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Referrals 101: How to Create a Customer Referral program

It starts as just any other day. You get up, open your Instagram app and start scrolling. But pretty fast, you see your friend’s newest guitar and nothing else on the feed matters.

You need that guitar.

Even more so when your friend’s post praises the store team that helped her buy it.

Alternatively, your vacuum cleaner breaks down – again – and you realize it’s time to replace it. You immediately text a few people who are good at this cleaning thing to get recommendations, and spare yourself hours upon hours of research.

In these scenarios, your friends and family refer you to products they love and trust, whether you seeked it out or not.

Because, sure, many customers are more vocal when something goes wrong, but if a company gets it really, really right, we can’t help but share our enthusiasm with the rest of the world.

And in a world where everyone shares something all the time, we can’t leave the feedback we get from customers to chance.

Why Customer Referrals are Good for Business

When we make a referral and our friends and family buy a product thanks to that, the company behind these products makes more than a sale:

  • It earns a customer who already trusts it more than the usual new customer.
  • It earns a customer who often makes a larger initial purchase than the usual new customer.
  • When trust is established, customers are likelier to forgive a company’s mistakes.
  • Customer referrals often cost the company less than many other lead generation strategies.

 

And yes, as a marketer, you can absolutely increase your referral rate in an intentional, value-driven way.

How to Increase Your Customer Referral Rate

From building a strong company-customer relationship to giving rewards, here are some of the most impactful ways to increase your referral rate.

1. Obsess Over Your Customer Experience

In today’s informed world, customers know they have choices. You need a good product at a good price to get them to buy in the first place, but what really keeps them buying – and excited to be a customer – has long been the experience they get to have with your brand and team.

When you’re looking to move them from “customer” to “advocate” status – the kind that tells their friends how wonderful your company is – you need to step up your customer experience even more.

Make it the best one they’ve had, especially when things go wrong. It just might be the best advertisement you’ll ever create.

2. Ensure Your Customers Know Your Values

As rational beings as we might be, people make purchase decisions based on emotions first, then rationalize them later on. When they’re passionate about a value or a cause, they strongly prefer to buy from companies that share these values – and do something about them.

If you already walk your talk, integrate it into your messaging:

  • “We have environmentally friendly packaging.”
  • “We have gender and racial equality in the boardroom”
  • “Every time you buy from us, we donate to someone who needs our products most (you buy a meal, we donate a meal).”
 
Give back to the world, but also to your customers.
 
Thrive Market
Source: Thrive Market
3. Help Your Customers Spread the Love They Refer a Friend

Once you’ve built the trust to earn a referral, it’s time to help your most enthusiastic customers to spread the love. Start by helping them incentivize their friends with a gift card, store credit or discount.

  • It helps your customers feel less like salespeople and more like gift-givers.
  • It helps hesitant friends give your store a try anyway.

 

Even if they trust the friend’s recommendation, they might be influenced by their own preconceptions, such as “only other people can wear this” or “I don’t spend this much money on this type of product.”

Getting a product for free or at a major discount can make it easier to give it a try. Maybe they’ll discover they love these clothes, or that the quality of the product is more than worth its higher price.

4. Incentivize the Customers Who Refer a Friend, Too

Customers who refer a friend are some of your most valuable customers. They’ve earned every bit of pampering you can send their way as gratitude… and it can also lead to a greater motivation to provide more referrals.

A few ideas to help you show your love:

  1. Give them a gift card, store credit or discount (When you refer a friend, you each get $10).
  2. Create a tiered program, which increases the rewards they get the more referrals they make.

  3. Provide special status or access, such as social media shoutouts, consultations with a professional (stylist, guitar builder, etc) that works with you, or the ability to vote on new products. This could be reserved to the customers who make the most referrals.

Reverb referral program
Source: Reverb
5. Be Active - Promote Your Referral Program

If you’ve built a strong foundation – excellent customer experience, shared values – some referrals will just happen out of nowhere. Maybe even lots of referrals.

But being proactive will likely increase your referral rate.

It might even give customers the idea to make a referral in the first place. So how do you let customers know you have a referral program or encourage additional referrals from current advocates?

  • Create a dedicated “refer a friend” landing page, and link to it from a prominent place on your website.
  • Share your referral program everywhere you can, including social media and live events. Emphasize rewards, customer experience and values.
  • Send personalized referral links to everyone on your email list, and allow social media sharing. Bonus points if you add a couple of tweet or caption options they can just copy-paste.

 

Vive referral program
Our client Vive links to it from its top menu and uses the landing page to answer common questions about its referral program, showing customers how simple it is to participate
 
  • Email customers who’ve never made a referral and give them an incentive that’s larger than usual for their first one. Remember to reward both them and their friends.
  • Email customers who’ve already made referrals, thank them for that, and remind them they get more rewards the more friends they refer.
  • Consider featuring top referrers on social media, alongside the great rewards they received or the joy their friends experienced thanks to them.
  • Look for ways your products can connect customers with their friends (playing board games together, going shopping together, planning an event together) and ask for them to share it on social media and use your hashtag. You can feature the best entries on your account, and remind followers to share the love via referral rewards.

Once You’ve Built a Referral Program, it’s Time to Scale it

One of the biggest hurdles of growing a referral program is keeping track of all the referrals. The more complex and tiered your program is, or the larger the customer base you have, the more unsustainable it becomes to manage this manually – let alone to scale it.

For our customer, NEIWAI, the solution was to automate the process. NEIWAI, which has over 100 premium clothing stores in China, leveraged its initial US customer base for win-win referrals.

  • Each customer that referred a friend was able to give that friend a $20 gift card.
  • The referring friend got $20 for each referral too.
  • Customers could refer as many friends as they wanted.

The results?

=> 15.61% of referrers did end up referring multiple friends.

=> Thanks to automation, NEIWAI was able to manage this program smoothly and drive $443,000 from this program alone within three months.

NEIWAI referral program case study

If you’re thinking big from the start, it’s important to set yourself to success from the start with a system that can help you grow. The more prepared you are, the better the experience you can offer customers, the more enthusiastic they’ll be to keep sending referrals your way.