Are you struggling to set up effective referral programs for small business? As a small business owner, you may face challenges such as having no reputation, low budget, and limited industry experience.
But don’t worry, we’re here to help you! You can generate new leads, increase referral sales, and grow your business by implementing a successful customer referral program. How? Detailed analytics will reveal the top of the best strategies for this topic!
Too much theory? 9 examples provided ensure 100% give you a different perspective on success! So you can consider and apply the best ones for your business!
Keep reading if you really want to succeed!
What is a Referral Program?
A referral program is a type of mouth-to-mouth marketing plan! Where a company encourages its current customers to spread the word about their products/ services to their friends, family, or coworkers.
In exchange for successfully referring someone, the happy customers who made the referral often receive rewards such as discounts or freebies.
There are three main participants in:
- The referrer: The existing customer who recommends the brand’s products or services.
- The referred: The person who is being recommended to the brand’s products or services by the referrer.
- The brand: The company that offers the products or services and runs the Referral Program.
One famous example of a successful referral program is Dropbox. Dropbox offers its users (referrers) additional storage space for every new user they refer who signs up for Dropbox. This way, both the referrer and the referred receive a benefit, and Dropbox gains a new user.
How Can Small Businesses Benefit From Referral Programs?
Why are referral marketing programs super suitable for small businesses? How many benefits can it bring? Did you know that 82% of small businesses rely on referrals as their primary source for acquiring new customers? This underscores the significance of referral programs for small businesses.
By encouraging existing satisfied customers to recommend their products or services to others, companies can gain access to a wider audience & increase their chances of success. The statistics below will give you a better understanding of the importance of this!
Cost-effective
Referral programs are considered a cost-effective marketing strategy for several reasons!
According to recent statistics, leads from referrals have a 30% higher conversion rate than leads generated from other marketing channels such as cold calling or mass advertising. So impressive!
It means that for every 100 referrals, 30 are likely to convert into customers! So you can see this type of referral marketing platform lowers the cost per acquisition.
Moreover, customers acquired through referral friend programs are more valuable to the business in the long run. You can expect 16% more in profits from referred customers! Of course, it is a significant increase.
Back to the cost, while setting up a referral program involves some costs (such as the cost of the referral incentives and the cost of implementing and maintaining the program), these costs are often lower than those associated with pay-per-click (PPC) and content marketing strategies.
Even though there are costs involved in setting up and running the program, the returns (in terms of new customers and increased sales) often outweigh these costs.
One of the reasons why referred customers are more valuable is that they are more likely to stick with your business. This will reduce the costs associated with customer churn, a significant expense for many small businesses.
Increase brand awareness
Referral programs significantly aid small businesses in enhancing their brand awareness. When customers refer a brand to their friends or family, it introduces the brand to a new audience and creates a positive brand impression.
Recommendations from friends and family are often seen as more trustworthy & credible than traditional advertising! Of course, it will enhance the brand’s reputation and visibility.
People trust recommendations from friends and family, which can significantly boost brand awareness. In fact, 92% of consumers trust the referrals or recommendations of people they know personally.
Plus, referral programs transform loyal customers into brand advocates who promote the brand within their networks, expanding its reach and visibility.
According to recent statistics, around 2.4 billion brand-related conversations happen daily in the US. It indicates the potential reach of word-of-mouth and referral marketing. Moreover, 82% of small businesses claim that referrals are their primary source of new business.
Offering incentives for referrals can motivate customers to promote the brand actively. These incentives, such as discounts or free items, encourage customers to refer others and create a positive association with the brand.
Referral programs can also increase user-generated content, like reviews & testimonials, which can be shared on social media, further increasing brand awareness. All leads to high brand awareness!
Build strong customer relationships
Building strong customer relationships is crucial for any small business to thrive and succeed in the competitive market. One effective way to do this is through referral propagation, which can lead to a loyalty cycle and strengthen customer relationships.
Finance Online has shown that referred customers are 4 times more likely to refer the good brand to others! So, it can result in a chain of referrals.
Moreover, referred customers have been found to have a higher lifetime value than non-referred customers. In fact, the lifetime value of referred customers is 16% higher than that of non-referred leads. Customers acquired through referral programs are more valuable to the business in the long run, which can lead to stronger customer relationships.
Gain loyal customers
According to a study by the Finance Online, strangers referred by other customers have a 37% higher retention rate. It means referred customers are likelier to stick with your business and become potential customers.
So why do referred customers tend to be more faithful? One reason is that they come to your business with a pre-existing positive perception. This positive perception can translate into a better customer experience, increasing loyalty.
