referrals Archives - Duct Tape Marketing
Find a Consultant Become a Consultant

Tag Archives for " referrals "

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;

Get started with referrals for only $17

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

Offer Lunch

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. 

Peer-2-peer Teaching

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.

marketing strategy

If you prefer to learn at your own pace -check out the Marketing Action Plan Course

Ecosystem Balancing

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

Internal Referrals

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.

Create buzz

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.

Example

The Perfect Introduction, In Reverse

"Hello,


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.


Regards," 

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.

Best Practices

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.


Referral Mastermind

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.

Example monthly meeting agenda

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!

referral engine

How to Create Your Referral Engine

Marketing Podcast with John Jantsch

Today I want to talk about what is probably the highest pay off marketing activity right now. Obviously there is a lot going on in the world today. I find that a lot of people are looking around trying to figure out what they can do marketing-wise. Obviously a lot of businesses are being displaced. With the massive change businesses are feeling it is also being experienced by customers. Long time customers are being disconnected from longtime providers. Customers are being forced into changing their purchase behaviors, how they research, think, and buy.

This can be leveraged as a huge opportunity. Many companies are still looking at how to remake themselves. But I’m suggesting it is the time to look inward. To seek referrals from existing customers and strategic partners as the primary lead generation initiative. Listen to find out how to do this.

Tips discussed during the podcast:

  1. Highest payoff marketing activity right now is referrals
  2. How to ask your existing customers for referrals
  3. Referrals can benefit both your business and customers
  4. Some people may need what you do so reach out to them
  5. Talk to other businesses to strategize and find ways to help each other
  6. Make partnering up with other businesses successful and bring something of value to the table

Like this show? Click on over and give us a review on iTunes, please!

 

Klaviyo logoThis episode of the Duct Tape Marketing Podcast is brought to you by Klaviyo. If you’re looking to grow your business there is only one way: by building real, quality customer relationships. That’s where Klaviyo comes in.

Klaviyo helps you build meaningful relationships by listening and understanding cues from your customers, allowing you to easily turn that information into valuable marketing messages.

Want to learn more? Head to Klaviyo.com/ducttape to schedule a demo.

How to Build an Effective Referral Program

How to Build an Effective Referral Program

You spend a lot of time and energy winning over new business, and once you’ve gotten that prospect to convert, you work hard to create a positive customer experience.

Rather than going out and trying to find brand new customers all over again, it’s much more time- and cost-effective to turn to the customers you already have, not only for repeat business, but to create a steady stream of referrals when they pass you name along to their friends.

It helps to establish a concrete plan for generating these referrals from your existing customers. This is why establishing an effective referral program is so important. We’ll take a look at what a referral program is, why you need one, and how to get the most out of the program you create.

What is a Referral Program?

A referral program is a systematic approach to generating referrals. This is a broad term that can encompass any number of tactics that you use to encourage and gather referrals, either from existing customers or partner businesses.

Know Your Customer

The first step to creating an effective referral program is really understanding your existing customer. What do they like about your business? What keeps them coming back? When you understand their wants, needs, and behaviors, you can create a referral program that draws them in and encourages them to refer their friends.

Fortunately for you, today’s tech-filled world provides marketers and business owners with a myriad of tools to track customers’ behaviors and solicit input through various online channels. The first step is to decide what you’re hoping to get out of your referral program, and the next step is to turn to the data.

Data can help you see what’s really important to your existing customers and who your best customers are. You should create a referral program that’s centered around what your best customers want. Once you’ve identified these best customers through your data analysis, don’t be afraid to reach out to them with a survey to get their input on how you plan to structure your referral program. After all, if they’re your top customers they’ll likely be the ones who are taking advantage of the program by sharing your name with their friends!

Create a Customer Reward Program

An often-used technique in building a referral program is offering a reward to customers who refer your business. There are a number of different ways to go about creating a customer referral program, but all good programs have some key elements.

  • Offer a reward your users want. This might be a discount on their next purchase, a gift card, or access to a special good or service that other users don’t get. It doesn’t have to be an expensive offer, but it does have to be something that your customers will find useful.
  • Double the reward. Customer referral programs are even more effective when you make an offer both to the referrer and referee. Dropbox very famously did this, offering additional free storage to anyone who referred them and to their friends who signed up as a result of the referral, and this approach led to exponential growth for the company.
  • Be transparent about your offering. Customers don’t want to feel like they’re being bribed into saying something nice about you or passing your name along. Make sure that the terms and conditions of participation are clear and simple, and display them prominently on your website. Not only will this likely lead to customers you hadn’t expected participating in the program, it also gives customers a sense of ease.
  • Make it easy. If your rewards program is hard to find out about or difficult to sign up for, then what good is it to you or your customers? Trumpet your referral program on your website, via email, and on social media, and be sure you’re up front about the terms of participating. Make the criteria for joining the program easy to understand, and make the sign up process as simple as possible.

When you create an effective customer referral program, you can more easily create referral champions: enthusiastic customers who will refer your business over and over again!

Encourage Online Reviews

When you think of online reviews, you may feel that it only applies to businesses in certain industries, particularly those businesses that are B2C. The fact is, though, that in today’s online world every business should be concerned with gathering reviews online.

More than 90 percent of consumers look to online reviews for guidance before making a purchase. If you’re not being reviewed online prospects might not even know you exist, or they might write you off as illegitimate because of a scant online presence. Not only that, but your online reviews factor into your SEO ranking, so if you’re not gathering reviews, then Google doesn’t notice you, either.

Include links to your online review pages in follow-up emails to customers, asking them for feedback on their purchase. Of course, part of soliciting reviews is knowing how to deal with unfavorable ones. It’s actually okay to have a few bad reviews—otherwise prospects begin to worry that your “reviews” are all from shills—but you do need to directly address complaints in a timely, considerate, and appropriate manner.

Engage Other Business Owners

The only thing better than building a referral program on your own is building a referral program with another small business owner. As a fellow entrepreneur, they face the same challenges and have the same goals. Why not team up to divide and conquer in your efforts to build a referral base? Finding business owners who have a similar customer profile to yours allows you to tap into their existing network—and vice versa—so that you can double your pool of prospects overnight.

