When building the profitability of your business, you truly cannot overvalue referrals from other clients and business associates. The person who is referring this potential customer has already started to sell them on what your business has to offer and how the referrer has already benefited from the business relationship.
Word of mouth is still one of the most powerful marketing tools, but it is also one of the hardest to foster positively. Although negative experiences often spread wider, positive experiences that clients relate can truly make an impact on your overall business. Internet marketing campaigns and traditional advertising should still be a part of your whole marketing plan, but a referral program to reward referral sources will help encourage those positive stories to come out.
Referral programs are implemented in many companies, but the debate has been focused on when a client should be given a referral reward. Should you send a reward every time they refer someone to you? Do you give a reward just for the referral or only if it turns into business for you? While the specifics of your program are entirely up to you, it is essential to develop and implement a referral system.
There are benefits and drawbacks for both methods, and which program works will depend on the size and type of your business.
4 Types of Referral Reward Programs
For Every Referral: By necessity, the gift will be smaller if you receive a large number of referrals, so this program works best for companies trying to build on a currently small number of referrals. A gift every time will act as encouragement to spread the word, but it may get expensive.
For Multiple Referrals: This reserves rewards for customers that refer multiple people your way, such as offering a reward for every five referrals.
When Referral is Given: For this referral, you give the customer a small token of appreciation every time they refer someone to your company, even if it doesn’t turn into business for you. This may not always bring the best referrals, but the number of referrals will almost certainly increase in volume.
When Referral Turns into Business: By only rewarding referrals that actually help your business grow, you save on the costs of a larger reward program and you can make the actual reward much nicer than if you have to give it away more often. No matter which program you chose, you should reward referral sources in some capacity, as it means your customers have essentially been advertising for you. But what should you give to encourage better referrals?
6 ways to Reward Referral Sources
Gift Baskets: By picking up a gift basket for a referral reward, you can control the cost of your rewards while offering a variety of gifts in one. With a set price through a gift basket company, these can make fantastic thank you gifts or as Christmas gifts for clients. This may get expensive if you give a gift every time someone refers potential business, but clients will appreciate the gesture.
Gift Certificates: While you can offer gift certificates for your own business, customers will love if you let them treat themselves with a certificate for a massage or to a local restaurant. These seem more personal and are great for rewarding top referrers. A local spa may even be willing to give you a discount for the certificates.
Cash: This is the kind of reward that will usually motivate. There are two ways for this to work: You can offer a flat bonus for every referral or a percentage of the profit you make on the transaction.
Discounts: For more frequent referrals, offering a discount on the customer’s next transaction is a cost-effective method of offering a bonus. Customers are always looking to save a little cash and it will encourage them to come back to take advantage of the discount.
Thank You Letters: This small token of appreciation doesn’t cost much but offers its own unique charm, especially if you have the time to sign the card yourself. That personal touch can mean more than a physical object.
Small, High Quality Gifts: Fountain pens with your insignia, small clocks or other such gifts will last your customers a long time to remind them of your company.
It is not necessary to advertise to your clients that you will reward them for referring your services or products to other people, but it is important to reward them each and every time.