Strategies to Set Up A Referral Program for Your Small Business
We can see clearly the benefits of referral programs for small businesses! Let’s explore these strategies below to learn how to set referral campaign perfectly!
Keep it simple and easy to share
What is precisely a simple, customer-friendly, and easy-to-share referral program?
First, it must have a transparent process with minimal steps that customers can easily follow. The process should be straightforward so customers can understand how to participate, refer others, and claim rewards.
An intuitive interface ensures customers can navigate effortlessly and complete the referral process without any hassle.
In addition to simplicity, ease of sharing is also a crucial factor in the success of a referral program. Customers should have multiple sharing options (email campaigns, social media, direct link) to choose their preferred method.
Pre-filled messages can also make it easy for customers to share by offering pre-written messages they can customize. One-click sharing can enable sharing with a single click or tap, encouraging customers to share more frequently.
These features will enhance the overall customer experience. Why?
A simple customer loyalty program save customers time and effort, which makes them more likely to participate and refer friends. Easy sharing fosters positive interactions, which makes customers feel good about recommending your business.
Simplicity builds trust, and customers appreciate clear rules & straightforward rewards. When sharing is effortless, customers engage more, becoming active promoters of your brand.
Add a clear CTA (Call-to-Action)
Simply having a referral program in place is not enough! You need to make sure that your customers are actually participating in it. And that’s why a clear call-to-action (CTA) comes in.
It can catch customers’ attention and encourage them to join your referral program.
Your CTA should be easy to find, short, and persuasive enough to convince customers to share with their friends. It also should be easy to understand and prominently displayed on your website & other marketing materials. Here are some tips to make a clear CTA:
- Action-Oriented Language: Use phrases like “Share now,” “Buy now,” or “Shop now” to prompt the reader to take a specific action.
- Simplicity: Ensure your CTA is easily understood without extra information or distractions.
- Visual appeal: Highlight your CTA stand out with contrasting colors.
- Conciseness: Avoid using confusing language that could be misleading.
According to a recent study of The Signal, customized CTAs have been found to convert 202% better than basic ones. It is because personalized CTAs consider the specific interests and needs of the target audience.
By tailoring the CTA to the audience’s preferences, businesses can provide a more customized experience for their customers! In turn, it can lead to increased engagement and sales.
Offer valuable rewards and incentives
Of course! Nothing is free! The customer’s time should be exchanged for valuable rewards and incentives!
When promoting your business, offering rewards and incentives can be a great way to attract new customers and keep your existing ones happy.
You can provide many types of rewards, such as cash transfers, gift cards, free products or services, and even company swag. However, it’s essential to choose the right type of reward for your brand and business.
- To start, you need to decide who gets the referral reward. It’s the person who made the referral, the new customer who was referred, or both.
- Next, you should choose the best type of referral reward and create a reward structure that works for your business. Consider using extra-motivating reward structures, such as tiered or milestone rewards.
- Choosing a referral incentive should attract customers! You must also make sense of your business and not hurt your bottom line. A tempting discount combined with a friend’s recommendation can be hard to resist.
- Still, it’s vital to ensure that your referral program is easy to use, easy to understand, and communicates the benefits and incentives of the program.
Remember that the right referral incentive can motivate your existing customers to make a referral and make it easy for new customers to buy. So, take the time to choose the right rewards and incentives for your business, and make sure your referral program is straightforward.
Make use of small business position
Small businesses indeed have unique advantages when setting up a referral program. Why don’t you make use of it?
First is deep personal relationships.
Small companies often have a closer, more personal relationship with their customers! The reason is because they are typically more customer-focused and understand the importance of building solid relationships.
They interact directly with their customers, allowing them to get to know their needs and preferences more deeply. This close relationship helps build trust and loyalty, critical factors in customer retention.
Of course, this personal relationship can be leveraged to encourage customers to make referrals. Customers with a strong relationship with a business are more likely to make referrals because they trust the company and want to share their positive experiences with others.
Next is flexibility.
Small businesses are typically more flexible than giant corporations. Why do we say that? Because small merchants can adapt more quickly to changes in the market or customer preferences.
This flexibility allows them to innovate and respond to customer needs more effectively! As a result, it can lead to a better customer experience and increased customer loyalty.
Plus, this flexibility could allow a small business to experiment with different types of rewards or program structures to see what works best for their customers. They can also make changes to the program more quickly based on customer feedback.
Small merchants should design a referral program that fits the business and customers to use these advantages. Listen to your customers’ feedback, be flexible, and always strive to offer value in your referral program.
