How to Create a Referral Program
In many small businesses, referrals or word of mouth advertising is the main source of new clients. This is especially true if you provide a product or service that requires skill or special expertise.
We all prefer to do business with people we know, like and trust and we tend to look to others for recommendations when we are looking for a trusted service provider. In my experience, clients will tell others about you if you deliver great service. And I’ve also discovered that some clients will go out of their way to tell others about your business if you give them an incentive to do so.
Here are just a few businesses that can benefit from a formal referral program:
- Financial Advisor, Mortgage Broker, Realtor, Home Inspector or Insurance Agent
- Health professional: Dentist, Chiropractor, Massage Therapist, Naturopath
- Personal service provider: Esthetician, Hair Stylist, Wedding Planner or Photographer
- Business supplier: Web Designer, Graphic Designer, Lawyer or Accountant
- Home service provider: Plumber, Builder, Electrician, Painter, Flooring Supplier
- Children’s Services: Camp, Lessons, Private School, Tutor, Day Care
Case Study
The rack card on the right was designed to let clients know about the rewards program. For all new referrals, clients receive a choice of two rewards – 1) a night at the movies for two, OR 2) a $50 gift certificate at a nearby spa.
“Now wait a second,” I hear you saying. “That’s going to cost me a lot of money.”
You’re right. It is. And yet it really isn’t. The only marketing dollars you have to spend are to promote the program and you can do this through low cost no cost ways like posters, bill inserts, email, point of purchase hand-outs or rack cards. The back of your business card is another great place to promote your referral program.
Unlike paid advertising, a referral program doesn’t cost you anything until you get a new client! It’s like having your clients as commissioned sales people. The revenue that one new patient will bring will be hundreds or even thousands of dollars. So the cost of promoting the program and giving the rewards is easily justified.
Another benefit is that people will talk about you. I remember when we bought a new horse trailer and told a friend about the great service we received. They soon bought a horse trailer of their own and the dealer sent us a $50 dinner certificate as a thank you. We must have told dozen more “horse” friends about the reward we received and about our trailer. The word of mouth advertising that the dealer got for that $50 was priceless.
What Kind of Rewards Should You Use?
There are many ways to set up a referral program and I’ll cover them all in my “Low Cost No Cost Marketing” Business School video training course for small business owners. Here is just one creative reward idea:
- Partner with one of your clients or suppliers in a joint venture. They provide the reward for free to you (or at a discount) and they benefit by receiving new clients from you. For example, a Chiropractor might partner with a local restaurant. When a referral is made, the person making the referral receives a gift certificate to the restaurant.
An added spin to this is to offer the same reward to the new client as a welcome gift. So now both the referrer and the referral receive rewards. That means you’ll have to clients raving about you!
How Often Should You Reward?
Reward for referrals every time – don’t make your clients reach 3 or 5 or 10 referrals before they receive a reward. People like recognition every time, even if it’s small. By all means, when someone reaches 5 referrals, give them a special bonus.
Referral programs are a great way for you to get creative. Find out what rewards would interest your clients and make them fun and exciting. And remember to tell your other clients about your top referrers in your newsletter so that the buzz spreads.
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