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How can a small business manage referral marketing? – our guide to success

referral programs EarlyParrot

Customers bring power to the engine of every company, whatever its size. However, it is small businesses that value every customer the most. Why? Because they do not have many, so each new customer means a lot more.

Such small businesses often seek various online and offline ways to acquire new customers. One of these methods is referral marketing, and in this article we will share with you everything you need to know as a small business to start your adventure with referrals and reward programs. 

One more time – what is referral marketing

Referral marketing is all about the power of…words. It works by rewarding your existing audience with various incentives in exchange for referrals. For it to be a success, referrers have to first share their unique links on channels such as Facebook, LinkedIn, WhatsApp, and Twitter. They are then rewarded for spreading the word and acquiring you new clients and subscribers. It is a highly profitable form of marketing with many benefits for businesses, especially those small ones.

What is interesting is that people trust referrals from friends 7 times more than any other advertising method due to the perceived authenticity of a referral. Moreover, 92% of customers trust referrals more than advertising, and referred customers usually spend 16% more than other customers. Interesting, right? 

Let’s discover some of the greatest advantages of a referral program that small businesses can expect to benefit from.

How small businesses can benefit from referrals 

  • referrals = new customers 

When your existing audience recommends your company to other people, often across various channels, you will increase your brand recognition, brand awareness, and customer acquisition rate. 

The more people who recommend your brand, the more customers you will get and, as a result, the more income you can earn. All of this contributes to the growth of your small business, both in terms of profit and experience. 

  • growing an online presence 

The more people who talk about your brand, the bigger your online presence becomes. Hashtags, mentions, screenshots of your profile or website, or even something as simple as plain text with the name of your business on it can contribute massively to building a strong online position. When customers recommend your company, they become your company’s advocates and help you to increase your outreach in digital media by talking about the benefits of your products and/or services on your behalf. 

  • enhanced brand reputation

When people recommend your brand, it means they trust you. No one will recommend a brand to their family or friends if they do not like it. As more people start talking about your brand and inviting others to try your services, your brand reputation increases and this will contribute to creating a positive brand image.  

  • happy customers

Incentives are usually what encourages customers to participate in a referral program in the first place. Rewarding your customers for their help is a great way to thank them for their time, as well as to make them satisfied with your services. 

Happy customers are more likely to return to your company in the future, especially when it comes to first-time buyers. Starting your relationship off with a nice surprise will be beneficial to your business in the long run, trust us!

  • improved sales revenue and higher conversion rate  

Whilst it is true that incentives and free gifts do cost your company money, a referral marketing program allows you to generate more profits, attract more customers, and vastly increase your ROI. Moreover, traditional customer acquisition is quite expensive, so a program like this will allow you to generate more income at a lower cost. 

Top 10 referral practices that every small business should know

#1 think of a valuable incentive

Customers love incentives, there is no doubt about that. Research shows that 75% of consumers, i.e. 3 in 4 of your customers, favor companies that offer rewards. Moreover, around 70% of consumers are likely to recommend a brand provided they offer good loyalty programs. 

So, what can you do with these pieces of information? You want your customers to like your brand and keep coming back, right? The best thing you can do is offer them nice incentives for their loyalty. Think of valuable rewards that you could offer to your customers for simply referring your brand to their family and friends. Your customers will value your company for its personalized and friendly approach towards them. 

#2 be creative 

When thinking about what incentives would work best for your customers, do not be afraid to get creative! Think about the type of business you run, as well as what sort of products and/or services you offer. Original and unique incentives will drive customer loyalty and enhance brand recall. It is a great way to build up a special place for your business in the minds of your customers. 

What are your options, then? You can choose from gift cards,  discount codes (on next purchases or those over a certain amount of money), free products, additional samples, extra reward points, free company merchandise, complimentary bonuses (e.g. free plan upgrades), and more.

#3 know what your customers like

There are plenty of gifts and bonuses to choose from, but keep in mind that not everything will work. This is why you should pay extra attention to your average customer’s profile and make sure you know what they would be happy to receive.  A feature-rich CRM like Copper sales management tool can help you understand your customers and create a more targeted referral program.

For example, if you run a business that offers relatively expensive and luxury products, you could offer a discount code for the next purchase a customer makes. If you run a company that sells beauty products, like make-up and hair care, chances are that your customers would love to receive free samples or gifted products from your offer. In a similar fashion, if you run a Saas (Software-As-A-Service) company, a great way to encourage referrals is by offering a free subscription upgrade for a certain amount of time. Use right software to manage your subscription billing service effectively. Pick whatever suits your business model best!

#4 be grateful 

Your referral program should not finish with simply asking your customers to refer you to their friends and family. In fact, this is only the beginning of your work and there is much more to come after that! 