Promote your referral program via multiple channels
Promoting referral programs can be a challenging task, especially when it comes to reaching a broader audience. The good news is that there are various channels available that small businesses can use to promote effectively.
Here are five channels that small companies can use to promote their referral programs:
- Email Marketing: Merchants can create customized emails to send to customers and incentivize them to refer their friends and family. Remember to highlight the program’s benefits and provide clear instructions on participating.
- Social Media: Social media platforms like Tiktok, Twitter, Facebook, and Instagram are excellent channels for promoting your referral program. You can create posts that provide an overview of the program and its benefits!
It is a good idea to encourage your followers to participate. Paid advertising also will be not bad option on these referral platforms to reach a broader audience.
- Website and Landing Pages: Merchants can feature the program on the homepage, create a dedicated referral landing page, or include the program on customer pages. Ensure the program details are easy to find and clearly communicate the benefits of participating.
- Post-Purchase Messaging: After a customer makes a purchase, they are often highly engaged with your brand.
It is an excellent time to promote your referral program by providing clear participation instructions and highlighting the rewards. Merchants can use email or SMS to send personalized messages to the customers after they purchase.
- In-App Notifications: If a small business has a mobile or web app, you can use in-app notifications! A common way is to send personalized messages to your users and incentivize them to refer their friends and family. Ensure the notification is clear and concise and provides a clear call to action.
Track the result and optimize your campaign
If you’re running a referral program campaign, tracking specific metrics and using the right tools to optimize your campaign are considerations. Here are some key metrics you should follow:
- Share rate: This is the percentage of customers who share your referral program. If the rate is low, consider offering more incentives to your advocates.
- Clicks per share: This refers to the average number of clicks each share gets. If the rate is low, you may need to motivate friends and family of your advocates to click.
- Conversion rate: This is the percentage of referred leads who end up purchasing your product or service.
- Referral rates: This is the percentage of all purchases that result from referrals.
- Referral revenue: This is the total amount of revenue brought in through your referral program.
- Viral coefficient (a.k.a. the K-factor): This measures the growth of referrals – how many new customers each existing customer brings in.
- Participant conversion rate: The percentage of participants who make a purchase.
- Invitation click-through rate: The percentage of sent invitations that are clicked.
- Invitation conversion rate: The percentage of clicked invitations that lead to a purchase.
To optimize your referral program, you can use a tool like Google Analytics or UpPromote! It is primarily a marketing tool but also offers features that can be used for referral programs.
One of the best features is referral tracking. It provides a reliable real-time tracking process to track all referral orders! UpPromote also helps reduce the risks of fraud & referral scams that may cause loss to the business.
9 Examples of Small Business Referral Programs
Too much theory? Now, we will analyze 9 examples of small businesses and explain why their referral programs are effective!
Tomlinson Bomberger
Bussiness background
Tomlinson Bomberger is a small business that offers landscaping, lawn care, and pest control services to people living in the Lancaster, PA area.
Their referral program is worth mentioning because of its community-minded and feel-good messaging. According to their website, the business has grown over the years because of all the great referrals they have received from their clients.
The reasons why Tomlinson Bomberger referral program is effective
- One thing that stands out about their referral program is the friendship-focused image! What content of images? They emphasize how referring to the landscaping business can help friends out.
- The program also includes an enticing call to action (CTA) that reads, “Referrals | Want to make an easy $75?” This incentive is tied to the company as a $75 company credit! It is awarded to the referrer for every qualifying purchase made by the referred friend.
- Another significant aspect of the referral program is the cumulative credit system. Every time a referred friend makes a purchase, Tomlinson Bomberger rewards the referrer with another $75. The more referrals you drive, the more credit you can accumulate towards their customer services.
- To make it easy for users to participate in the referral program, there is an easy-to-find CTA button on the website and transparent terms and conditions explaining how to earn referral rewards.
Overall, Tomlinson Bomberger’s referral program is an excellent way for customers to spread the word about their services while making some credit towards their landscaping, lawn care, or pest control needs.
PA Fitness
Business background
PA Fitness is a small business that operates fitness centers in Marysville and Arlington, Washington. The fitness center has a unique referral program to encourage people to invite their friends to work out together.
The reasons why PA Fitness referral program is effective
- What sets this program apart is its feel-good, friend-oriented approach.
The program features a welcoming image of women exercising together and a concise referral text emphasizing the “why” behind referring. The text reads, “Working out is always more fun with a buddy!” and highlights the latest fitness equipment, top-notch facilities, and one-on-one personal training.
- Moreover, the referral program also features an easy-to-find, long blue CTA button that says, “Invite my friend.” And the text below the CTA button encourages people to invite their friends by stating, “Your friends will thank you.”
