Referral Programs: A Guide for Small Business
Running a business is hard
But with a good referral program it doesn't have to be
As a small business owner you are probably thinking about helping your current customer or trying to figure out how to increase sales. But you've also got to think about increasing leads, and that is where referral programs come in.
As a business owner myself, I know you just want your customers to be happy with their purchases. But wouldn't they be even happier if they could get something more? One of the best ways to accomplish this is by having good referrals program in place.
In a recent survey of 2,000 business owners by Texas Tech, 83% of the respondents claimed that they have a business that they love so much that they'd recommend it to others, yet 29% do so.
There is a lot of potential and profit in closing that 54% gap, but where do you start? You start by building referral programs. Read on to learn more
Why are referrals programs a thing?
I am willing to bet that you have made referrals to other people and you have had a time in your life when you needed a referral.
This symbiotic relationship leads to a level of understanding. A type of survival mechanism that comes from referral reciprocity. Referrals are also seen as a type of social currency. There are people that crave the social currency of being the go-to person, that connector.
Most importantly, referrals remove risk. Referrals help us solve a problem. They reduce the amount of work we have to do to find the right solution to our problem, and they come prepackaged with answers to common questions: Will they work? Will they know? Can I trust them?
That is the best way to think about referrals, as the ultimate way to lend and borrow trust.
Why do referrals programs matter so much?
Easily attract your ideal customer.
Frankly, most of the people that get referred to me are much closer to my ideal customer because my ideal customer is the one referring them. They understand our business and they know who would make a good fit for us.
Shorten the sales cycle
A strong referral program can significantly shorten the sales cycle. Referred leads were likely sent to you from someone you trust, so you can skip the know, like, and trust stages and jump straight to the try stage.
Increase your premium pricing
Referrals also allow you to diversify your pricing portfolio and charge a premium for your product or service. Customers that are familiar with your brand and have a positive perception of you are willing to pay more.
Magnify Lifetime Value
Referral programs increase the lifetime value of your current customers. A real estate agent might receive 12 to 15 new referrals from just three initial leads if he or she creates an exceptional experience for those first three leads. Therefore, your customers' lifetime value can be multiplied to a great extent if you focus on referrals.
Referrals are invaluable to any business. By ignoring customer referrals or not incorporating customer referral program ideas into your marketing strategy, you're missing out on a valuable source of revenue.
7 Types of Referral Programs
How can you start building referral programs that actually work and what do they look like? That is what I am going to share with you in this post;
Every Client Referral Programs
Every business should have everyday referral offers that work for any type of customer. So what do these referrals look like? How can you make them successful? And what elements should they consist of?
I like to group client referrals into four main types; direct, implied, tangible and community. For more explanation on these referral types see my post, How to Make Your Business More Referable. Every client referral programs are probably the ones you are most familiar with, a gift certificate, refer-a-friend model, donation matching offers, etc.
Each of these types of referrals offer something different, but they all need the same elements to be successful.
Client Referral Keys to Success
First, everybody needs to win or feel like they have won. The person giving the referral should not be the only one rewarded. If that referral turns around and does business with you, they should be rewarded too.
Next, there should always be a strong tie back to your brand. A referral program with a strong connection to your brand should also have a strong connection to your most loyal customers.
The last key is consistency in your approach. You need to be consistently nurturing and developing these programs. Referral programs are not set it and forget and they are not a one time play. These programs need to be scheduled regularly. They should be weekly, monthly and quarterly depending on the program type.
Client Referral Elements
Create easily shareable content
If you want to increase the likelihood that you will be referred then you must make it easy. Build content for your referral programs that are clear and concise so your customers can easily find what they need. This can be done through special referral program landing pages or posts. You can also offer pre-written emails or social content for your referral clients to seamlessly share with their followings.
Have a special process for referral leads
Not all referral leads will be ready to buy right away but they are definitely at a different stage in the sales funnel than your regular leads. They have a far more intimate relationship with your business through direct recommendations and should be treated as such with a special funnel built for them.
