We all know word of mouth from satisfied customers is the cheapest, easiest, and best way to grow your business. In fact, it’s not uncommon for a relatively new business owner to brag about “not doing any marketing.” And to be sure, organic growth from word of mouth is a good sign you’re business is gaining traction.
But while that’s all well and good, we need to develop levers we can use to keep the business growing over the long haul. And when it comes to word of mouth, we can’t just hope people tell their friends. Even your most loyal clients will not always have your business top of mind while they go about their day. Furthermore, if you’re not consistently and properly thanking your clients for sending you their friends, you can inadvertently leave them feeling unappreciated.
Developing an effective referral system helps you get more great clients from the people most likely to know them: your existing great clients. You’ll consistently incentivize and reward clients while making it easy for them to spread the word about your good work. And it all starts with answering these four questions.
Question 1) What qualifies as a "referral"?
The first decision to make is what exactly constitutes a qualifying referral. Is it contact information? Qualified prospects? New clients who’ve signed an agreement?
In some cases, you may want to focus your efforts on encouraging your clients to help find you prospects. One way of doing this is simply asking for the contact info of friends who may be a good fit for your services. This approach may be too direct for some, but can be a great fit depending on the size of your business, your relationship with your clients, and your skill at follow-up. Alternatively, you could track anyone who emails and calls about your services and mentions an existing client as their source for hearing about you. You could then follow up with some kind of thank you and/or perk for the referring client.
The advantage of focusing on leads is you’re able to lavish love on your clients who are driving word of mouth. After all, if they’ve brought you a qualified prospect, that’s worthy of some thanks. This strategy is commonly used in e-commerce companies, where customers are offered a small reward in exchange for posting about their purchase on their social media platforms. However, based on your industry, conversion rate, and average customer spend, it may limit how generous you can be in incentivizing clients.
Another approach is to offer your perks once your client’s friend has moved from “prospect” to “customer.” You can set the bar as low as the purchase of some “low barrier offer,” or as high as signing some sort of ongoing agreement. As long as you have good intel on your average client lifetime value, you’ll know how generous you can afford to be. For instance, if your average lifetime customer value is $10k, you can afford to be way more generous than something with a $20 dollar value.
But as we’ll see, not all perks need to cost money.
Question 2) What incentives do the referring clients get?
Our next step is to decide on the incentive(s) you will use to encourage and thank your clients for spreading the word about your services. As covered previously, recognizing and rewarding your best clients is key for strong retention. But how to do that can require a bit of planning.
The most obvious option is cash, but research suggests this can be perilous. As students of Self-Determination Theory know, you can inadvertently turn people off if they feel they’re being bribed. (For more on SDT and how to negotiate this challenge with your team, check out this article HERE.)
Another option is to offer your clients services. This could be more of what they’re already using, such as a free month, or another service you offer that they haven’t been using.
Beyond cash and services, you can also offer unique gifts or experiences. For businesses with high customer lifetime value and relatively lower volume, you can afford to think outside the box here and personalize your thank you gift. It’s even better if you can think of something so memorable, thoughtful, and/or outrageous that they tell their friends about how you thanked them. For some great gift ideas, check out John Ruhiln’s book, Giftology.
And let’s not forget, some people feel most cared for upon receiving personal recognition. This could be anything from a personalized video thank you message to having their name (and friend’s name) posted on a chalkboard.
Finally, consider giving your clients or customers a choice on what they receive. Although this may require a bit more bandwidth and complexity, your clients will get to choose the appreciation that’s most meaningful to them, including respectfully declining anything at all.
Question 3) How can you make it easy for your clients to refer business?
Now that we know what will qualify as a referral and how you’ll thank your clients, we want to make it as easy as possible for your clients to refer business.
First and foremost, help your clients easily message what you do, who you do it for, and how you do it. Consider creating marketing materials specifically for clients to give to their friends. This could be anything from a dedicated landing page on your website for friends of clients, to a PDF report, to an email they can forward on. Depending on your business, there may also be value in creating physical materials like handouts/ flyers, booklets, VIP cards, etc. This way they have something to give to a friend during an in-person meet-up.
By creating exclusive materials for referrals, you’ll amplify the credibility your clients are lending you AND you’ll make their life easier. In addition to clearly laying out your UVP, these “for friends” materials could also include value-building content that establishes you as an expert, as well as case studies and testimonials that provide even more social proof.
Finally, in most cases you’ll want to provide some exclusive offer for your clients’ friends. In other words, in addition to deciding the incentives for your referring clients, you’ll want to decide what incentives to offer their friends. Oftentimes, particularly when the incentive is a credit towards your business, this can mirror the one you’re offering your client. And as usual, offers of any kind benefit from time and/or quantity limitations to create some urgency for action.
One final pro tip: teach your clients what to look for. For instance, at Mark Fisher Fitness, anytime one of our Ninjas (clients) hears a friend say “I wish I had the motivation to workout,” we know that’s a Future Ninja we could help.
Question 4) How will you market the referral program to your clients?
Our last step is to build in touchpoints that systemize individual asks and messaging to educate your clients about your referral program.
For individual asks, think through your customer journey and decide where it makes the most sense to discuss referrals. Many businesses will bring up referrals during the point of sale and “make referrals a condition of doing business.” This is exactly what it sounds like; upon signing up a new client, you make it clear that your business grows by referrals. For this reason, it’s your expectation that upon getting your clients the results they’re looking for, they’ll spread the word about the work you do.
Others choose to wait until the moment clients achieve the results and/or receive positive feedback about the product or service. Usually if a client is giving you unsolicited praise and/or has objectively achieved measurable success, they’ll be amenable to a request for help in finding other great clients.
Still another moment to follow-up with a referral ask is after receiving a positive response to a formal feedback survey. At Mark Fisher Fitness, we track something called the Net Promoter Score in all of our client surveys. In order to find our NPS, we ask; “On a scale of 1-10, how likely are you to refer [Name of Business] to a friend?” Clients that give you a 9 or a 10 are classified as “Promoters.” And for obvious reasons, they’re the ideal client to ask for a referral.
Beyond these individual asks, you’ll want to promote your referral program to your clients on a regular basis. These “group asks” can come in any number of places: monthly posts in a private Facebook Group, periodic mentions in your client-only emails, physical posters in a brick-and-mortar business, etc. Like any kind of marketing, the key here will be consistency. It will only be natural for your clients to forget about the awesome benefits of your referral program. Your job is to keep it top of mind!
Your happiest and most dedicated clients will want to help you out. Since having a good referral program is predicated upon you being great at what you do, you’ll only be making your clients’ friends more successful by working with them. Furthermore, you’re increasing the good will and social capital of your clients. You’re helping them serve as the introduction of a valuable resource to their friends.
And if you’re not sure you have an amazing service? That’s where you want to start. Some thoughts and actionable tips on improving customer service can be found HERE and HERE. And if you’d like our system for aggregating feedback from clients, you can check it out HERE.