Why You Need A Customer Referral Program

By Mike Linville
Customer Referrals

How do you say thank you to customers who help grow your business by sending new customers your way?

Of course you’re grateful, but if you don’t have a formal customer referral program you could be missing out on even more potential business. By having a set of specific rules for what customers will get from references, you’re incentivizing positive, trackable chatter in exchange for a “finders fee”.

Now you may be sitting there, gritting you teeth and thinking, that’s not a marketing endeavor I’m quite ready to take on.

I thought you’d say that! So I offer to you 3 reasons your business can benefit from having a formal customer referral program that you may not have considered.

Trust

Have you ever had to hire a contractor? There are always dozens of possibilities that seem acceptable, but which one is the right one for YOU?

This pre-hiring process can be exhausting and extremely stressful. But right as you’re about to play Russian Roulette with yellow page ads, a sparkling glimmer of hope presents itself to you. His name is Bob.

Let’s say Bob is a family member, friend, or cohort who suggests a fabulous contractor who is professional and affordable.

Insert beach noises and instant sigh of relief here.

This example of social proof is like referral jet fuel, so work it into part of your client acquisition process by asking new customers how they heard of you. Be sure to also reward the customer that did the referring with something like a product/service credit a monetary gift.

Dance Monkey, Dance

With the current state of the economy many potential customers can get stuck in “thrifty mode”. Unfortunately, you may have to dance around price with potential clients. In the end this may make you feel like you’re devaluing your business and yourself.

But if your business is swimming in a sea of referred customers, you’re less likely to have this problem. Referred customers have already heard about how amazing you are, and probably already want to hire you. Meaning you won’t have to jam discounts or other promotional materials down their throat.

Retention Rates

I’m not exactly sure how to say this so I’ll just keep it frank. Referred customers tend to be better customers.

Not only do they tend to have better retention rates, but according to the University of Pennsylvania’s Wharton School of Business; referred customers have about a 16% higher lifetime value.

Long story short, referred customers tend to be easier to work with & like to give you more money. But these beautiful gems don’t just fall from the sky. You’re going to have to get creative and think about:

  • How can you implement a customer referral program?
  • How can you reward referrees?

Doing so will allow you to attract the type of customers that will help you to achieve the kind of success you deserve.

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  • George A. Herman

    Interesting articule,I just had a referral,the potential client even said she “liked me”,within five minutes of are conversation. “Can you start within a week,I replied,yes. Gave her proposal,never heard from here until yesterday,”please come and fix what another contractor ruined”. The old saying ” the client had to pay twice”.

    George

  • M

    Someone please tell me how to do this in California where referral fees are illegal and gifts have to be below some ridiculous amount. I think it’s five dollars.

  • M

    Hi, it’s M again. I should have mentioned that I am a licensed contractor. Referral fees might be legal for other businesses in California, but not for us.

  • https://getambassador.com Jeff Epstein

    Great article, succinct and to the point. We’re huge believers in customer referrals at Ambassador, in fact we’ve built our entire business by enabling companies to easily track and manage referral programs.

    Being creative and choosing a reward that truly incents a customer to refer others is critical — from points to product to cash — each situation is unique. Identifying what your “users” value is the first step in creating a successful referral program.

  • ReferSell

    Great article! A website dedicated to Referrals is: http://www.ReferSell.com

    • blackdogdev

      Hey there …

      I am currently working on a “Top Secret” project and will be away from my email for a while.
      Please contact Denise Karapinar, the Black Dog Project Manager for any design, development or maintenance issues. Her contact info is as follows.
      Denise Karapinar, Project Manager
      e: projectmanager@blackdogdev.com
      p: (916) 608-2151 x205

      You are in good hands with Denise.

      Thank You,
      Mike Linville
      Black Dog Studios
      p: 916.608.2151
      f: 916.608.2154
      e: m.linville@blackdogdev.com