How to Build an Effective Customer Referral Program?

Anurag Gade Anurag Gade
May 17, 2022 8 min read
How to Build an Effective Customer Referral Program?

Starting a new business venture is always tedious. One has to understand different terminologies before embarking on a new journey. Moreover, you need to understand how the market functions, influences, and affects your business. In addition to all this, one needs to be familiar with the different strategies required to implement a successful business program.

This is because a successful business is a combination of different tactics and strategies working in absolute sync. And one of the key strategies is a customer referral program. Having an established customer referral program works as a catalyst for your business’ rapid growth. As an aspiring entrepreneur, you cannot afford to stay behind when it comes to customer referrals.

Therefore, this article will walk you through what a referral program is and show you how you can design a strong customer referral program.

What Is A Referral Program?
Why Should Your Company Have A Customer Referral Program?
Benefits Of Having A Customer Referral Program
7 Steps To Design A Customer Referral Program

What Is A Referral Program?

As per the name, a referral program is a traditional word-of-mouth marketing tactic that gets customers to advertise and advocate your brand on your behalf. This is one of the oldest and most widely used marketing strategies used by brands worldwide to retain customers while simultaneously gaining new ones.

Instead of relying on customer reviews, online descriptions, or sharing feedback surveys, a referral program has the customers directly talking about how good your brand is with their colleagues, partners, and friends.

A referral program is designed explicitly for companies and businesses to acquire new customers and generate leads that are fit and valuable for your brand. This makes it easier for your sales and marketing team to develop, nurture, and design a plan to engage with the customers.

For example, a sporting goods company is more likely to have an athlete as its brand ambassador instead of an entrepreneur. An athlete holds the potential to inspire and encourage like-minded individuals to use the brand, making the brand more trustworthy.

Why Should Your Company Have A Customer Referral Program?

A referral program relies on word-of-mouth. This means every new customer has heard about your brand directly from someone who has used your brand and found it amazing.

With a strong referral program, you know that every new lead/customer has a reliable source that informs them about your company being trustworthy and delivering satisfying results.

Every business or company has a set of loyal customers that are very dear to the company. A referral program is built to incentivise those customers who largely admire your product and services by getting them to spread the word about your brand. Word-of-mouth from these customers results in increased awareness and sales for your business.

The clients who are already familiar and in love with your products/services act as an evangelist by indirectly becoming invested in the future of your business. In return, you have to present them with suitable rewards for each referral.

Benefits Of Having A Customer Referral Program

  • Most marketing surveys suggest that referral leads are 30% more than the leads generated using other marketing channels.
  • All referred signups tend to have a longer lifetime value than non-referrals
  • A strong referral program leads to stronger brand awareness, leading to an increased market share over time.
  • A referral program is one of the most cost-efficient platforms for marketing. It relies solely on word-of-mouth which is generally cheaper than other customer acquisition tactics.
  • Customers acquired via the referral program have a whopping 40% retention rate.
Companies with referral programs:
Companies with Referral programs

7 Steps To Design A Customer Referral Program

There are sizeable benefits associated with a customer referral program. For starters, it is a highly cost-efficient marketing technique that keeps you from spending valuable bucks on other marketing channels.

Moreover, leads generated via the customer referral program tend to have a higher lifetime value. As you can see, there are apparent advantages to a strong customer referral program followed by metrics that are ready to be calculated and measured.

Given everything it brings to the table, you cannot skip out on having a customer referral program. And if you don’t have one already, here is how you can build one using the given steps.

Set Your Goals

Everything planned has a few prerequisites that need to be fulfilled. Similarly, before you build a customer referral program, you need to set some goals first that you aim to achieve through the program. This primarily includes asking yourself:

  • What do you aim to achieve through this program?
  • Are you looking to generate more leads?
  • Are you looking to enhance growth?
  • Are you tied between leads and growth?
  • Are you looking to add customer retention to the mix?
  • Is the customer-referral program a trust-building exercise for the industry?

The answers to all these questions will help you delve in a little further and see all the broader goals that can be accomplished on a much smaller scale. Irrespective of the growth or customer segment, numerous objectives can be established and achieved with the referral program. But all those objectives should be measurable so that you can easily measure your success against the target. The success of every customer referral program involves the engagement rate, participation rate, and conversion rate.

Define Your Message

Every referral program needs to have a set message behind it. Moreover, this message needs to be easily understood and perceived as it is by your target audience. If it isn’t, then the audience won’t bother to give your brand a second thought. Make sure you clearly outline what your referral program aims to achieve.

For this, you will need to state how your program works, what is expected of the customers, how they can do it, and everything they can expect in return (incentives/rewards). In simple words, you will need to make sure your Call To Action (CTA) is clear, crisp, concise, and prominent.

Assess Where And How Referrals Come To Your Business

Research is an integral part of every business activity. Every business has referrals coming in one way or the other. Therefore, a critical step in building a customer referral program is research and assessing where and how referrals are coming to know about your business or if they know about your business.