Recognition is important to everyone, especially those who go the extra mile
Your referral clients should receive a special thank you note. You can also publicly thank them through your newsletter or on social media. These thank-you notes can also include special offers for just your referral clients.
Appreciation is a wonderful thing; It makes what is excellent in others belong to us as well. - Voltaire
Find Your Referrals Champions
Customers and clients who are already referring business to you are what I call 'Referral Champions'. They are a great customer, they are a returning customer, and they have had a good experience with you. In a lot of ways they are your ideal customers and they know how to connect with someone like themselves.
Types of Champion Referral Programs
Get a handful of your best customers together for a free lunch. The lunches and get-togethers are offered as a thank-you, but the networking that occurs can be mutually beneficial to you, your business, and your referral champions as well.
Gathering all of your champion referrers to meet creates an opportunity for them to build a peer-2-peer teaching relationship. This could have further positive impact for everyone involved.
Exclusive Events & Offers
Create exclusive events or offers just for your high value clients that have continually supported your brand. Track who these people are and target them with something that is more lucrative or enticing than your Every Client Referrals. Highly exclusive offers are more than $10 of your next purchase. These are offers for premium products at cut-rate prices.
Exclusive Content or Advisory Board
You can create exclusive content or an advisory board of your champion customers. For example, the advisory board could facilitate a quarterly meeting to brainstorm ideas on topics such as expand your target market or unique ways to broaden your customer reach. There could even be incentives involved such as product discounts for ideas that win.
Keys to Champion Program Success
Have a specific ask
There needs to be a very specific ‘ask’ for champion referral programs. The more specific you can when describing exactly the kind of customer you are seeking, the better your chance of success.
A client of mine used to take his champion referrals to lunch and show them a list of people he wanted to meet in this client's church or club. This approach was very direct and as a result, the customer had an easy time connecting my client to the names on his list.
Make it easy and reward them
With any champion referral program, you should make your champion referrers' job as simple as possible, and you should definitely acknowledge them and publicly thank them for referring your business.
Ecosystem balancing is the idea that you should take your existing clients and think of everyone else who serves them and find ways to form relationships with those people in order to add even more value.
The benefits for B2B companies
If you work with clients that also work with other professionals or have a B2B model, ecosystem balancing is a great option for you, but not only for referrals. Knowing the individuals in your mutual client’s ecosystem can help you understand what they do for your customer and help you to better serve your customer.
Speaking from experience
A past client of mine, who is an author, wanted to expand her brand. When we were developing her marketing strategy she told us that she employed an executive coach and an accounting professional. So after we built her brand plan, with her permission, I reached out to the executive coach and the accountant and had a quick session with each of them explaining the newly created plan. Afterward, they had a better understanding of our mutual clients business than ever before and were able to better serve her.
They were both so blown away by this process that those two individuals actually became referral sources. They wanted to introduce me to their clients because they realized their other clients needed that level of innovation and collaboration.
Understand the client ecosystem
If you work with any clients that also work with management consultants or executive coaches or accounting professionals, or even have advisory board members, think in terms of how you could actually add value to the relationship that they have with your mutual clients by holding strategy sessions or giving presentations.
By doing this you will have a better understanding of who the other players are in that person's ecosystem, because there is real value in meeting those other professionals. For the right business, the ecosystem balancing approach could be really potent. If you want a deeper understanding, I talk more about ecosystem balancing in my book, The Ultimate Marketing Engine.
One of the most valuable referral systems you can build comes from within your organization. When given the right information, incentives, and tools, your internal team can be a great referral source.
Teach your team marketing strategy
Teach them about the core message, explain who your ideal customer is and what makes your business unique. By doing this, they will feel more involved and have a better understanding of the business. Ultimately leading to a better understanding of your ideal customer and improved internal referral generation.
Make it easy for them to share good news about the business
You can do this by developing simple ways for your employees to share business news and offer their feedback or opinions. For example, you could produce easily shareable content for you internal team to re-post on their social media platforms.
Keep things exciting by offering rewards or contests for referrals. This adds an element of fun to the work and can create a positive and productive internal culture for your business.
