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What Is a Community Referral Program and How it Works

A community referral program is a strategy where businesses and organizations generate support for a worthy cause. It leverages customers’ interpersonal relationships to refer new potential customers, and companies’ apportion proceeds to the cause. Many businesses ...

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A community referral program is a strategy where businesses and organizations generate support for a worthy cause. It leverages customers’ interpersonal relationships to refer new potential customers, and companies’ apportion proceeds to the cause.

Many businesses use such programs as part of their corporate social responsibility (CSR). Two in five companies consider CSR a uniquely competitive advantage, while 39 in 50 investors look at a brand’s CSR before investing.

Even Fortune 500 businesses showcase their CSR efforts in leading publications.

Turning your business customer into a supporter of community-related worthy causes makes sense. Interested? Read on.

What is a Community Referral Program?

A community referral program is a strategy where businesses give back to the community. They partner with local groups, community organizations, socio-civic institutions, non-profit organizations, and similar entities. The partnership allows the program to support worthy community causes.

Brands leverage word-of-mouth recommendations to generate support for a worthy cause. Companies can use program proceeds to donate to charitable organizations, schools, and other community groups. Some purchase items or fund projects that benefit the whole community.

Almost anyone can organize, launch, and manage a referral program benefiting groups and communities. They could be businesses, government agencies, non-profit organizations, and special interest groups.

Businesses have a significant role to play. Companies have a customer base that they can leverage to draw and gain support. You can request loyal customers to refer friends, business associates, and social contacts to the business. The sales you generate from customers can fund a worthy cause.

The goal of such programs is to create a long-lasting positive impact. A community organization can support its project and uplift the lives of constituents. Such a marketing strategy also helps strengthen community relations, allowing businesses to gain more customers.

Benefits of Community Referral Programs

Community referral programs are essential for realizing a business’s corporate social responsibility. After all, many brands recognize that doing business is beyond making money. They appreciate the need to give back to society, too. So, what benefits can the community and businesses derive from such a program? Let’s find out.

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For the Community

  • Increased access to resources and support.

Some communities have insufficient resources to make constituents’ lives more convenient, comfortable, and safer.

For example, access to safe drinking water remains a problem in many US households. The EPA and American Community Survey say nearly 500,000 households lack standard plumbing. Meanwhile, over 1,100 community water systems violate the Safe Water Drinking Act.

Water-related businesses can create a customer referral program to generate support. They can leverage their current customer base to buy plumbing products and donate the proceeds to communities with such issues.

  • Raises awareness of local needs and organizations.

Some folks go about their daily business without minding their neighbors’ and others in the community. They can become numb to issues and needs everyone else faces.

Businesses can help by raising awareness through referral strategies. They often work with local organizations and cause-oriented groups to drive a message to everyone in the community.

Moreover, customers use social media to spread the word. They write blogs, publish videos, post comments, and ask social followers to share. These activities increase awareness of issues impacting local communities.

  • Fosters a sense of community and collaboration.

Once they become aware of local issues, people realize they must act. For example, problems with safe drinking water affect everyone, especially vulnerable groups.

Referral programs rally the whole community to address the concern and safeguard everyone. Businesses are at the forefront of such strategies. They can encourage everyone to unite, collaborate with interest groups, and foster a lasting sense of community.

For the Business

  • Improves brand reputation and builds positive community relations.

Although community referral programs benefit society, businesses engaged in such practices can also boost their reputation. It’s a priceless social currency that brands can leverage to generate more income.

Community folks will learn more about the brand. They will recognize its value in building a safer and more progressive community.

Moreover, the company’s relationship with the community will strengthen. It enables the brand to enter a potential market because of solid connections and an excellent reputation with community leaders and members.

  • Generates valuable leads and potential customers.  

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Referral strategies are the go-to of seasoned marketers to generate excellent leads. Otherwise, 39 in 50 marketers wouldn’t implement this tactic and choose other marketing channels or strategies instead. That extends to community referrals.

Not everyone in the community might know your brand. You can consider the program an advertisement for your business, generating customer attention and evoking interest. These are leads.

Leads are potential customers. The more you have of the former, the more chances you get of making sales. Increasing sales lets you generate more cash to donate to a good cause. Alternatively, you can use the proceeds to buy much-needed community resources.

  • Creates a more engaged and loyal customer base.

Did you know that Americans love to give back to society? In 2022, 16 in 25 charitable givers were ordinary folks. They donated over $319 billion to cause-oriented institutions and organizations. We’re not talking about corporations donating only $21 billion. These are ordinary Americans. And they could be your customers.

Launching a community referral platform leverages customers’ natural generosity. They know it’s for a good cause. Contributing to a worthwhile endeavor makes happy customers, allowing them to feel good about themselves.

Community referral platforms empower customers to channel their generosity. They will engage your business more often and become loyal supporters. Consequently, you will generate more income by ensuring optimal customer satisfaction with your brand.

Examples of Community Referral Programs

Anyone can create and launch a community referral platform. However, businesses are more empowered to implement and manage such strategies because they have the backing of dedicated customers. Let’s look at several examples across four industries.