These strategic partnerships work best when the business owner is someone you yourself know and trust; you’ll be recommending their business to your valued customers, so you want to be sure they’ll be providing the same excellent level of service your clients have come to expect from you.

Reevaluate Your Approach

It’s no small feat to get a referral program up and running, but once you’ve established your program your work is far from over! You want to track the results of your program and make changes as appropriate.

Keep track of where your prospects are coming from. Are they finding you through online reviews on Facebook or Yelp? Are they coming directly through your customer referral program? Did a current customer forward them your email newsletter? Has your partnership with another local business resulted in conversions? Understanding how people are finding you allows you to adjust your program accordingly.

If your customer referral program hasn’t taken off, maybe it means you need to market it more effectively. Send an email blast out to existing customers letting them know about it, and include a link in your email signature for people to refer a friend. Or perhaps it’s an issue with the reward; try making a different offer in the coming months and see if your numbers pick up.

You’ll also want to monitor your customer acquisition costs. Hopefully your referral program is driving those costs downward; it should be costing you less to acquire customers via referrals than it would be to go out and approach an entirely new cohort through outbound marketing tactics. If you’re seeing your costs rise or stagnate, that’s another sign that you need to revisit your approach. Perhaps the reward that you’re offering is too costly for you to take on, or maybe your strategic partner’s business is not as well aligned with your business as you had hoped, and you’re not getting the proper number of referrals from that relationship.

Building an effective referral program doesn’t happen overnight. You first have to understand your existing customers—what they want and need—and then build a program that encourages them to spread the good word about your products or services. And then there’s the work of maintaining the program, checking in on your results and making changes along the way. It take some effort, but when you land on an approach that’s effective and generates repeat results, you’ll feel a great sense of accomplishment and see the benefits in your bottom line.

Why Partnerships Are Your Secret Weapon to Building Referrals

Why Partnerships Are Your Secret Weapon to Building Referrals

Generating referrals is the key to securing your business’s long-term success, and it can feel like a pretty massive undertaking. One way to lighten the load and help you to create a more sustainable stream of referrals is to build partnerships.

Why go it alone when you could instead join forces with other business owners and make the referral process easier for both of you?

Types of Partnerships

When you’re thinking about establishing partnerships for your business, there are a few different types of relationships to consider.

  • Strategic partners. These are businesses or individuals who provide a good or service that is directly tied to your business’s product offering. If you’re a graphic designer, you want to have a trustworthy copywriter who you can suggest to your clients.
  • Content partners. A network of publishers, bloggers, and those in need of content for their own sites can help you to spread your business’s name, mission, and unique point of view to a whole new audience of people.
  • Co-marketing partners. These are business owners whose business models have some sort of synergy with your own company. If you’re a plumber, this person might be an electrician or contractor. If you own a wine shop, this might be the owner of the cheese store down the street. As a fellow business owner who’s not in direct competition with you, but does business with a subset of the population who might also have an interest in and need for your business’s offerings, these relationships offer easy cross-promotion opportunities.

Bonus points if you can create partnerships that are unexpected like the ones I outline here; unique partnerships can generate even more marketing buzz!

There are a variety of reasons to consider each type of partnership, and there’s a different value-add that comes from each one. That’s why it’s important to focus on building up a comprehensive network of partners, with different partners from each type of group.

Become a Trustworthy Guide for Your Customers

No matter what business you’re in, there are a lot of other businesses out there that do what you do. While a key part of standing out from the crowd is making sure you have a clearly defined value proposition, another thing that will keep customers coming back again and again is that they see you as more than just a provider of a good or service—they see you as a trustworthy partner and advisor.

One way to become a trusted partner is to tap into your network of fellow business owners who you yourself know and trust. When you’re able to suggest other service providers to your customers, it makes you seem like someone who’s in the know and who truly has your customers’ best interests at heart.

Let’s say, for example, that you own a rare used bookstore. A customer comes in and buys a first edition of a work by their favorite author, but then they want to be sure they’re going to be able to care for their new, beloved purchase. You should be able to provide them with a list of trusted partners—a bookbinder who can help restore the original leather cover, a vendor of special boxes for book storage, or an appraiser who can help set the sale price for another rare book in their collection.

These partners need to be people that you know and trust; you’ll do more harm than good if you suggest another business who does not do right by your customer. But if you do have a strong network of other worthy businesses who can provide a service that’s of real value to your existing customers, then you establish yourself as a trusted source of knowledge in your industry, and the next time your customer is looking for advice or to do business, they’ll be coming back to you.

Move Up the Hourglass

There is a lot of work that goes into winning over new business, particularly if you’re starting from scratch. For someone to decide to go with your company, there are four steps in the marketing hourglass before a new customer even makes their first purchase. And there is a tremendous amount of effort and money that can go into those first four steps.

For someone to come to know and like your business, there are marketing and advertising dollars to be spent. To establish trust, you need testimonials. For the trial phase, you need to create products or services that you’re willing to give away for free in hopes that it converts your prospect into an actual customer.

Establishing partnerships, however, allows you to leap over the heavy lifting associated with these steps. You don’t need to spend excessive amounts of money on advertising and marketing to prospects when you have a solid partnership network who will refer their customers to your business.

A prospect who has been referred to you by a business owner they already know, like, and trust, will have an inherent level of trust in your business. This allows you to jump ahead and move right to the try and buy portion of the hourglass.

Double Your Network Overnight

As the old saying goes, two heads are better than one, and that’s particularly true when building up referrals. You’ve worked hard to create repeat customers, and new customer acquisition is a costly endeavor. You know that other small business owners have put a lot of blood, sweat, and tears into creating their own roster of return clients. Why not come together with a fellow entrepreneur to double your network overnight?

When you establish a strategic or co-marketing partnership, suddenly you have access to another business owner’s entire rolodex. There’s no competitiveness there, because you offer products that are related but different, and so you’re willing and able to share your existing network with this other business owner.

Additionally, you can consider creating new marketing campaigns that are a joint effort. While you double your reach, you can also halve your costs by splitting advertising fees with your new partner. Running joint promotions for your business can allow you to catch the eye of your established customer base, their established customer base, plus those who are new prospects for both of you.