Customers and Hiring
Use your referral system for hiring. Some of your best candidate recruitment people are the ones that already work for you and love what they do. Use them as a resource and leverage their insight.
Your Referral Partner Network
Create a strategic partner network by building a best-in-class team that offers services your customers might need.
Start by identifying key players and recruiting them for your partner network. You can find them by polling your best clients and seeing who else they work with, who else helps them, and who else solves their problems for them.
After you have identified six or seven potential strategic partners it is time to begin the conversation. Start by writing, what I call, the perfect introduction in reverse. Which is a process that lets a potential partner tell you exactly how to refer your customers to their business.
The Perfect Introduction, In Reverse
We have customers that we believe could benefit from your services. And we'd love it if you would take a moment and tell us the best way to refer you to our clients. In order to make it easy for you to tell us how to spot your ideal client and refer your services to them we have included a form with this note. We have also included a completed example for your reference.
After you have built the relationship, establish how you can continue to work together to build up each other's referral business.
Some examples are; create content together, create special offers for each other's clients, create co-marketing opportunities, interview each other, host webinars for each other's audiences, hold events together, etc.
I built a great deal of my following by going to organizations that I knew had small business owners as part of their universe and offering to do educational webinars for their audience or offering free eBooks that could be co-branded. These deals helped me gain exposure to new referrals and helped them win with their audience.
Below are some examples of partner network ideas
Notice how they all are unique to the industries involved, provide value to clients, and both businesses involved win.
- A partnership between wedding caterers and florists. This could include a third party, a wedding planner, and they all offer each other's services to their clients that are getting married.
- Service technicians and painting contractors. Upon completion of services the technician can offer 10% off of the painting contractor services, increasing exposure for both parties.
- This one is creative; a financial planner and massage business. Once a year around tax season the financial planner can bring in a masseuse for a 15-minute shoulder massage while the customers are waiting to speak to their accountant. The masseuse could hand out their business cards and give samples of their services. In the mean time the accountant is getting more business because all of their clients will be talking about their unique practice.
Start Your Very Own Expert Club
Create a program for your ideal customer by starting an expert marketing club. You can host a monthly breakfast or webinar for your audience and bring in additional experts to speak.
There's an example in my latest book, The Ultimate Marketing Engine, where I worked with a real estate agent who moved to a new town. She was having trouble establishing her business so we brainstormed how she could start reaching out to the local community.
The result; she started her own networking club for business owners where she talked about social media and marketing because she was also experienced in that field. In these meetings she didn’t sell her business as a realtor at all, but guess who the members thought of when it was time to buy or sell a home? She built her entire massive real estate business by hosting these monthly networking clubs.
Another great example is Derek and Melanie Coburn in Washington DC. They have an organization called Cadre. Derek was a financial planner who wanted a better way to network. He brought a group of folks together and they started curating content for their businesses. This small group turned into a 300-person networking organization. Eventually he sold his financial planning business and now he and his wife run the networking organization full-time.
Lastly, you can create a mastermind group for referrals. This option is very beneficial to B2B industries. If you're a coach, consultant, or marketer it is a no brainer. The referral mastermind approach is similar to the partner network approach, but you work directly with your own clients instead.
How to get started
Start by setting up monthly training for your clients around a specific topic. You can charge money, but my gut feeling is that it would generate so many referrals for you that it would be worth it if you made it complimentary.
Once you build a reliable audience for these smaller training sessions you can start to offer them the mastermind concept. You wouldn’t even need to teach anything necessarily, just facilitate everyone coming together to learn from each other.
Offer even more value
If you wanted to add another layer to your referral mastermind you could offer to run one for your client in exchange for referrals. In this system you would bring their clients together to help them make their business more successful, but it would benefit both parties in the long run.
Through the mastermind process you are naturally sharing referrals with each other. And that is where the magic really happens. When you start working together and build up each other's businesses, leading back to that everybody wins mentality.
Now it’s time to implement some of these referral program ideas and best practices to generate your best customers yet. Don’t wait, get started today!