A Huge Potential for Small Businesses5 min read
Referral marketing for small businesses differs from large corporations’ classic referral marketing campaigns. Although referral marketing has proven successful for all sizes of businesses and in all industries, there are several advantages and disadvantages for small businesses, which we will discuss today.
What is Referral Marketing?
When a business gets new customers through word of mouth, it is called referral marketing. An old customer or someone you know for business can refer someone who needs your products or services.
Many companies have referral marketing programs. These programs often reward referrals or referrals (or both). Marketing referral programs make it easy to see their effectiveness.
What is the purpose of Referral Marketing?
The main purpose of referral marketing is to attract new customers through word of mouth.
People want to share what they love with their friends, whether in person or online.
84% of customers trust recommendations from people they know more than any brand advertising.
If you offer high-quality products and services, you will already have satisfied customers who recommend you to others. Why not increase organic word of mouth and refer your customers to more people?
Even if people like your work and want to share your brand organically, they won’t consider referring friends without being prompted. Referral marketing creates a reminder for the customers in the form of a reward.
This way, a formal referral marketing campaign keeps you focused, builds long-term relationships with your most loyal customers, and builds a healthy base of new customers.
How does referral marketing work?
A referral marketing system gives you a systematic and consistent process of acquiring new customers. If everything comes together—your customers are happy, your incentives are exciting, and your program is working—your referral marketing strategy will be successful.
Companies like Dropbox, Uber, Tesla, and PayPal have made great strides with their referral marketing strategy. Their success proves that a strong referral marketing campaign can strengthen existing customer relationships, generate new leads and grow your business through trusted referrals.
Advantages of Referral Marketing
1. Boosts word of mouth
Referral marketing enables word of mouth. Since you’re encouraging your best brand advocates to recommend you to others, a referral marketing campaign puts you in front of a demographic you wouldn’t otherwise reach.
With an automatic referral rewards system, you can turn word-of-mouth marketing into a strategy and drive even more awareness for your brand.
2. Increases target audience
A project often comes up in conversation because someone mentions a new logo or design. It gives the business more leads and target audiences, which is the goal of most marketers.
It is more or less the case with referral marketing. Your existing customers are sharing your brand with friends and family, and they’re already screening people they think would benefit from your products and services. And because these new prospects are hearing about you from a place of trust, they want to try your brand.
3. Grow your business through a media platform
A marketing referral program is a proprietary tool, which makes it a real way to connect and interact with its customers.
Not only is this a marketing channel you have full control over, but your referral system allows you to scale quickly as each new customer can drive more sales.
4. Increases customer loyalty
Referrals who become new customers are often among your most loyal supporters. From the first moment they hear about you (from a friend), they have already put you in a good light. And if you offer a two-tiered reward, i.e., the new customer is also rewarded, the odds of them becoming a satisfied customer are in your favor.
High customer referral loyalty means these customers have higher overall retention rates and higher customer lifetime value – 16% more than other customers.
Best practices for small business referral programs
Now that you know how your small business can benefit from a referral program, let’s explore the best practices for building your referral program.
1. Keep it simple
Make sure your customers can quickly understand what you want them to do and what you have in store for them.
Keep your description brief, but include relevant guidelines. What are the requirements for customers to receive rewards? Are rewards cumulative?
2. Display a clear and attractive call to action (CTA)
Your call to action (CTA) should be easy to find. Always put the title at the top of the landing page. Display it in a large font, and consider making it larger or larger—another easily accessible CTA button.
Highly effective CTAs grab consumers’ attention, specifically inviting consumers to download and tell them what motivates them.
Offer valuable but inexpensive incentives based on your business.
3. Consider inexpensive and two-way incentives
It includes store credit, gift cards, and discounts.
Offer free goods or services (or deep discounts) only after the customer has provided a successful reference.
Another inexpensive way is to create giveaways, where everyone enters to win a gift card, credit card, or another nice item from your business.
Charitable donations can also motivate gratitude, especially if they include donations to local charities.
As a small business, you can also secure great and valuable friends by helping out with friends’ gifts!
4. Use Social Media
Why focus on social media? Because this is what your customers often share with many friends at once. Integrating social media into your referral program means increasing your impact with less time and effort.
Make it easy for customers to share your referral list on social media. Do this by adding pre-filled video and photo messages that anyone can edit and share with a single click.
5. Leverage your position as a small business.
Your small business has a unique value that no big box business can emulate. Include some of these features in your referral program!
Include an emphasis on ownership in your welcome message.
Use positive emotional messages about helping your friends and your business.
Launch Your Referral Marketing Program
Now is the time to start building your referral marketing program.
The big question is: will you make a DIY program or use special software? Go for it if you have the time, patience, and experience to build your referral marketing program. But remember that all the administration and tracking work can quickly become a headache due to the many incoming signals.
Optimized software may be the answer if you want to avoid the hard work and any development hassles. The referral software takes care of everything from referral tracking to analytics and reporting, ensuring a seamless referral experience for all members. Plus, it allows you to get referrals to your business right away.
By automating referral marketing, you can focus on your business instead of trying to add more work to your team.