Referrals are the lifeblood of any business. Why go it alone on this important road to generating referrals when you could join forces with another like-minded business owner? Together, you can help each other to create a sustainable referral engine that will continue to benefit you both in the long term.

If you liked this post, check out our Small Business Guide to Referrals.

Five Tips That Make Asking for Referrals Less Intimidating

Five Tips That Make Asking for Referrals Less Intimidating

Asking for referrals can be tough. It can feel like you’re being pushy or imposing on someone’s time. But in reality, the majority of happy customers are more than willing to give a referral when asked.

While the first hurdle in asking for referrals is getting over your own insecurities or mental blocks associated with the process, here are five additional tips that make asking for referrals less intimidating.

1. Provide Great Service

This one might seem obvious, but the first step to feeling good about asking for a referral is providing the best service possible. Of course you’re going to feel sheepish approaching a customer who had a less-than-stellar experience with your company. But if you are honest, responsive, and helpful from start to finish, then why shouldn’t your customer be excited to pass your name along to others?

We’re all human and mistakes do happen. There will be times when a customer has a sub-par interaction with your business. That doesn’t mean that you should run away and consider that customer a lost cause. If you are proactive about reaching out, apologizing, and asking for a second chance to wow them (and then delivering on your promise the next time), you might just create an even more loyal customer. People appreciate honesty and businesses who are willing to go the extra mile, so when you make that effort—even if it’s after an initial mess-up—you should feel confident asking for a referral after you’ve proven your mettle the second time.

2. Start a Conversation

Sometimes it can feel difficult to ask for a referral because it feels like you’re selfishly asking for a favor out of the blue. One way to mitigate this feeling is to establish a meaningful conversation with someone before you ask them for a referral. Send them a congratulatory note when you see on LinkedIn that they reached a milestone in their career. Forward them an article that you think would be of interest to them. Donate to a Kickstarter related to their business’s newest product launch. There are lots of simple ways that you can show support for someone that will make asking them for a referral further down the line feel like more of a part of a conversation rather than a demand coming out of nowhere.

Of course, there is an art to doing this. You don’t want to make a grand gesture of kindness and then turn right around and ask for a referral. No one wants to feel like they’re being bribed into saying something nice about you and your business. But if you show a genuine interest in what someone is doing in their business life, they’ll feel even more open to saying something genuinely kind about you when you ask.

3. Provide Various Ways to Gather the Referral

It’s always best to ask someone for a referral directly; people are far more likely to refer when they’re asked than they are to go out of their way to do it on their own (even if they had a positive experience with your company). However, you want to be sure you’re making it easy for customers to refer you, whether you’re asking them directly or not.

Include a link to sites where customers can provide a review (whether that’s Yelp, Facebook, or a tool like Grade.us) in your email signature. Customers who see this reminder each time they communicate with you might be more likely to review you when they have a spare minute if they’re presented with the opportunity to do so on more than one occasion. You can also create a “refer a friend” button or page on your website. This makes it easy for you to collect referrals from customers by sending them a link to the page, while it also allows customers you haven’t reached out to directly to still submit a referral if they feel so inclined.

4. Create Partnerships

One of the best ways to generate referrals is by creating partnerships with other business owners. They’re facing the same struggles as you when it comes to generating referrals, so it’s easier to ask them for referrals. They understand how intimidating it can be to ask customers to pass your name along, and so they’ll be all the more willing to do so for you and your business (and you will be willing to do the same for them).

Work to find businesses that are providing a good or service that makes sense with the work your company does. If you own a shoe store, talk to the cobbler down the street. If you’re a DJ for weddings and events, speak with the local party equipment rental company.

Asking a fellow business owner for referrals is not only a bit less intimidating than asking a customer, it also establishes a steady flow of referrals. Business owners will continue to come across prospects who are in need of your services, whereas past customers might only meet someone every once in a while who’s looking for the good or service you provide.

5. Be Specific In Your Ask

Some people are hesitant to ask for referrals when it seems like a broad ask: “If you know anyone who needs what I do, let me know!” One way to counter this is to do a little research.

Let’s say you’re a website designer who already has a list of local businesses you’d like to target. You’ve looked at their sites and have some specific thoughts on how to strengthen each of their designs to help them grow their business.

Go onto LinkedIn and see if any of your current clients have connections at these businesses. If so, you then have a specific referral ask that you can make. Reach out to your current client and say, “I see that you know the marketing manager at Company X. I’ve been wanting to get in touch with someone over there about their website design; I’ve got some concrete ideas about how to organize their site that could help grow their sales. Would you be willing to put me in touch with your connection?”

This serves a few purposes. It shows to your current client that you’re serious about your business, know your stuff, and do your research. This makes them feel more at ease in referring you to their connection. It also makes you feel more empowered in your ask. You know exactly what you want, and you’re confident enough in the services you provide to be unafraid to ask for that referral.

Asking for referrals can be scary. But if you provide excellent service to your customers, there’s no need for you to feel shy. People are excited to spread the word about a great business, and if you’re able to drum up the courage to ask for referrals, you’ll be sure to get great new leads for your efforts.

If you liked this post, check out our Small Business Guide to Referrals.

What Are Referral Champions and How Do You Create Them?

What Are Referral Champions and How Do You Create Them?

Every business owner knows that the key to generating referrals is creating a positive customer experience. When someone has a great interaction with your brand, they’re more likely to go and recommend you to their friends or colleagues.

One recommendation can mean a lot to your business, but what if you could turn that happy customer into a referral champion: someone who refers your business again and again?

It is possible to foster relationships with clients so that they become referral champions. Read on as I take a look at the steps to nurture these relationships and keep customers referring your business for years to come.

What is a Referral Champion?

Simply put, a referral champion is a happy customer who refers your business to more and more friends. Of course, there’s a bit more to it than that. A referral champion is likely someone who’s had more than one interaction with your business. A customer wouldn’t necessarily recommend a dry cleaner after visiting the shop just once, but if they take their shirts there each week to be cleaned and are consistently happy with the results, they’ll be more likely to suggest the business to a neighbor.

