Refer a Friend program

Every small business owner I have spoken to always mentions that lead acquisition is very important for him. One of the best sources for lead acquisition for a business owner is through ‘Referrals’. 92% of consumers trust peer recommendations vs. only 40% trust Ads in search results, 36% ‒ online video ads, 36% ‒ Sponsored ads on social networking sites and 33% ‒ online banner ads. [Learn more about Referral Marketing] why you are missing out if you are not running a formal referral program for your business.

In this blog, I want to focus on a key aspect of Referral Marketing that many businesses get wrong – setting up the right referral incentives. Customers love referring their favorite brands and are overjoyed when they are rewarded for their love. While a structured referral program can result in terrific ROI for a business, an imperfect incentive structure can really hurt and deter even your happiest clients from recommending you.


5 things a business owner should consider while setting up the right referral incentives for his business:

Your customer should not appear “cheap” –

A one sided incentive where-in you only reward customers who generate referrals is a dangerous strategy especially if the referrals start realizing that they have been recommended to your services because the customer is getting rewarded. You do not want your customers to appear “cheap” in front of their friends. Consider a 2-sided incentive structure & offer something complimentary for the referrals to try out your offering.

Your customers are your biggest brand ambassadors out there. When they are happy with your service or product, they will definitely speak about your brand to their friends and family. However, if your referral program offers an incentive to the customers’ friends, then the customer would go out of his/her way to recommend you to their friends & why not! Getting a steal on what you love for those you care about.

Single or dual incentives

Incentives should be aligned with your brand image or service – 

As an educational institute, offer your students high value guides, special invites to conferences. As a medical practitioner, offer your patients additional time with your premier doctor, offer free consultation to the family. As a healthcare provider, do not reward your patient with free movie tickets for referring their family. Brand reputation is everything in most industries and you do not want to come across as a pushy salesman when it comes to referrals. Realize why your customers love you and what is it that they would refer you for? Your customers love your product, your service, your support!

Offer them premium versions of your product, related complementary services, exclusive membership benefits, and upgrade to a higher tier on the loyalty program, etc.

Make them feel special. Give them more of what they love!


Soft Incentives work! They really do! – 

Incentives do not always have to be monetary or materialistic. Recognizing your premier brand ambassadors and talking about them in your newsletters and other communication (after taking necessary permissions) will make your customers feel super special & often result in even further referrals and loyalty.

If Apple were to showcase you as their biggest fan and invite you to their annual conference as a VIP guest, would you not be an Apple loyalist for life? Think about it!


Add a personal touch – Customers love it –

Your customers are spreading the word about you and bringing you additional business. The least you can do is thank them. While personalized autoresponders are great, taking the next step and engaging with these brand ambassadors especially can really take your referral program up another notch. Have a special meet for your most loyal customers, call them personally, send them personalized letters. These small actions on your part will make your customers want to refer you not just once, but repeatedly.


Ensure you still make a profit – It is still business –

Make sure the incentives you create and plan to offer to your customer leaves something on the table for you as well. Consider all the costs associated with an incentive program – managing the program, sourcing & delivering the award to your customers. The customer cost of acquisition (COA) should be less than the lifetime value of the referral customer (CLV). As long as that’s true, you are doing just fine.

Running an effective incentive program can reap superb rewards for your business. With the right commitment, both you and your customers will benefit significantly.

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