Referrals sell. They always have, but today – fueled by society’s Internet-driven, viral communications – they can sell in bulk.
A great challenge for businesses and organizations, once they’ve created something word-of-mouth worthy, is to cultivate and leverage happy customers to generate referrals that lead to sales.
There are several ways to launch a referral program, but most include these key components: asking customers to make referrals; offering an incentive for successful referrals; establishing rules around the incentive offer; and tracking referrals.
There are many ways to skin a cat when it comes to asking customers (or friends, co-workers, associates, etc.) to make referrals. Organizations with high-maintenance products or services likely want to handpick which customers they ask to give referrals. Picking a less-than-satisfied client can quickly backfire and require you to put out fires.
Many organizations simply ask all of their customers for referrals with a “one-way” type offer (refer X friends by entering their e-mails here, and you get X) that doesn’t present the opportunity for negative feedback.
If you offer a sophisticated product with a more complex sales cycle, it probably makes sense to handpick your referral candidates. If not, perhaps you should ask en masse.
The “ask” itself again should reflect the expectations and complexities of the referral. Phone calls, meetings and even lunch might make sense for some organizations, while e-mails, blogs or website promotions might make sense for others.
The only limitation on incentives is your imagination – well, and possibly a customer company’s policy related to what types of gifts (and/or what value) can be received.
A tried and true method that you’ve undoubtedly experienced – perhaps at a car dealership, hair salon or fitness facility – is an offer of a one-time cash award or discount for every future customer you refer.
Another technique is to give the existing customer making the referral “more” of your product or offering as a reward. Omaha Steaks offers free burgers added to your next order if you refer someone. Cloud-based, data-storage company Dropbox offered extra storage space to customers and referrals who signed up (a tactic that increased signups by 60%).
The only rule of thumb for the incentive is to make it worthwhile for customers but not so lucrative that your sales team decides to set up a side business in lead laundering.
Bad leads waste time. So does an individual trying to “game” your referral system.
Make concise, written, publicly available rules for your referral program. They should cover what type of prospect contact information must be provided and what type of relationship the customer should have with that prospect. Explain what occurs when that prospect is already in your system as a lead. Be clear about how many referrals they can make over a certain time frame, and how many successful referrals they can be rewarded for over a certain time frame.
You can find examples of such rules and restrictions for referrals programs on the Internet (here is an example for AT&T’s U-verse services). Use common sense, and think through the “what if” scenarios. You might want to ask some of your favorite customers for input as you craft your guidelines.
If your organization uses a CRM platform, tap into it to help administer your referral program. If not, use a spreadsheet to record and maintain prospect and customer information. Record any relevant details about the lead, including when it was generated, contacted, closed or dropped.
Follow the “rules” defined in your process and communicate accordingly with the person who made the referral. Have a system in place that reminds you to contact them on a successful referral or an unsuccessful lead.
Be diligent with this process, because any foul-ups could strain your relationship with a prospect and the existing customer who made the referral.
That’s our four-item checklist to help you begin building a formal referral program. If you have such a referral program in place, please use the comments section below to share your ideas, thoughts or suggestions. Many readers are new to the process, and could benefit from the input and expertise of those experienced in referral marketing. For that matter, let us know what we can do at ABC Signup to further encourage your referrals.