The Basics of Running a Customer Referral Program

referral program ideas

A referral is the best recommendation customers can give about your products and services. Referrals are the most influential and trustworthy source of advertising. That’s why a good marketing plan capitalizes upon word-of-mouth recommendations and incentives for referrals.

Saving You Money

Setting up a referral program can provide you with a steady flow of new customers. More importantly, the cost to bring a referral into your store is less than it would be through traditional marketing and advertising campaigns.

Patrick Kunish, Director of Sales at Smartwerks, has seen the difference a customer referral program can make for furniture and mattress stores. “When selling a specialty item,” he said, “such as a piece of furniture, you need to have a system in place that rewards customers sent in by referrals. Reward customers for sending you referrals with gift cards, discounts, and promotional items.” This gives them the incentive to spread the word about your business and service.

Did you know that the cost to attract a new customer is five times higher than retaining an existing one? In a way, these new customers resemble a returning customer. They know exactly what they are looking for and how much it will cost when they enter your store. One study found that customers gained from referrals were more loyal and valuable than other customers.

Implementing a Referral Program

First, you need to provide your customers with an exceptional customer experience. This means having the right products on the shelves and excellent customer service from the moment they enter your store to the moment they leave.

Next, you’ll need to decide on a program that’s right for your business. What are the goals and timelines for the program? A well-thought-out plan will help you succeed.

How do you want to incentivize your customers? One way to do this is to determine the right incentive. First, see what is available in your marketing budget. The discount given to your customers comes from your marketing budget. You can also ask your best customers what they think is a fair amount for an incentive. This can be done while they are in the store, or online through your social media pages.

Make It Easy for Everyone

“The best way to set up a referral system is to have an automated one,” said Kunish. Your point of sale software should have a referral program in place. This reduces employee errors and time spent with data entry. It should also make it easy for customers to redeem referrals and receive their discounts on future purchases.

Now, it’s time to advertise it. No one will know the program unless you tell them about it through signage inside the store, on the website, and social media. It’s important to train your employees on how to politely ask customers about participating in the program. You can also incorporate the customer referral program in your current advertising, such as print and digital ads.

Calculate the Return on Investment

To see if the referral program is working or underperforming, you’ll need to track it. Again, this is where automation of the program is helpful, if not essential for its success. Analyzing what is working and what’s not meeting your expectations means that you can tweak the program by offering bigger discounts, or pull back a little on the discounts if you’ve achieved your goals. The key to a successful referral program is to get one in place that will offer more value to your customers, but not more work for you.

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