This process should be a combined effort undertaken by everyone responsible for building customer relationships, such as marketing, sales, and support staff. The research includes assessing how the above three are dealing with referrals. An assessment will show your current position in terms of referrals while simultaneously mapping out the scope for improvement.

Moreover, this research shows you how much a customer is worth. Once you know where your referrals are coming from, you can spend the time monitoring and managing onboarding programs required to break these referrals even.

Create A Suitable Landing Page

A referral program comprises a suitable message. But the message is only important if it reaches the designated target audience. For this to happen, you need to have a place wherein your referral program will be available for the audience to read about. This is where you should create a relevant landing page that will explain every aspect of the referral program. Ensure that this landing page is easy to find and is easily accessible from your home page.

It is beneficial to include a landing page on the website’s primary navigation tab. Up next, optimise your landing page by using SEO techniques such as targeted keywords which will help with the search results. The better you optimise your landing page for SEO, the higher will be the internet traffic on your page.

Finally, ensure your landing page covers all aspects of your referral program. In simple words, this landing page should explain how the referral program works, what is expected of the customers, how they can utilise the program, and what rewards they are liable to upon successful referrals. It is helpful to include a separate dedicated referral on either side of the page to make the process easier for the customers.

Choose Your Incentives

The loyal customers who genuinely like your product are likely to recommend your brand to others without expecting anything in return. However, to improve your customer retention rate, you will need to incentivise these customers, which is exactly where the referral program shines.

Merely asking your customers to refer your brand to others won’t cut it at times. Therefore, you will need to sweeten the pot by offering some kinds of incentives. These could either be monetary incentives or early-bird discounts on all your product and services. Your incentives will usually rely on the line of work you are in. For example, Oyo Rooms offer a 30% discount on all their existing services for customers who refer other people to their services.

Incentives come in different forms and shapes. They can be paid out directly as cash, or you can be creative with it. You can opt to offer discount coupons, a rewards card, gift cards, exciting vouchers, or any other relevant items you deem fit.

All these can be sent out to your customers as a gesture of appreciation for their referrals. Know that these referral programs brought in the best results when the one sending out the referral and the referred both receive something.

Spread The Word About Your Program

Now is the time to let the people know about your program. The more people know about what your referral program has in store for them, the better it will be for your business. If you have a newly devised customer referral program, you will need to spread the word through emails, newsletters, and social media.

Moreover, all your customer interactions should have mentioned your referral program. Some of the prominent ways of letting people know about your referral program are,

  • CTA on all company banners and websites.
  • Mentions of your referral program are everywhere in your customer emails and company newsletters.
  • Direct your customers to the referral page every time they make a purchase.

You will need to spend a considerable amount of time at the start to spread the word. But once your program is up and running, you can cut back on the messaging. Note that mentions of your referral programs should always be active on your company’s website and should be included either in the emails or the newsletters.

Tracking And Monitoring The Program’s Effectiveness

Once your referral program is up, then it is time to start monitoring from time to time. You must monitor every customer in your customer referral program. Ideally, these are things you need to monitor carefully,

  • Who is being referred?
  • Who is referring?
  • Has the referred customer taken advantage Of the program?
  • Has the referring customer received their respective incentive?
  • How long did it take for the referral to reach the referred person?
  • What more needs to be done to touch base with both the referred and referring customers?

There could be unexpected circumstances that can, at times, affect your program. Tracking your program from time to time will make you aware of such things. The longer your program runs, the larger data set you will have. All this data will eventually help you better understand your average customer. Moreover, it will also tell you which aspect of your program needs work.

Conclusion

You’re more likely to trust a brand that has come in as a recommendation from your friend instead of as an advertisement. All research ultimately hints that people are most likely to trust their friends and family recommendations above all other marketing and advertising channels.

Every referral program has the potential to create a never-ending cycle of word-of-mouth marketing. Given the dynamics of marketing, the modern-day market demands an efficient marketing system, and this is where a strong customer referral program can lead to maximum lead generation.

FAQS

What is the strategy you use to increase customer referrals?

Provide exceptional customer service, offer incentives, and encourage your customers to share your referral program on social media.

What is the best referral program?

GetResponse – $30 account credit per referral, Dropbox – Up to 32 GB per referral, Fiverr – Up to $100 per referral, and Chase Bank – $50 per referral are some of the best referral programs.

How effective are referral programs?

The customers acquired through referral programs have a 37% retention rate.

Must have tools for startups - Recommended by StartupTalky

Subscribe to StartupTalky

Get the latest insights delivered to you right in your inbox

Great! Next, complete checkout for full access to StartupTalky.
Welcome back! You've successfully signed in.
You've successfully subscribed to StartupTalky.
Success! Your account is fully activated, you now have access to all content.
Success! Your billing info has been updated.
Your billing was not updated.