The other alternative is that it’s someone who had a truly remarkable experience with your business. Back to the dry cleaning example: a woman has a formal event this evening. She’s gotten a black ink stain on her cream wool dress, and it needs to be cleaned by that night! Her regular dry cleaner is way across town—she doesn’t have time to get there—so she turns to you. You’re able to remove the stain and have the dress ready to go by 5pm. That’s the kind of exceptional experience that may lead her to refer you based solely on that one interaction.

This is why you often hear me talk about the importance of creating an amazing customer experience. Whether someone is going to use your business just once or come back again and again, the experience must be high each time. It can be the first step to establishing a great referral champion relationship.

How Do You Find Them?

So now we understand what a great referral champion looks like, but how do you identify your potential referral champions from amongst all your customers? This is where calculating Customer Lifetime Value (CLV) comes in. The CLV represents what a customer will be worth to you over the entire lifetime of your interactions; this takes you beyond looking at a single transaction and helps you to see the bigger picture.

We’re able to take that formula a step further to include a customer’s referral value (CRV) as well. V. Kumar, a professor at Georgia State University’s J. Mack Robinson College of Business, and his colleagues offer a comprehensive approach to calculating CRV, which allows you to identify the number of referrals you can expect to get from each customer based on their prior behavior.

The formula also takes into account whether or not those referrals would have found you on their own without their friend’s recommendation. If that customer would have done business with your company anyway (which surveys showed was the case about half of the time), then the overall value of the referral is lessened.

Make it Easy to Become a Champion

Now that you understand the nature of your relationship with each customer, you can begin to get strategic about how to create the strongest referral champions possible. Some of your customers have a high CLV—they’re doing a lot of business with your company—but they haven’t yet become strong referral champions. Most happy customers say that they’d be willing to put in a good word for a business, but not all of them follow through.

In order to create referral champions, you want to make the referral process as simple as possible. Your customers are busy people and don’t have time to search for ways to refer you. You need to put that information front and center. Call to action buttons on your website, links to your Yelp or Facebook profiles in your email signature, and simple forms that ask for as little information as possible will all reduce friction in the referral and review capturing process and will drive your happy customers to share their positive feelings toward your brand.

Take Care of Your Existing Champions

There are some customers that already have a high CLV and CRV—they’re giving you a lot of their own business and are consistently referring you to friends. For customers like this, you want to be showing your appreciation for both their return business and steady referral stream.

There are a number of things you can do to thank them. Consider hosting an exclusive event for your best customers. Present them with a coupon to use on their next purchase, or with a gift card to their favorite local shop. Send them a free copy of your latest white paper or eBook on a topic they’d be interested in. Even a personalized phone call or email can go a long way.

The important thing here is to make sure you’re keeping the customer experience highly personalized. Your best customers don’t want to feel like they’re getting generic communications—they went out of their way to refer you, so you should go out of your way to send them a meaningful thank you.

Incentivize the Process

Whether someone is already a strong referral champion or is a happy customer with the potential to become one, instituting a referral program can be a good way to ensure that your customers continue referring your business well into the future.

There are a few tricks to creating an effective referral program. Make sure that the offer you’re making is one that customers will actually find beneficial, and create incentives for both the person doing the referring and for their friend. This will make it all the more likely that once that friend becomes one of your customers, they will turn around and refer one or two of their friends.

Referral champions are invaluable to your business. Each and every referral counts, so when you’re able to create a customer that generates multiple referrals over the years, that’s like striking gold. Keeping the customer experience high, making it easy to refer their friends, and going the extra mile to provide personalized service are the hallmarks of an effective referral champion program that will keep you in business for many, many years.

If you liked this post, check out our Small Business Guide to Referrals.

make business more referable

How to Make Your Business More Referable

“How can I make my business more referable?” I get asked this question all the time but the question people should be asking is “who do people refer?” Having the answer to that question will better prepare you to take advantage of this powerful marketing tactic.

Having been in this business for decades, I’ve come to the conclusion that people make referral decisions the same way they make purchasing decisions. They decide something is the right price and fits their needs (which is the logical part), and then, they determine they will have more life, impress their friends, boost their confidence, and so on (the emotional part).

Here’s the thing – emotion typically comes first.

In order to increase your odds of getting referred, you need to tap into this emotion/logic formula. People have to believe you can help them and that you will deliver what is promised (logic), but, they must also feel good about helping you, trust that their referral will be treated well, and genuinely like the experience they have with your business (emotion.) The businesses that get the most referrals solve their customer’s problems while also providing a fun or unique experience.

If you are not getting referrals naturally, take a deep look at the previously mentioned formula and how it applies to your customers.

Now, let’s say you run a more serious business, like a law practice, that doesn’t typically have anything fun about it. In this situation, I’d think of ways that your business can make a genuine emotional connection with your clients and make that one of core elements of your business.

I have a lot of opinions on this topic, so below are a few tips I’d recommend implementing to boost the odds of your business getting referrals.

Tips to make your business more referable

Create a referral engine

No, this is not a shameless plug for my book. Creating a referral engine is absolutely essential if you want to bring in consistent referrals for your business. The key to getting more referrals from your existing clients is to create and focus on a referral process that you operate on a consistent basis. Once the process is in place, it will be easier for your customers to refer your business.

I usually suggest that every business build multiple referral programs and offers in each of the following four types.

Direct referrals

With a direct referral program, you simply state to your existing clients an offer for the act of creating a referral that turns into a client. “Refer a friend to our marketing firm and we’ll give you a free website review” is an example of how to use this approach. It’s motivating and describes what the business does.

Implied referrals

This type of referral is terribly underutilized. In an implied referral program you want to do things that make it very obvious you are doing work for someone, without necessarily asking for a referral. This sets up a situation where a friend or neighbor might simply ask you to refer the person running an implied referral program.

Tangible referrals

With a tangible referral, you put something in the hands of your customer that has real value and that they can give to a referral source. The thing we like about this tactic is that you can run it three or four times a year as a low cost, low exposure way to keep referrals top of mind.

