If you have a great business, your customers will want to tell others about it; they might be even more inclined if rewarded for their efforts. Referral programs are particularly important for small businesses that don’t have large marketing budgets. But how exactly can a referral program help you gain more customers?
Referral Programs Reward New and Old Customers
Referral programs let you offer incentives to current customers and reward new customers willing to take a chance on your business. Regular customers could receive free products, for example, while new customers are often given discounts. This is a win-win situation that offers something for everyone.
Referral Programs Can Uniquely Reflect Your Business
According to Business Insider, startup business Jet offered a referral program that gave company stock to its top customers. While offering stock may not be an option for your particular business, it’s important to think outside the box and come up with a program that’s unique to your business, and that your customers will love.
Referral Programs Save on Marketing Costs
Referral programs, if set up properly, have the potential to bring in a lot of customers on a shoestring budget. You can either ask your customers directly for referrals or create an incentive program with coupons, discounts or rewards. Good referral programs translate to quality leads at a relatively low price. Money saved on marketing costs can in turn be put back into your business to improve your products and services. This will, of course, bring in more customers.
Referral Programs Promote Repeat Business
Whether you’re running a car repair business or providing pool services, you know that satisfied customers often become repeat customers. Customers who see they are appreciated will likely remain loyal to your business. In other words, a referral program that brings in even a few long-term customers is well worth the effort.
Referral Programs Promote Trust
This one is perhaps the biggest reason why you should make referrals a permanent part of your business model. While most people use the internet as a resource to find services, they’ll usually put more trust in the referral of a family member or friend. Forbes states that 85 percent of Millennials post on social media after either a good or bad experience they had with a company. What this shows is referrals have the potential to bring in more customers than general marketing.
Referral programs can help you widen your customer base and even pinpoint the type of customers looking for your services or products. The key is to create the type of referral program that specifically meets the needs of your business.
The Big Question: Will This Work For My Business?
Pro: People Will Come Back
If they are pleased with the service, a loyalty program can get people back into your shop. Ideally, you will get them into the habit of choosing your business over your competitors. You can tweak the loyalty program at a later date or switch up the rewards on a regular basis and not lose any business.
Pro: Improved Customer Service
One benefit of digital or online customer loyalty programs is an up-to-date record of services your customers have recently bought. You can recommend products or packages that they might not have considered. Recommendations can be made during payment or as part of an email marketing campaign.
Con: Potential for Fraud
Unfortunately, if you use a paper-based system to track purchases, there’s little to stop your customers from giving their cards away to others. This defeats the purpose of a loyalty program but can be largely solved by using an electronic system.
Con: Loss of Revenue
With any loyalty program, it’s important to price out the freebies carefully. If your markup is low, it’s likely using it as a freebie would absorb the profits made as the customer earned the reward. You can avoid this by choosing your rewards strategically.
Con: Gets Customers Used to “Freebies”
Hopefully, your customers choose you because of your shop’s competitive advantage. A loyalty program should be a bonus or a way of encouraging new customers to come to your business. Unfortunately, some customers may get used to the free transmission check and expect your staff to “have a quick look” when it’s a service for which you normally charge.
A loyalty program may help get your business off the ground. Consider it in terms of your overall sales and marketing strategy. A well-managed loyalty program provides a smart return on investment by increasing brand recognition and profits.