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How to Create a Strong Customer Referral Program

A well-executed referral program can be a gift that keeps on giving for your business, bringing you loyal customers through incentivized word of mouth. Here's where to start with creating one. 

Katie Caron
11/02/2018
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(Photo: Pexels user bruce mars)

Research from Texas Tech shows that 83 percent of satisfied customers are willing to refer a product or service, but just 29 percent actually do. Many happy customers may not be spreading the word on their own, despite their positive experience with a business. A formal referral program can give them the nudge they need. But according to a Wharton School of Business survey, only 30 percent of companies said they have a formalized referral program. If you’re one of the majority of businesses that don’t offer a referral program, you could be missing out on a large segment of potential word of mouth advertising. Here’s how to create a strong customer referral program in four steps.

1. Evaluate goals

First, sit down and clearly outline your goals for your referral program. What does success look like for you? Do you want a clear change in sales after a year, two years or five years? Will you measure success more anecdotally? Do you want to set a target each month for generating referrals or let them happen more organically? This is all totally up to you, and you can change your goals as you move forward. Taking the time to be clear on your goals will make all the following steps easier to tackle.

2. Set your rewards or incentive parameters

Next you need to figure out what exactly your referral program will look like, based on your goals. You might find more success with a rewards-based program, but that’s not necessary if you don’t want to go that route. If you do decide to offer a reward, think about what makes the most sense as an incentive for your customers. A VISA gift card for $50-$100 or so might be wise  — since this is the home furnishings industry, a $10 gift card or store credit isn’t going to do much for a customer making a long-term furniture purchase. Brainstorm with your team about creative incentive ideas and get it formalized into writing. You’ll also want to start putting together a list of any referral sources you may already have so you can start building a network and reaching out. These will likely be your loyal, returning customers.

3. Market your referral program

This may sound counterintuitive — part of the whole point of a referral program is that your customers are basically doing your marketing for you, right? This is true, but it’s also true that if people don’t know you have a referral program, it isn’t going to work very well. Make sure you have details about your program up on your website, maybe on your About or Contact page or even its own page. Promote it in your email newsletter. Have a small sign in your store at check out, and tell your customers about it in person. You don’t want to be pushy about it, but frame it as something your customer has to gain. 

4. Keep record of referrals

Finally, make sure you’re keeping a detailed record of your referrals so you can measure how frequently you’re generating them and re-evaluate your goals when needed. This can be something like a customer relationship management system or something as simple as a shared spreadsheet.
 

What incentives would you offer in a referral program? Let us know in the comments!

 

 

Photo: Pexels user bruce mars 

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