Community referrals

There are so many community organizations that need and deserve your support. When you partner with a non-profit player and support their mission, events, and needs you can also offer promotional support by running the occasional promotion that benefits your partner. “When you buy this week or sign a contract this week, 10% of the proceeds go to benefit our community partner” is an example of how this would work.

You can build one program and then simply keep adding to it until you have referrals coming from numerous sources while promoting how referable your business is.

Show your personality and rock the customer experience

People don’t generally remember businesses, they remember other people. Having a personality is essential for getting referrals. When you can develop personal connections with your business, you give them a reason to remember and recommend you to others. Make their experience with your business one that they will never forget.

Target your influential customers and related businesses

Seek referrals first from your most influential customers. Note, these people may not actually be your best customers, but they are the people whose opinions carry the most weight with others.

I’m a huge advocate for building up a strategic partner network for your business, and it’s important to use these partners to boost your referrals. These businesses should provide complementary services to your own.

Build relationships

Building off the importance of strategic partnerships, it’s imperative that you focus on your relationships in an effort to boost referrals. This takes time, but it’s a must because many of your most influential customers won’t provide referrals until you gain their trust.

Offer incentives

Incentives can be tricky. For example, I wouldn’t recommend money offerings alone for referrals as they are poor motivators. Don’t be afraid to test offers to find out what works best. Sometimes trial and error gets you to the best solutions.

I personally believe is far better to work on making your business more likable before you offer any kind of incentive for referrals, but incentives are good to keep in the back of your mind when needed.

Make it easy for people to refer you

Make the ask. What do you have to lose? When you go in for the ask, be sure to do it at the right moment, and that moment is when your customer is likely to be happiest of all, and that is the moment right after they buy something. Use a post-purchase survey online or encourage your customer to write a review. The more you can do to get someone to recommend your business right after purchase, the more referrals you can generate.

Be sure to create tools, education, and follow-up systems as well to rock the referral marketing world.

What makes things catch on?

In Jonah Berger’s book, Contagious: Why Things Catch On, he explains there are six essential factors that make things catch on. These include:

  • Social currency: We share things that make us look good or help us compare favorably to others.
  • Triggers: Ideas that are easy to remember spread. Viral ideas attach themselves to top-of-the-mind stories, occurrences or environments.
  • Emotion: Emotions move us in irrational ways. This means that when we care, we share.
  • Public: People tend to follow others, but only when they can see what those others are doing.
  • Practical: Humans love giving out advice and tips, but especially if they offer practical value.
  • Stories: People do not just share information, they tell stories.

Take a look at the factors above and see how you may be able to apply them to your business (you don’t need to address all of them to be effective, but strive for at least a few.

Wha have you implemented in your business to increase referrals?

If you liked this post, check out our Small Business Guide to Referrals.

referral generation

Create a Referral Engine That Works Every Day

I’ve written about this topic many times, but it just never get’s old! (Check out the referral marketing archive on Duct Tape Marketing) The fact is, although I’ve been writing about the idea of referral generation for years, it always remains relevant, no matter what marketing trends and technologies come and go.

Getting referrals can often seem like a daunting task for marketers, but it doesn’t have to be. I’ve put together a list of recommendations you can use to teach your clients how to build referrals (not to mention teach yourself a thing or two).

Teach referral generation

It’s imperative that you teach people the best way to refer you and that you teach your clients how to build referrals (hint: showing them this blog post may be a good place to start). You need to make it easy for people to refer you. If there is any ambiguity, your chances of losing a referral drop significantly.

Let your customers know exactly what your marketing action steps will be if they refer a lead to you. In some cases, your lead sources will be motivated by rewards, but mostly they want to know you appreciate their efforts.

Build a team of champions

I’ve found that the greatest source of lead generation is a happy customer. A happy customer is much easier to turn into a referral champion than an unhappy one.

As your champions refer your business, be sure to do something that makes them feel special, such as a referral appreciation event, or sending a referral source a gift card to their favorite coffee shop. When it comes to showing your champions you care, a little bit can go a long way.

Look for moments of truth

Any time you get a review, testimonial, or compliment, get a referral out of it. Keep in mind that once you’ve set the referral expectation, you still have to deliver the goods and delight the customer.

Make sure you build and document your process for actually collecting these leads.

Create a review funnel

As mentioned earlier, it’s important that you make it as easy as possible for customers to refer your business. Consider using a tool, such as Grade.us, that makes it simple for customers to write reviews for 3rd party sites, like Yelp (see Grade.Us example below). A review funnel takes the guesswork out of giving a referral and just naturally takes your customer to a place where giving a referral is simply just the next step in the process.

review funnel

review funnel

Stay top of mind

Once you have a happy customer, it doesn’t stop there. It’s important to stay top of mind with your customers and delight them. Finding ways to do more business or get more referrals from your existing customers is a smart way to build a business.

To make sure you don’t ignore your customers, which unfortunately happens more often than not, consider creating a calendar of contacts and finding a way to make certain that your customers, referral sources, and hot prospects never go more than a month without some form of contact.

Stay top of mind by sending emails with referral incentives, holding referral-based contests for people – the sky’s the limit. Be creative with how you want to engage your contacts to get those referrals.

Additionally, it’s amazing how far a simple phone call can go. If you haven’t spoken to a valuable contact for over a month, call them to check in and see how they’re doing. A personal touch like that can go a long way and can help to bring in referrals organically.

Use content for referrals

Great content not only helps people find you and buy from you, it’s also a great tool when it comes to establishing strategic referral relationships. Everyone needs content, so if you can be the partner that brings content to the relationship building table, you win!

When it comes to content, I like using the following five methods to get a referral relationship going.

Invited content – Reach out to potential strategic partners and offer them exposure on your blog. This is a great way to get referred and introduced to a strategic partner’s community.

Co-branded content – If you’ve created a “must have” piece of content in your own lead generation efforts, take it to potential and existing partners and offer to let them send it to their community and cobrand it with their contact details. It’s a win-win!

Sponsored content – One of the most powerful ways to get referrals is to get asked to present your expertise to a room full of your strategic partner’s best clients.

Curated content – Select a big topic and bring in partners who are willing to introduce their networks to a day-long event. Fill the event with partners that will equate to a group referral.

