Have you ever been to a restaurant or seen a movie solely based on a friend’s recommendation?
If so, you already know the power word-of-mouth marketing can have.
In fact, a well-known Nielsen study found that 92% of people trusted word-of-mouth or recommendations from friends and family above all other forms of advertising.
The effectiveness of word-of-mouth is why it’s so important to incentivize your customers to talk about you — which is also known as referral marketing. What’s in it for you? Increased profits and new customers who are more loyal than average, according to a Wharton study. Not to mention, you can set up a referral program so that you only have to pay the incentive when you win a new job, which means it could cost you nothing to try.
Let’s go over how to build a referral program that delivers big results for little costs.
Before even building your referral program, determine what you expect out of it. Set measurable goals so you can easily track how you’re doing when you launch your program.
Some goals could be:
Remember that you can always adjust your goals later on, so it’s not a big deal if your goals are a little off to start with — just give it a good guess-timate!
When drumming up a referral program, your first step should be determining who this program will reward. You have three options on who to reward:
Often, the most effective programs reward both parties because you can compensate someone for their efforts and give someone else a good deal at the same time. But if you choose to do a one-sided incentive, reward the referrer — they’re the ones doing the work.
You also need to establish some rules to determine who can qualify for the incentives. Does the referee need to spend a certain amount of money? Can the referrer earn bonuses for referring multiple people?
When choosing what you’ll give away, you need to make sure the price is right. Otherwise, you might be putting your profit in jeopardy.
To avoid this conundrum, pick an incentive that is friendly to your customers and your profit margin.
It’s easier said than done, but remember you can always change the reward based on the results of the program.
As far as what you should give, you can never go wrong with cash or discounts — so start there. Make sure to think about your services and customers when deciding your offer, too.
For instance, if you have a lot of repeat customers, giving a discount to the referrers for future services makes sense. But if you do a lot of one-time big jobs, a cash offer might be more sensible.
Just like a financing program, a referral program works best if you let your customers know all about it.
In other words, you need to spread the word about your program to get customers to spread the word about you. (That’s a lot of “words.”)
Here are five ways you can promote it:
As you are promoting your referral program, let your customers know they should mention Wisetack’s financing options when trying to push people to your business. 62% of customers think the availability of financing is important when it comes to working with a business, so it can be an effective selling point.
Running occasional contests in addition to the regular promotion of your program is a great way to get even more referrals.
Here’s how to go about it:
In conclusion, referral marketing can be one of the most effective — and cost-effective — ways to get new customers. It is a low-risk (arguably no-risk), high-reward tactic that can get you new customers and make existing ones more engaged with your brand. Give it a try if you haven’t, and let us know if we can help in any way.