How To Use Referral Marketing

According to a study, while 83 percent of customers say they're willing to provide referrals after a positive experience, only 29 percent actually do. In order to convince your customers to provide referrals, you need to come up with a customer referral program. Given below are 5 steps you can implement in order to build a successful program.


Step 1: Know the type of referral you need

Referrals are going to happen when they happen. You can’t control when a friend asks another friend for a referral. However, you can influence how often your customers talk about your products or services. There are four different types of referrals.


Direct referrals

This type of referral simply means that you offer your existing client a reward for turning their friends into your clients.
For example, This approach is both motivating and connecting to what the business does.


Implied referrals

In this case, you don’t necessarily ask for a referral but make it quite obvious that you are working for a customer. If a friend or a neighbor has similar requirements, you would be their first choice since they get to see a sample of your work and because they trust your existing customer.


Tangible referrals

In this type of referral, you give your existing customer, something of value and ask them to share it with a friend. This could be a gift card for which your ad could say, “Bring a friend for free!” or “Give your friend a free product!” This is a simple and tangible strategy that can help you turn those friends into customers whom you can later reward for more new customers.


Community referrals

There are a lot of non-profit organizations that could use your support. Partner with them and support their cause, in return for which they will refer your business to their donors and other constituents. For each referral, 10% of your profits could benefit the non-profit organizations so they could also benefit from your sales.

Depending on your industry, you can choose one or more types of these referrals to implement.


Step 2: Create a system

Asking for referrals shouldn’t just be an afterthought. It should be a well-planned strategy that is a part of your sales cycle.


What is the right time during the customer journey to ask for a referral?


It depends on your industry. You could ask your customers when you’re invoicing them to complete the job. Or you could ask them after the sale during the follow-up call or meeting. You could ask them while offering them customer service for their queries or complaints. Although you need to take care of the fact that you don’t ask for a referral when your customer is angry or frustrated. They will only agree to a referral if they feel positive about your business and are content with your services.


Make sure you set reminders so that you never forget to ask your customers for a referral. Thus, having a system in place always helps your business.


Step 3: Reward the customers who matter

Did you know that referred leads convert 30% better and have a 16% higher lifetime value than leads acquired via other channels? Customers referred by other customers have a 37% higher retention rate and are 4 times more likely to refer more customers to your brand.


Depending on your industry and the type of customers, you need to understand what is it that motivates your customers to give you a referral and then build a plan around it. You could either provide a discount simply for giving a referral. It could be a 15% discount for providing a few names and contact information. Or you could make it contingent on the referral actually purchasing. This could be a free gift or a discount for referring to a friend who becomes a customer.


For example,  DIRECTV customers who refer a friend that signs up for their service receive $100 in bill credit—and the newly-referred customer also receives a $100 credit.


Step 4: Work on customer awareness of the program

You can’t get referrals from people if they don't know about your referral program. One way to create customer awareness is by creating a page specifically for your program. On this page, you can explain all the benefits and incentives that you offer to your existing customers for bringing in new customers to your business.


Feature this page on your company website. Make sure you emphasize “happy moments”. This is when the customers have had a good experience with your product or service, either after a purchase or after they give you a positive review.


In order to invite customers to your program, send emails to your existing happy customers. These customers will be your first sources of referrals since they are satisfied with your products and services and are loyal to your company.


Step 5: Follow up regularly

Did you know that nearly 50% of top sales performers ask for referrals consistently?


The second biggest mistake you can make with referrals, after not asking for them, is - not following up after you get them.


These warm leads from your existing customers will be the secret to increasing your revenue and growing your brand awareness without spending much time or money to do so. Build a timeline in your customer referral program so that you follow up within two weeks of getting a referral. Otherwise, your prospect might go to one of your competitors thereby turning a hot lead into a cold case.