Incented content – Something as simple as a photo or video contest rewarding the person who gets the most votes is an effective way to create some buzz while getting some great referrals.

Have you started implementing a referral program at your business? What are your favorite tactics to use to bring in referrals?

Many of the ideas in this post receive even more coverage in my Wall St Journal best-seller – The Referral Engine.

If you liked this post, check out our Small Business Guide to Referrals.

The true power of referral marketing and how you can use it today to grow your small business fast

Referral marketing, also known as word-of-mouth marketing, is one of the oldest (and still most effective!) marketing strategies out there. It’s basically about people buying your products and services because somebody they trust recommends it to them.

Word-of-mouth is a subtle process that is present everywhere in our daily lives. The reason for which a lot of small businesses are not considering it more is because of the simple fact that it’s not that visible like a TV commercial for example (I like to call this the “Super Bowl effect”).

Nevertheless, study after study, word of mouth always shows up like the most powerful form of promoting your business. Just look at the numbers below, from a study performed by the Nielsen Company (a leading global provider of information and insights into what consumers watch and buy).

Basically, the graph shows that 90% of consumers around the world say they trust word-of-mouth from their friends and family above all other forms of advertising. Also, 70% of them trust other consumers’ opinion posted online. These numbers alone are gold and speak volumes about the power of this (sometimes disregarded) marketing channel.

But why makes referral marketing that special?

1. It comes with the persuasion factor already included!

Think about that: when was the last time you went to a new restaurant because your friend couldn’t stop talking about how good the food was when he went there? Or what online program (course or mastermind) have you bought after seeing the amazing results another small business owner had after signing up and implementing what he/she learned? If you are like me, I bet there were a few!

So, basically, referral marketing works that well because people trust the opinions of other people they respect and love, like their friends, family or other people they admire.

2. The laser targeting aspect of referral marketing!

If you tried (or want to try) Facebook ads, you know that if you don’t get your target audience right, your entire ads budget will go to a waste! It’s like throwing spaghetti on a wall with your eyes closed and just pray that some of them will stick!

But with referral marketing, all the targeting is magically and perfectly done for you. Many of your clients will recommend you are amazing products and services to those friends and family members (and social media followers) that WANT it and NEED it the most. So you see? Your targeting can’t get any better than this (and without any efforts on your part whatsoever!).

3. The reach of referral marketing today can be crazy high.

I remember that several years ago (ok, many years ago!), when I was a little girl, my father would not hire any handyman to do work around the house unless it was somebody highly recommended by a friend. So every time he needed one, he picked up the phone and called at least 10 friends before getting a referral.

But today, if I need to urgently buy a laptop or if I want to try a new gym or if I want to hire a trusted virtual assistant, all I have to do is to post my message on social media (to my friends or in the groups I am part of). I will have a reply in the next 10 minutes or so.

With a simple Facebook post or the Instagram selfie, everybody can reach hundreds of (trusted) people in just seconds. This is also valid in the opposite way: a very good testimonial about your brand or products/services, posted on social media, will reach hundreds (even thousands) of potential clients in minutes.

Ok, so we covered why referral marketing is so effective and why you should use it to grow your small business fast with zero impact on your (small) budget.

Now let’s see exactly HOW you can take advantage of this massive opportunity. Because all the theory is useless unless it comes with a plan to implement it.

But first, let’s get clear on a fact: your business will not benefit if your only referral sources are only your close friends and family, right? There are also other sources of information that are trusted by the average consumer today and that can also bring you more sales that you can handle (nice picture, right?).

And these sources are:

  • customers’ opinion/reviews posted online and
  • influential bloggers in your niche.

Then, please note that you, as a small business owner, have a huge advantage over any big company out there: you are much closer to your customer and you can deliver your personal attention to each of them and thus make them feel special for being your clients. And this is one of the most effective ways to benefit from the word of mouth marketing.

With that huge advantage in mind, here are the best ways to use referral marketing to your advantage:

1. Focus on one thing: having a very good product or service.

If your product is not doing a good job at solving your clients’ needs, not only you will not gain any advantage from word of mouth, but you are going to even turn it against you. Because if a good testimonial can reach people in minutes, a bad one will only need a fraction of a second! Bad news always travels the fastest.

2. Make it personal.

Get to know your clients, remember their names and purchasing habits, start a conversation with them and know more about their status and their desires, greet them like you would greet an old dear friend – all this will make them feel welcome and special. And this type of feelings always leads people to share it with everyone they know.

3. Exceed their expectations.

If you want to really achieve stellar business results fulfilling your clients’ needs is not enough anymore. The market is full of small businesses just like yours that also do the same thing. So go the extra mile. Get creative, is anything you can add (even a little something) that would make their day extra special / make their life a little easier just because they bought something from you?

4. Have a process in place to manage clients concerns and unhappy clients.

This will give you two major things: you will always improve your products and services and you will also avoid bad testimonials that can do a lot of damage.

5. Proactively ask for testimonials and referrals.

Don’t make the mistake to wait for all the good testimonials to magically come to you out of the blue sky. People are busy and they have other things on their minds so even if they were very happy with their purchasing experience from you, they won’t think to send you their testimonial unless you ask. So don’t be afraid of asking. If you did a good job and they are happy clients, they will be willing to help you.

Also, if in any conversation (online, text messages, on Facebook groups etc) somebody is telling you something positive about your brand/business/product make sure you record that. Print screen, take photos, save links, do whatever it is required to do. In this way, you’ll never run out of (fresh) testimonials when you need them.

6. Make it easy for people to spread the word (bonus points of you can also make it fun!).

You can start by simply asking questions that make it easy for them to fill in a nice testimonial (like “What feature of the product have you enjoyed the most and why?”).  Then you can always go further:

  • send an email campaign about your business in which you encourage your past clients to forward your message to their friends
  • if you have a blog for your small business make sure that all your posts are easily shareable
  • incentivize your clients to refer your services by giving them something back in return (like a nice discount on their next order, a gift card, an e-book or something else you know they would like)

7.Use all the testimonials effectively.