- What is noteworthy about the program is that it doesn’t offer any extrinsic incentives. Instead, it highlights the intrinsic incentive of helping a friend.
- As you can see, PA Fitness’ referral program makes it easy for people to share their love of fitness with friends while making them feel welcome and appreciated.
The program is simple, inviting, and focused on the benefits of working out together. It’s a great example of how businesses can create programs encouraging people to refer their friends without relying on monetary incentives.
Bandier
Business background
Bandier is known as a famous activewear brand! It has devised an excellent way to encourage its loyal customers to refer their friends.
So, why is this referral program working so well for Bandier? Well, it’s pretty simple. Customers who love the brand naturally want to tell their friends about it. By offering referral rewards, the brand gives customers more reason to spread the word.
The reasons why the Bandier referral program is effective
- When a referred friend makes their first purchase, the customer who referred them earns $25 in points. What’s more, the referred friend also gets $25 in points.
- Even better? The referring customer can continue to earn points for any future purchases their referrals make. It means unlimited rewards for everyone involved.
- Plus, the point system encourages customers to make multiple referrals to earn enough points to redeem their rewards. It means more referrals, which leads to more chances of landing new customers.
So, if you’re a Bandier fan, why not refer your friends and earn fantastic rewards?
Dave’s Cooling & Heating
Business background
Dave’s Cooling & Heating is an HVAC company in Frederick, MD. They have an incredible referral program, and we will reveal why you should learn from them.
The reasons why the Dave’s Cooling & Heating referral program is effective
- First, they focus on community, meaning they believe their customers are part of their family. They say, “The best way you can reward us for a job well done is to tell a friend… If the person you referred becomes one of our customers, we’ll give you a gift as a thank you. It’s a win-win-win!”.
- The next is that it’s enticing, and both parties get to win. When a friend referred by an existing customer becomes a new Dave’s customer, the referrer and the friend earn $50 each. That’s a great deal for everyone involved!
- Lastly, Dave’s Cooling & Heating has made its referral program easy to understand, even for someone who has never heard of it. They explain the mechanics of their HVAC referral program in two simple sentences so customers know exactly what it takes to earn the reward.
This way, customers can confidently refer their friends and family, knowing that the entire process is straightforward and the reward is worth it.
Upserve
Business background
Upserve is a company that sells restaurant management software! It includes various customizable modules like point-of-sale, worker scheduling, and regular diner rewards. It is one of the choices among restaurants of all sizes.
The reasons why the Upserve referral program is effective
One exciting aspect of Upserve’s referral program is that whenever a user refers friends, and those friends sign up, the company donates $200 to the Clean Water Fund. So crazy!
Upserve values community impact and sees its referral program as a natural extension. By donating to the Clean Water Fund, the company is making a meaningful contribution to society.
This approach can also attract customers who choose a business for its products or services and what it stands for. All you know is that doing good things for others gives the giver greater happiness than just doing it for self-gain.
The program works because most people are inclined to do their part for charity when given the opportunity. If you have a specific mission to make the world a better place, then Upserve’s referral program can help your business achieve that goal while gaining customers at the same time.
Dragon Gym
Business background
Dragon Gym is a small business based in Exton, PA, that provides martial arts and fitness training services. Their referral program is designed to incentivize students to refer their friends to the gym! And it does so in a way that makes them feel appreciated and valued.
The reasons why the Dragon Gym referral program is effective
- The referral program is introduced to students via a personal letter from the gym’s president. The letter emphasizes the importance of word-of-mouth marketing to the gym and thanks students for their support.
- The rewards for referring friends are tiered! What’s mean? The more friends a student refers to, the greater the reward they receive.
The reward is tied back to the business, with the student receiving either $100 off their next month’s tuition or cash when someone they refer decides to sign up after completing the Quick Start Course.
- The program mechanics are described clearly and concisely! The gym provides an easy-to-find red CTA button for submitting the referral form, further simplifying the process.
Dragon Gym’s referral program is an excellent example of how a small business can create a feel-good, community-minded marketing campaign! You can learn from this way to encourage customer loyalty and word-of-mouth referrals.
Scribe Writing
Business background
Scribe Writing is leveraging its customers’ network to get more authors to publish with them! This process is through their Small Business Referral Program called Book in a Box. By offering a monetary incentive, the company relies on the fact that new authors are likelier to trust other experienced authors!
The reasons why the Scribe Writing referral program is effective
Did you know this program offers $2,000 for every referral made? Yes, you read that right!
