Whether you are a shop keeper, real estate agent, direct salesperson or service professional, having a referral program can be one of the easiest ways to get new business.
Functionally, a referral is someone who already has a good feeling about working with or buying from you because someone recommended you, making the sale much easier! This post will walk you though all kinds of tips and ideas for setting up your own referral program!
What Is A Referral Program?
A referral program is when you give your customers some kind of structured bonus for suggesting your shop or services to their friends and family.
This is super powerful, especially in this time of people feeling disconnected because of technology and social media.
A one-to-one referral of a great product or service is a great way to earn trust and respect even before someone reaches out to you the first time!
Why Not A Buyers Program?
A referral program is different from a buyers' program where you bonus people for having used your services or bought your products. Think of the the “punch cards” that you get from from your favorite coffee shop or your Starbucks “stars” you get when you buy a latte.
These programs are good for encouraging repeat customers, but not so great at bringing new people in the door.
If I had to pick, I would have a strong referral program up before I did bonuses for multiple purchases. Getting business is the whole point of marketing. Keeping customers happy after they know about you is just icing on the cake.
Referral Program Examples
Here are four different examples of referral programs to get your wheels turning before we dive into the details….
Coaching Referrals
One of my buddies, Mimi, has a coaching program for real estate agents with big teams. She was a super successful big team manager for years and is great with people, so coaching hard driving real estate agents is a good fit for her.
Mimi could set up a referral program for each referral her current clients send her. Large team owners attend networking, training and masterminds which other big team owners attend.
She could offer extra one-on-one coaching time, a special training event or even have a party for the team if they give her 3 referrals. For example, she could pay to have a special trainer come into the big team and teach them something special that she doesn't specialize in herself.
Direct Sales Referrals
Many direct sales people already have company sponsored bonuses if someone books a party or orders a certain amount. But does that really make someone who has helped you get LOTS of parties feel special?
If you have someone who refers sales and parties to you all the time, make sure to think of something that will make them feel special. Send them a card EVERY time they send a referral over. Email them a thank you or do a special video just for them. Doing a public Facebook post where you thank them and tag them (if appropriate) might be a great way to get other people to send new customers your way too!
My pal Kirsten sells Pure Romance and is always happy to have a party referral. She said “I usually offer cash because everyone likes cash! Some direct salespeople people do gift cards, jewelry, almost anything works”.
Online Referrals
One of my favorite online stores, Rocky Mountain Oils, has a referral program built into their buyers program. I have for sure referred them out and also other products like Erin Condren Planners to get credit toward future purchases! (#promos)
Now, this is much more complex than doing a business card you can hand out, but if you are techy or have a great person to help you get this set up, it is for sure a good idea!
Store or Farmers Market Referrals
Many of my peeps have a presence at farmers markets or trade fairs and a few have real live retail stores still. One of my favorites, Donna, just opened a metaphysical shop, Calling All Angels, in Colorado and this post is for her! I wanted to get her wheels turning about how to drive more traffic to her physical location.
If you have a physical location that is open all the time or regularly you can do the fun “business card” referral program (shown below). Give out cards and have your referrers fill in their info on the back. You can also get “recommendations” from Facebook friends so don't forget to make a business page with your business.
Setting Up Your Referral Program
So now you are convinced that a referral program is a good idea… yay! So how do you functionally set one up?
What Are Your “Gifts”
First off think about what you should give as a gift for the referral! For this you want to think about the short term and lifetime value of a customer PLUS how much your products cost!
Say you are a shop owner and your average sale is about $30. If you get 5 people in the store you should gross about $150. Giving $10 in products away to get $150 in revenue makes a lot of sense (not to mention that they will probably spend more than the $10 credit… we all do!)
Here are a few more ideas:
- A greeting card thank you
- A customized sticker
- Time with you
- A party
- A starbucks card
- A present
- % off your next purchase
- Store credit
- Special training
- “Secret bonus”
- Free products
It is not so much about WHAT you give, it is about being appreciative of the person who took the time to recommend you to a friend.
Licensed Professionals
Fo one wee minute, let's think about a real estate agent who could make thousands of dollars of commissions on each referral. What is that recommendation worth?
For sure a gift card to a local fun and funky coffee shop, but also what about taking those great referrers to lunch or host a neighborhood wine tasting at their house if they are social people.