Now that you have all those great and compelling testimonials, use them! Feature them strategically on your website (your Home page, your About page, any sales page / opt-in page) and also share them on social media. Remember: 64% of consumers make an online research before deciding to buy, so that is a very good reason to get persuasive in every way you can.

8. Stand out from the crowd and be visible to your clients.

We all know that people love to buy from the best, the experts in their field. It gives them confidence and it makes them feel good about themselves. And this is exactly how you would want your clients to feel like after buying from you!

Also, no matter what type of business you have, providing valuable information and advice to your audience (actual and future clients) by writing a few effectively placed articles is the fastest (and easiest) way to become known as an expert in your field.

So make it your goal to write at least 5 well-written articles at have them published on good quality websites that you know are valuable for your audience.

To make this very easy for you, I have put together all the steps to take to have this done in less that 2 hours. Download your FREE strategy cheat sheet right here (only available to the readers of ducttapemarketing.com):

http://passioncreativitybusiness.com/welcome-readers-ducttapemarketing-com-2/

If you follow the advice I gave you in this article, if you take action, I guarantee you that pretty soon you’ll get messages saying “I am reaching out because I have heard so amazing words about you and your product and I would very much like to buy it also. Where should I send my money to?”. And that, my friend, will be a perfect moment and then you’ll just know that you really made your small business work for the long term.

If you liked this post, check out our Small Business Guide to Referrals.


About the Author

Olivia Angelescu is a launch & growth strategist for BUSY (or just Impatient) small business owners who want results FAST! No more waiting for months and months to build your freedom business! Why not do it now? Olivia is working with her clients by both 1-on-1 coaching and online training. You can find her at www.passioncreativitybusiness.com and on her Facebook page

How to Optimize Your Referral Program and Boost Your Sales

Referral marketing looks like the elixir of marketing. You are making your customers refer their friends to your business at no extra cost.

Doesn’t that sound great? If you are a business owner, I know it does.

But here’s the thing: creating a referral program isn’t hard. With software companies like ReferralCandy and Referral SaaSquatch, it has never been easier to create a referral program for your company.

What’s hard is to make it work for your company.

In most cases, your customers won’t care about getting a friend of theirs sign up for your company’s offer (whatever you have to offer) because they don’t see the value in it. It’s not that your referral program is bad, it’s that your customers won’t be motivated to use it, even if you give away a lot of money.

Your referral program needs to have a few specific attributes that will make your customer want to share it with their friends. As you will discover, it’s not money.

In this article, I will show you what really motivates your customers to share something with their friends, and how to apply it to your referral program.

(And be sure to check out the bonus resource at the end of this article with a checklist of all the things you need to do to implement each optimization for your referral program.)

What Makes People Refer Other People

Before we get the nuts and bolts of the referral program optimization, we need to start by knowing what will make your customers refer their friends. We need to get inside the psychology of your customers to understand their motivations. Even if you follow all the common “best practices” that are all about the web, if your program doesn’t respect certain psychological principles, it will likely fail.

The first thing you need to know is that, to your surprise, there’s a whole area of the psychology and economy fields that is dedicated to studying what makes people refer other people. This field is known as “Behavioral Psychology“.

One of the world’s foremost experts on this particular topic is Jonah Berger, a pretty smart guy from Standford who wrote what’s probably the best book on the topic. He called his book, not surprisingly, “Contagious: Why Things Catch On“.

In this book, Berger explains there are six essential factors that make things catch on. He sums up these factors in a word-playing acronym he calls STEPPS, which stand for:

  • Social currency: We share things that make us look good or help us compare favorably to others.
  • Triggers: Ideas that are easy to remember spread. Viral ideas attach themselves to top-of-the-mind stories, occurrences or environments.
  • Emotion: Emotions move us in irrational ways. This means that when we care, we share.
  • Public: People tend to follow others, but only when they can see what those others are doing.
  • Practical: Humans love giving out advice and tips, but especially if they offer practical value.
  • Stories: People do not just share information, they tell stories.

These six factors are the psychological triggers that will make your referral program succeed. If you understand these principles, and if you use them in your referral program, your customers will share it with their friends.

This doesn’t mean your program needs to hit each of the six factors. You may be able to fit only one or two. The point isn’t whether you are able to fit them all or not, it’s about making your program more likely to be spread out through your customers.

In the next section, I will show you a few ways you can implement these attributes to optimize your referral program.

How to Optimize Your Referral Program

Start with Why

Simon Sinek explains in his fantastic TED talk that companies like Apple have been able to achieve the extraordinary success that characterizes them because of one simple distinction: they started with why.

Let me explain: companies that understand the purpose of their existence (that is, their why), are able to attract customers who share their fundamental beliefs. By saying why you do something, you can differentiate yourself from the rest.

As Sinek explains, “People don’t buy what you do. They buy why you do it.” (If you hear his TED speech, he will repeat that line so many times you will remember that phrase for a long time.)

Focusing on the why of your referral program is directly tied with two of Berger’s STEPPS factors: emotions and stories. People share when there’s a story that emotionally affects them. By having a clear why you can tap on both attributes all at once.

Sinek goes to explain that when Apple promote their products, they don’t say:

“We make great computers. They’re user-friendly, beautifully designed, and easy to use. Want to buy one?”

If they did that, no one would care. Have you ever hear someone say they love their HP, Dell or Lenovo computers because they are “great”? No, you don’t even hear someone defend one of those brands over the other ones. They are almost electronic commodities (at least for an Apple user like me).

That’s the exact opposite of what happens with Apple. Their customers feel so aligned with their most loyal customers are pejoratively called “Apple fanboys“. They like Apple so much they even stay up all night outside their stores waiting for the doors to open so they can get their products first.

This is how Apple communicates their products:

“With everything we do, we aim to challenge the status quo. We aim to think differently. Our products are user-friendly, beautifully designed, and easy to use. We just happen to make great computers. Want to buy one?”

That’s a huge change with the former one, and it’s the one that makes all the difference.

If you want to apply the same kind of mindset to your own referral program, you need to understand your own why.

First, you need to know why you do what you do, business and product wise. Then, you need to know why you want your customers to refer their friends. It’s not because you make “great products” or because “it’s cool to share stuff and get $10 off a future order”. The why behind your referral marketing program has to be aligned with your customers’ valuesbeliefs, and needs.

