Selecting the Best Referral Programs for Businesses
Every business is a word of mouth business. This is even more true in the internet age of social media posts and Yelp reviews. Nearly three out of four people value the opinions of friends more than any other advertising when they make a purchase. One of the best ways to use this form of marketing to your advantage is to create referral programs that drive customers to your virtual door.
Offer Them Cash
This referral program is not for everyone but a cash incentive for the recommendation of a person that actually uses the product is a tried and true winner. Financial institutions and services like PayPal use these to up their subscriptions since money is their business. All referral programs should be balanced between the minimum amount that the company will make and the cost per referral. In PayPal’s case, they spent around $60 million but gained $1 billion in revenue. As you develop your referral program, do the math first and decide if you can afford this kind of high cost, high return program.
Free Product Referral
If you offer a product, then it makes sense to give one away for every referral that you get. This is a good way to save some money on your referral marketing campaign since the sales price of the product is not the same as the manufacturing cost. For most manufacturers, whether large scale or hand crafted, the actual product costs pennies to make, removing labor and sales expenses. This is the way that cloud service provider Mozydoes it. They offer customers more space for the recommendations. For a small business, it is only the raw material costs that are generally important as you have already budgeted your time into the equation.
Give a Gift
Ultimately, you want people to fall in love with your business. The current customers already know about you and, at least in theory, like what they see, so let them offer your services as a gift. Uber did a two-sided referralwhere a customer could send a travel gift to a friend and receive one themselves. Much like coupons, a referral gift works well against your bottom line because you only incur an expense when a customer uses the service.
A Free Upgrade
When they launched their referral program, the personal management software Evernote added 13 million subscribers by offering free upgrades to existing customers that refer. You may want to emulate this program if you have a tiered package where paying a bit more gets you other services. A side benefit of this is that the referring person gets a taste of the higher package and may choose to pay to continue using it.
Just Say Please
If you buy into relationship marketing theory, where your main job is to develop a relationship with your customers, then you do not need to pay them for the referral. Hypothetically, you have already secured their loyalty so it is easy to simply ask them to share the word. This is direct marketing at its most fundamental. You are asking for help in a straightforward manner. It is what review companies like Yelp offer their subscribers. If you have a large social media network then the direct approach may be the referral program for you.
Photo Credit: Provider by Social Monsters with permission to use.