First things first, start by thanking your customers for their time and dedication spent recommending you, as well as showing appreciation for the trust of those accepting invites. A simple ‘Thank You’ can change whole relationships with your current and potential customers. It is also a sign of respect and lets your customers know that you care about them.

#5 think of the right promotional channels and utilize them proactively 

No matter how great your incentives are and how happy your customers will be to receive them, if you do not promote your referral program properly you will not be successful. You need to raise awareness about it and, therefore, your choice of promotion channels should be well thought-out and planned. Focus on those channels that bring you the most profit, as well as those where your audience is wide. Don’t wait for referral links to appear out of nowhere, but instead create conditions for that to happen!

You may want to think about proactively promoting your referral program on: 

  • Facebook

with over 2.7 billion active users, Facebook would be a great way to spread the word about your program. What is more, the average Facebook user has 338 friends on this platform, and so that is how many people you could potentially reach if just one person shares your referral program and invites their friends to try your company. 

As email marketing is still one of the most profitable marketing channels, with the possibility to boast your ROI by 4,200%, you may want to consider promoting your program this way.

  • direct mail 

Another great way to encourage referrals is by sending your customers short notes after they order from you. Consider it as a “thank you” with an invitation to join your referral program. Your customers will appreciate this kindness, and chances are that they will recommend your brand to other people as aresult.

#6 don’t forget to follow up

Follow-ups are extremely important in all circumstances. You should always pay attention to your communication with anyone and make sure your messages reach the intended recipients. In a world where everything is moving fast and people often have a lot going on in their lives, gently reminding your customers about your offer is a great way to reach out to them.

This applies to when you first send out an invitation to your customers to encourage them to refer your company to other people, as well as after someone successfully refers you and receives an incentive for doing so. The latter is particularly important when the incentive is a discount code, for example, as a customer using it means a new sale for you. So you do want them to use it, right?

#7 make interactions fun and engaging 

This tip depends on the type of business you run, but try to think of ways to make communication with your customers fun and engaging. You could use funny graphics and text, as well as add elements of personalization. 

Make your messages memorable and easy to remember. What you should be trying to achieve is staying in your customers’ minds for as long as possible. When this happens, they are far more likely to join your referral program and interact with your brand more often.

#8 make the process easy 

Great incentives, distribution channels, or even catchy images and text are all great ideas, but they are not enough. Your referral program should be easy for people to participate in. Try establishing some simple ground rules and make the process itself easy to follow. 

You surely do not want to receive emails on a daily basis from hundreds of consumers asking how to correctly refer your brand to their friends. What would be even worse is a customer thinking they correctly invited their friend, but in fact they did not do so successfully and you are unaware of this. That is why you should pay attention to the user-friendliness of your program.

#9 check out your competitors

Competition plays an important role in the performance and success of your business. For this reason, you should pay attention to what your key competitors are doing, including in terms of loyalty schemes and referral programs. 

It is even better if you compare yourself to the top-performing companies in the industry rather than to those with worse performance than yours, as usually the former will have more customers and therefore make greater profits.

To check out their approach to customers, we have a little sneaky tip for you! Go incognito and place orders at your competitors’ stores. Find out how their average customer is treated, what sort of emails are sent to you, how quickly orders are processed, what their communication skills are like, and more. Pay attention to their online reviews too!

Knowing all of this will allow you to spot areas for improvements within your organisation, as well as features that deserve some appreciation and celebration. Do not waste time. Go and check out your competitors now – you can really learn a lot

#10 pick the best customer referral software

Last but not least: the mastermind, the omega to your alpha, and your number one companion in terms of referral marketing – an efficient and powerful piece of referral program software. Without one, the chances of growing your small business with referrals are significantly decreased. 

What you need is a brandable, easy to integrate referral marketing solution that will make your experience with referral marketing pleasant and enjoyable. With tools like Early Parrot, a popular and highly regarded piece of referral marketing software, you can take your small business to the next level by:

  • lowering your Customer Acquisition Cost (CAC)
  • Accelerating the growth of your business 
  • encouraging customers to spread the word about your great services 
  • getting more repeated sales and satisfied customers

The good news is that you can now test out Early Parrot for free with no time limit! Give it a try and experience for yourself how great referral marketing can be. 

A successful referral program strategy is closer than you think

Now you should know what referral marketing is, as well as its key benefits and some best practices for running a successful referral program as a small business. 

With referral marketing you will:

  • gain new customers quicker 
  • grow your online presence and increase brand awareness 
  • generate more income at a lower cost
  • keep your customers happy and eager to come back 

Follow our guide to ensure that you will run a truly effective referral marketing program. Small businesses can succeed quickly too, and this article shows you how! All you need is time and dedication for success to come. Trust the process and enjoy growing your business in a fun and active way! 

If you are interested in learning more about referral marketing and its perks then do not hesitate to check out our blog where we share our knowledge with people who need it. We hope this article helped you!

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