(please don't think I am being cheap, real estate agents have RESPA laws which “prohibits a person from giving or accepting any thing of value for referrals of settlement service business related to a federally related mortgage loan. It also prohibits a person from giving or accepting any part of a charge for services that are not performed. These are also known as kickbacks, fee-splitting and unearned fees.”)
There are these kinds of laws for banking, insurance and other licensed professions. However, they don't say you can't have a referral program, just that you can't give big gifts for them!
How Do You Find Out About The Referral?
At the very simplest level you could use the back of the referral card to collect that data…
If you are just getting started with a referral program, this is a great way to dip a toe in!
If you are going the techy route you could do a full blown, technology based online version (I have found that most of my peeps are not really at that level!)
Always Ask, How Did You Hear About Us?
Functionally the easiest way to know where your referrals are coming from is to ask everyone you talk to, “How did you hear about us?”
Sometimes you will get, “on the internet” or “google” or “I don't know”, but oftentimes you will get someone's name. Note that down!
How To Record Referrals
So how do you keep track of your referrals? Hopefully you have A LOT of them, so a spreadsheet works best!
- Referrer's Name – All things for your referral program start with the person who recommended your product or service.
- Person Referred – It is nice to mention the name of the person they referred in a later step.
- Email – If you are getting hundreds of referrals, for sure set up a standard email that you can send out thanking them for their referral.
- Phone – While you might not be a caller, you can for sure text someone a thank you or call after a certain number of referrals.
- Address – If you are serious about having a referral program, sending a thank you note in the mail is the BEST way to say thank you. We get personal notes so infrequently that these are really noted and appreciated by the recipient!
- Card Sent – Yes or no, could be a checkmark.
- # of Referrals – If your referral program issues bonuses based on number of referrals then keep a cumulative record of those referrals.
When Referral Programs Work The Best
Okay, say you are all in and ready to start your referral program today, YAY! There are a few things to know about how to have a successful referral program.
The Law Of Reciprocity
The Law of Reciprocity means that that when someone does something nice for you, you want to do something nice for them… neat right?
So the first part of this is easy. Someone sends you a referral and you thank them, send a card or an email and it end there, or does it?
When you have a formal referral program in place you ALWAYS send a thank you or gift which then leads to them feeling “tagged” to send another referral in a glorious spiral of niceness for everyone!
(You can take this one step further and make your new customer a “special” customer because they were referred by a friend but that is too convoluted for even me to show in a graphic!)
Who Is Likely To Give You Referrals?
While anyone CAN give you a referral, it is best to think about who is most likely TO give you referrals.
My writing partner and I call the people most likely to give you referrals “Connectors”. Connectors are the people who are always recommending services, who attend networking events because they want to or have websites that give referrals in the form of affiliate recommendations.
I am a connector online. I recommend LOTS of products, some that I get paid to represent and some that I just think will help people.
When you are setting up your referral program, focus first on people who have connector tendencies to get the best results!
The BIGGEST SCREWUP – Thanks “Just For The Referral”
If you don't read anything else, read this bit!
When you have a referral program, it is tempting to thank your people for only those referrals that lead to a sale. But this is a HUGE mistake.
You should thank them for EVERY referral they send your way! Do this whether the person they sent buys or not.
By only thanking them when they send a buyer, you will cause them to stop sending as many referrals. They will try to find you “perfect” customers rather than talking about you with everyone they know!
The Most IMPORTANT THING… Following Up And Letting The Referrer Know
One thing that will make your referral program the biggest success is to always thank the person who referred you business. EVERY TIME!
If someone is sending you lots of referrals, it can seem like a bother to keep thanking them, but as a referrer, I can tell that when I get an email saying that someone bought something I recommended it triggers a response to try and do that again!
I belong to many programs but the ones that send me a message every time someone signs up get my most attention.
People like being appreciated and by thanking them, you reinforce the chances that they will send you another referral!
Referral Program Wrapup
Well there you have it! My top tips and ideas culled from having worked with hundreds of people on their referral programs. I really do think this can be the most effective and cheapest way of generating new business ever.
That said, consistency and gratitude are a must for this kind of marketing so make sure you tending to your referral partners well and always letting them know how much you appreciate their recommendation!
