Referral marketing: a no-risk, high-reward way to win more customers

Vincent Ninh
March 9, 2023
min read

The power of recommendations

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.

Determine your goals

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:

  • Winning 3 new jobs per week
  • Getting 80 new leads in the first month
  • Generating 7% more in monthly revenue within six months

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!

Structure your incentive plan

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:

  • The referrer (person giving the referral)
  • The referee (person using the referral — not the kind wearing stripes)
  • Both parties

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?

Make sure the price is right 

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.

Promote the program as much as possible

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:

  • In person: If you have a physical location, make sure to have materials there to advertise it (posters, cards, etc).
  • Emails: Email is one of the best ways to reach out to current customers — it’s free. Send an email when the program launches, then occasional reminders. You can also include a note or footer about the program in other emails.
  • Web presence: Make your program known on all your online platforms — website, Google Business Profile, social media, etc.
  • Customer interactions: Train your team (both in office and in the field) to mention the referral program when talking to a customer after a job. Remember those cards we mentioned earlier? They can really come in handy here.
  • Involve your employees: Speaking of your team — why not allow them to participate in the program? It can only help.

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.

Run a contest

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:

  1. Pick a time frame and theme: You don’t necessarily need a theme but it can help make the contest more catchy.
  2. Pick a prize: You can go bigger with contest prizes as you only have to give a few a year at most. Services can be a good idea if you don’t want to spend the cash (e.g., HVAC tuneups for a year, free flooring install, etc).
  3. Establish the rules: Pretty straightforward. You make the rules. 
  4. Promote the contest: You can use the same techniques outlined in the previous paragraph.
  5. Promote the winner: Once you’ve got a winner, share the news to motivate customers to participate in future contests.

Referral marketing is effective — and cost-effective

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. 

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