In order to grow your business, you must continue to make sales. In today’s economy entrepreneurs don’t have the luxury of wasting money and resources on marketing and not getting a positive return on investment. But what if there was an easy way to generate sales without spending any money?
On today’s Black Entrepreneur Blueprint podcast episode # 443, Jay discusses one of the most overlooked strategies to make more sales without spending money.
LISTEN TO THE PODCAST NOW
BLACK ENTREPRENEUR BLUEPRINT SHOW NOTES – EPISODE # 443
Definition – A customer referral system is a word-of-mouth marketing strategy that rewards your existing customers when they share your brand or business with their friends, colleagues, and family members.
In exchange for bringing in new customers, a referral system gives existing customers an incentive such as a gift card, a discount, store credits, free products, swag, etc.
A formalized program also makes it easy for customers to share your brand, with a dedicated referral page and messaging. And they don’t just share with anyone: they refer good-fit leads who are more likely to purchase from you. Referral programs mobilize your happy customers and turn them into reliable advocates!
REFERRAL MARKETING STATISTICS – Why You Need A Referral System
- 78% of marketers singled out referral marketing as providing excellent leads
- 4X – conversion rates are 4X higher for people that were referred
- ½ – A referral is a primary factor in half of all purchases
- 90% of shoppers trust referrals from family and friends
- 75% of shoppers are more likely to make a purchase if referred
- 74% of shoppers will give a referral if offered an incentive
WHAT ARE THE BENEFITS OF A REFERRAL PROGRAM?
A customer referral program can be a big benefit to any business. Here are four of the main reasons you should start your own referral program:
1 Standardizes The Process – A referral program standardizes the way you invite and reward customers for sharing your brand with others. By offering a formal referral program – with clear and attractive rewards – you can increase the odds of your business getting word of mouth.
2 Attracts New Customers At A Low Cost – The cost of referral rewards is fixed (per referral), and these incentives are only paid for performance. The result is a much lower customer acquisition cost (CAC) compared to most types of advertising.
3 Brings In Higher Quality Customers – Referred customers have a higher retention rate than other customers and are proven to bring more value to your business. They are proven to spend 25% more and are 37% more likely to make a repeat purchase. They also have a 16% higher customer lifetime value than customers who were not referred. And referred customers are three times more likely to refer someone else, meaning there’s a high chance they’ll keep the cycle of referrals going and bring you even more top-tier customers.
4 Has A Proven Track Record Of Success – Some of the most popular businesses have seen success thanks to a strong customer referral program.
Examples include Some of the most popular businesses that have seen success thanks to a strong customer referral program.
PayPal’s famous referral program literally gave away money. The company started out by offering $20 to start an account, and another $20 to refer their friends (this number decreased through the years). As one of the first notable referral programs, it helped PayPal achieve 7–10% daily growth and a user base of over 100 million.
Dropbox also offered a referral program that was greatly inspired by PayPal. It led to a 60% increase in user signups, with over 2.8 million referrals taking place in the first 18 months. Even today, 35% of all signups come from the company’s referral program.
Harry’s Razors – Sometimes, referral programs are the catalyst that makes a brand a household name. For example, Harry’s Shave Club offered a referral program before it even launched. The tiered referral program worked wonders for Harry’s. In one week, they were able to gather almost 100,000 email addresses.
HOW TO CREATE A WINNING REFERRAL SYSTEM
Now that you understand how referrals and referral programs help a business, it’s time to start building one of your own. But where do you begin? Here’s what you’ll need to do to create a referral program that delivers the most ROI:
Provide exceptional products – If your offering doesn’t stand out and make an impact, people won’t remember to refer you to others – no matter how great your referral program is.
Put your customers first – Develop a customer relationship and experience first so they can be advocates of your referral program
Have a clear marketing goal for your program – Why are you creating a referral program? Aside from more sales, is there anything else you hope to get out of it? A few other goals can include Increase customer loyalty (customer retention), Building brand awareness, Creating a viral marketing campaign, Driving customer acquisition,
Determine who will get the referral rewards – a one-sided incentive (only for the existing customer) or a two-sided incentive (for both the existing customer and the referred customer) This usually has the highest engagement.
Choose which reward to offer – Discounts/coupons, Store credit or points, Service upgrades or freebies, Free products, Free month subscription, Branded swag, External gift cards (i.e., Amazon, Apple, Visa), Donations to charity, Tangible referral gifts
Decide on a reward structure – single reward or tiered rewards based on the volume of referrals
Make it easy for people to refer – Provide multiple sharing options like a one-click referral link
Create your referral messaging – What message do you want to convey to your customers
Implement analytics and tracking – to know what’s working and what’s not
Figure out how you’ll tell customers about the program – How will you alert your customers about the new program: email, video, social media, etc?
Utilize referral program software tools – the easiest way to implement a referral program is by using software like
- https://osiaffiliate.com/ – Listen to OSI Affiliate founder Arlen Robinson on episode # 362 at http://traffic.libsyn.com/blackentrepreneurblueprint/Black_Entrepreneur_Blueprint_363_-_Jay_Jones_-_Chasing_Paper_Versus_Chasing_Purpose_-_What_Does_It_Really_Cost_You.mp3
Use customer reviews with referral marketing – implement customer reviews and testimonials with your referral marketing