who was referred or the advocate. This incentives system is simple to use and costs little money to implement.
A two-sided incentive, however, benefits both parties. Consider a referral scheme where the brand evangelist receives $20 in store credit, and the friend they suggest gets a 5% discount. It will significantly increase the number of customers who enter your sales funnel.
Step 4: Select a referral incentive
You may reward clients for their referrals in a variety of ways.
You might want to start with a one-size-fits-all strategy to start. In this configuration, the compensation is the same for any participant who meets the referral program requirements.
You might use a tiered structure as your client base and referral program budget expand. Based on the customer's tier, this system gives various perks.
Step 5: Create a referral program
Retailers have the option of creating their referral program. However, you can use a referral program tool if you're not experienced in building landing pages and establishing your referral program.
Most of the software for referral programs enables you to create one in a matter of minutes. Register an account, select your incentives, and the software will do the rest, automating your entire process. It will disburse the referral bonuses and send automatic email instructions to your brand ambassadors.
Referral programs offer a practical means of expanding your consumer base. After all, those who support a brand may also be the best brand ambassadors.
Since their friends and family believe what they say, their good recommendations can easily persuade future clients in their network.
Referral programs are simple to set up with the correct tools. Sit back and unwind as the entire procedure is automated.