Let me give you an example. The referral program that helped Dropbox grow so fast early on had a clear why. It wasn’t explicit, just like the one from Apple, but it’s one you could easily understand as soon as you used it.

If you look, they didn’t say: “We built a bulletproof, scalable, cross-platform cloud storage architecture to make file sharing easy. Join us!” (it hurts my eyes just to read that).

They said: “Listen, you don’t like to carry your USB around whenever you want to take a file out from your computer. You want a beautifully designed and easy-to-use way to sync all your files in the cloud and do it without having to think about it. We want to make your life easier. Want to spread the love?“.

Thanks to that flawless experience they created and amazing value proposition they offered their users, they were able to create a referral program with a 2-sided incentive which helped them permanently increase their sign up rate 60%. In April 2010, for instance, their users sent 2.8 million direct referral invites.

How to Optimize Your Why

Start by asking yourself, why are you doing this? Why do you want your customers to refer their friends? What value do they get in return? Don’t focus on the explicit value, like a $10 off.

Also, based on your ideal customer, do they share their problems with their friends? If they don’t, then why would you want to use a referral program? If they do, why would the share your products with their friends?

Finally, you need to think: is referral the way to go? Do you have enough customers? Even if you do everything right, having a referral program with only a few dozen customers won’t make a difference. Wait until you have a few hundred, so they can start making the ball rolling.

A good way to know if there is a possibility your referral program will succeed is to see if they share your products on social media without asking. That’s a big commitment (remember, social currency), and that shows a lot of passion, both about their problems and needs and for your products.

With the answers you get from these questions, you will achieve two things:

  1. You will be able to communicate your referral program benefits better; and
  2. Your customers will be truly motivated to use it, helping your company grow.

Explain the Benefits

A referral program has a clear benefit for your company: you get new customers without doing any extra marketing or sales. That’s great for you. But what about the customer? When they share something with their friends, they can’t risk the chance of looking like a fool. They need to be able to help themselves and most importantly, their friends.

You can achieve this by being clear on the benefits your customers get. Think, what is it for them? What do they gain by referring their friends?

If the problem you are solving is big enough for them, and if you have the right incentives in place, they will refer their friends to you. If you don’t, they won’t.

This is tied with Berger’s Social Currency and Practical values. Remember that your customers will want to share something it makes them look good in the eyes of their friends. Also, they want to share something that’s of good use, something that will improve the life of those that are being referred to.

For example, the referral program of Airbnb focuses on the main benefit of anyone who uses their service: getting a good accommodation deal. If hotels weren’t so expensive, people wouldn’t necessarily use Airbnb. But since Airbnb help you save a lot of money on rent when traveling, they put that value as the main benefit in their referral program page:

Thanks to their referral program, Airbnb has been able to drive a 900% year-on-year growth for first-time bookings. No other acquisition channel in their company was able to get those results.

How to Optimize Your Benefits

Make a list of your referral program’s benefits. Since you should already know you’re why it won’t be hard to understand what you offer and its benefits.

With that list, you need to think, what do your customers really get from you? Is it saving money? Is it saving time? Is it a better experience? Is it showing off?

In order to find the true benefit, apply the “5 Whys” technique. That is, for every benefit you find, ask 5 times why it’s a benefit.

Once you do that, you will get to the bottom of your benefit. Then, you will only need to show it clearly on your referral program page.

Show It In the Right Time and Right Place

You may have the world’s best referral program, but if your customers can’t find it, it won’t make a difference. Your customers have to be able to find the program, not only easily, but when they most need it.

Let me break you down that last sentence, because in it lies the difference between a successful referral program and one that has no impact whatsoever.

  • It has to be found by your customers;
  • Prominently;
  • When they most need it.

Why does it have to be found only by your customers? Because they are the only ones that will care about it. Since they know your company and the benefits of doing business with you, they will want to share it with their friends. But why a non-customer who hasn’t “feel” the benefits of your products would ever want to share them with their friends? There’s no social currency and practical value.

Moving on, where do most companies show their referral program? Usually, somewhere in the user’s profile page, and in some other cases, in the site’s footer. It makes sense, to be honest. If you showed it on your homepage to anyone who visits it, it will be ignored. But if you show it where your customers hang out, then it makes sense to make it prominent and easy to find.

Finally, there’s timing. Instead of just hanging your referral program in your footer so basically no one looks at it (I mean, who looks at footers anyway?), you should show it to your customers when they are most likely to find its biggest practical value, when they’re the most emotional, and most importantly, when it’s attached to the right trigger (like after they finish a purchase). By showing them your referral program when they are most likely to care about it, you’re triggering the right action (i.e. refer their friends).

One of the most effective ways to fit all these three criteria is to use email autoresponders based on certain actions or events (sometimes these are also called triggers, but they have a different meaning that Berger’s one).

For example, if your customer just left a review on your product page (assuming it’s a good one), you could send them an email thanking them and showing them your referral program. Or if one of your customers just used your tool after a certain amount of time (assuming that means it’s a positive thing), you can repeat the same process mentioned before, just like Headspace does.

How to Optimize for Timing and Prominency

Start by defining your triggers. What is the key moment where your customers really get to see the value of your products? When is their “aha” moment? That’s your trigger.

This is the moment when you want to show them your referral program, and make it easy for them to access and see.

Besides that, where do your customers hang out? Is it on a Facebook page? Is it on a specific part of your website? Is it, like Airbnb, in a users page?

Wherever it may be, make sure you show it prominently, and with its benefits.

Now It’s Your Turn…

If there’s anything you need to remember when thinking about launching your own referral program is this: creating one is easy, making it effective isn’t.

This article has shown you three science-backed ways you can make your referral programs more powerful. Now, the question is: are you ready to take these recommendations and apply them to your program?

If you liked this post, check out our Small Business Guide to Referrals.


About the Author

Ivan Kreimer is a content marketing consultant that helps SaaS business increase their traffic, leads, and sales. Previously, he worked as an online marketing consultant helping both small and large companies drive more traffic and revenue. You can follow him on Twitter and LinkedIn.

1 2 3