If someone is an author who has already published a book with the company, it can refer other authors and earn some money in cash or as a credit to the Scribe Writing account. Alternatively, users can donate the referral reward to charity.
The monetary reward is compelling! According to a Harris Poll survey, 77% of Americans prefer rewards a cash in exchange for referrals. However, not all small businesses can afford such a program. Therefore, if you want to make this referral program work for you, you must have a solid strategy.
Borst Landscape & Design
Business background
Borst Landscape & Design is a small business! It provides landscaping design and maintenance services in Allendale, NJ, and the surrounding areas.
One of the best things about their referral program is that it emphasizes how referrals help friends and Borst. They appreciate their customers’ business and want them to be part of their success.
The reasons why the Borst Landscape & Design referral program is effective
- Borst’s referral program is warm and inviting. They thank their valued customers for referring them to their friends, family, neighbors, etc, and offer a reward of a $125 credit on the current invoice to thank them.
- The best part of the incentive program is that it is cumulative. For every new client that a customer refers who signs with them, they will receive an immediate $125 credit towards any future services from Borst.
- To qualify for the referral program, the new client must sign a contract with Borst Landscape & Design and mention the name of the customer who referred them. The company makes this clear in its concise offer text. It includes the terms and conditions of the referral program.
Greats
Business background
Greats is an online sneaker shop that targets millennials, known for being socially motivated and generous. The company rewards referring customers and friends with $10 in credits when the new customer purchases using the referral code.
The reasons why the Greats referral program is effective
Giving credits to both parties is an excellent alternative to cash/ other product giveaways that might be too expensive. Also, customers are likely to use the credits at your store, which means you will earn a customer in the process.
Regardless of the size of the credit, customers always appreciate a price cut. If satisfied with your product or service, free credits push them to tell their friends about your business. This is why Greats’ referral program is an innovative and effective way to market their brand and build customer loyalty.
Best Referral Program Software for Small Businesses
You need a supportive toll to go far! There are two of the best referral marketing software for your small business!
ShareASale
If you’re looking for a reliable affiliate network to promote your products or services, ShareASale could be an excellent option for you to consider. ShareASale has been around for a long time!
You will be surprised to know that it’s one of the most reputable networks in the world. And, of course, it has a beneficial referral marketing solution for business owners.
Many significant publishers like Business Insider, Forbes, and BuzzFeed use ShareASale, which is a testament to its credibility.
If you use their software solutions like WPForms, OptinMonster, Referral Factory, and Referral Rock, you can also use ShareASale’s referral program to promote your products.
With ShareASale, you can easily create a referral or affiliate marketing program for your products! The good news is you can instantly access a network of over 225,000 affiliates ready to promote them.
You’ll find an in-depth dashboard and tracking tools to monitor performance! Plus, you can use along with built-in email marketing automation to stay in contact with the affiliates & inform them of sales and promotions.
Many customization options are available to help you design your unique referral and recruitment program.
ShareASale has a one-time setup fee of $500 plus a transaction fee equal to 20% of the commission you’re paying affiliates. It’s important to note that while more prominent brands may find ShareASale’s service invaluable, smaller businesses may find the costs too expensive.
UpPromote
UpPromote is one of the best referral tracking software for small businesses! Why do we say that? This tool is designed to help you increase your brand awareness, boost your sales, and reward your customers for their loyalty.
Here are some features you can take advantage of!
Easy-to-setup referral program: With UpPromote’s referral program, you can activate or deactivate the program with just one click. That’s true! You can also customize the reward and discount amounts easily.
Noticeable widget on your website: UpPromote’s referral program has a noticeable widget you can place on your website. This widget makes it easy for your customers to share referral links with friends. You can also set positions for the widget on your website and customize its color and text settings.
Potent rewards for customers and referred friends: UpPromote offers potent rewards for both your customers and their referred friends. You can choose between a flat rate per order or a percentage of sale for customer rewards and a fixed amount, percentage, or free shipping for friend discounts.
In-depth reports: It provides you with in-depth reports on conversions. You can filter the reports by date and time and view successful referrals. You can also get a graphical report on each customer’s clicks, sales, referrals, and commissions.
Promptly email notifications: UpPromote’s referral program sends reward emails instantly, making coupon codes accessible to redeem. You can also customize the email content & appearance.
Conclusion
That’s all about referral programs for small businesses! We hope that you will have a better understanding of this type of marketing! The final goal of course is to generate revenue and build customer loyalty. How? By using all the strategies we provided & referring to 9 valuable examples!
With the support of 2 recommended software, you have gotten closer to success! Good luck and thank you for reading!