Retail

The retail industry is growing by 8.3% yearly. It could reach over $37 billion by 2027 at this pace. That’s enough money to support charitable organizations and other worthy community causes. Big and small retailers can give back to society.

Let’s start with big-name retailers.

Like many businesses with referral and affiliate programs, home improvement brand Wayfair strives to make good on its corporate social responsibility.

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Besides offering affiliates a 7% commission for promoting over two million products, Wayfair has the Neighborhood Fund. It’s a program that supports people and families in finding a place they can call home. Wayfair accepts in-kind contributions and rewards employees for volunteering and other charitable acts.

More importantly, Wayfair has a consumer engagement program that is similar to a referral strategy. This Neighborhood Fund component encourages Wayfair customers to donate to the company’s charitable organizations at checkout. The brand also has a yearly “Save Big, Give Back” program.

These initiatives allow customers to feel good about themselves. They know they contribute to worthy causes. The best part? They can recommend Wayfair to family, friends, acquaintances, colleagues, and social contacts. This tactic solidifies Wayfair’s position and strengthens social proofing.

Community referral efforts aren’t only for big-name brands. Small businesses can also contribute.

Suppose you’re a small neighborhood bakery. You could coordinate with school authorities to organize a bake sale during a school event or program. Students, teachers, and staff can sell your bakery products and offer them a percentage of the sale.

For instance, you could give the school half of the sales generated. They can use the proceeds to fund school projects, improve student meals, and enhance student-related services.

Your bakery benefits, too. More people will taste your cookies, cakes, breads, and pastries. They can become new customers and recommend your bakery to families, friends, and neighbors. That’s how you generate more business.

Wholesale

Like retailers, wholesalers are seeing impressive growth. The global wholesale industry currently stands at $53 trillion. Although its annual growth rate is slightly lower than retail (7.1% vs. 8.3%), wholesalers generate enough wealth to contribute to societal good.

So, how do wholesalers create social impact?

Wholesalers only enjoy a modest 15% to 30% profit, while retailers can generate up to 50%. The good news is that retailers buy items from wholesalers in bulk. So, the cash flow remains more significant in wholesalers than retailers.

More dollars translate to more opportunities to support community programs.

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For example, a fashion wholesaler can entice retailers to buy more clothes, shoes, and accessories. A buy-three-take-one promotion should be sufficient. Alternatively, offering retail buyers a 20% discount on bulk items should encourage them to invest more.

Turning such strategies into platforms for benefiting communities should be easy. Instead of rewarding the retailer in a buy-3-take-1 scheme, you could donate the dollar value of the “take-1” item to a non-profit organization.

It’s the same story for the 20% discount. For example, a product sells for $1,000 per bulk. The buyer only pays $900 as a 10% discount, and the other 10% goes to charity.

Retailers and buyers of bulk products can support the wholesaler’s social initiatives. After all, nearly everyone wants to contribute to a social good. They can spread the word to their social and business circles, allowing the wholesale business to generate more leads.

As mentioned, a single lead is a potential customer. And if your brand has a hundred leads, those are the same opportunities you will get to convert into sales.

Financial Services

The financial services industry is a booming market. It grows by 8.8% annually, with experts observing the trend to reach over $55 trillion by 2030. The sector features insurance firms, brokerage companies, banks, investment institutions, lending organizations, and other finance-related businesses.

You can expect these companies to have enough money to support a community program or socio-civic activity.

Let’s consider some examples.

People’s interest in cryptocurrencies remains high despite market volatility and geopolitical uncertainties. Binance continues to shine with its low fees and easy-to-use interface for trading Bitcoin and other crypto.

Binance’s referral process is straightforward and rewarding. Referrers and referees get up to 40% commission on every crypto trade. The best part is referrers can determine how much commission to give a referred friend. More importantly, referees become Binance clients. And that makes them eligible for the brand’s charity program.

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Binance Charity has raised over a thousand Bitcoins (worth over $23 million), benefiting over two million people across 54 countries. Customers can invite friends to trade with Binance. The more social contacts they contact, the higher the chances of funding Binance Charity. That translates to more people the brand can help.

Other financial companies can launch and run such a program.

For example, an insurer can earmark a percentage of insurance fees to fund a community project. They can encourage existing clients to refer more customers. Instead of giving referrers a commission, insurers can direct the cash amount to a socio-civic organization or charitable institution.

Healthcare

Referrals aren’t new to the healthcare industry. Doctors often refer patients to fellow practitioners for more appropriate care. For instance, a cardiologist might recommend a pulmonologist to a patient with breathing complications.

You can also add a business side to this system.

For example, dentists can ask their patients to refer new clients. Dental practitioners can donate an equal number of dental care kits (i.e., toothbrushes, toothpaste, and dental floss in a neat pouch) to an orphanage. Dentists can also offer rewards for referrals.

Biotechnology firms can partner with veterans organizations and hospitals to provide amputees with prosthetic limbs. They could allocate a small portion of each sale to these institutions so veterans will improve their mobility.

Hospital clients and veterans’ families can help spread the word to social contacts, allowing the company to boost its revenue. The more biotechnology products it sells, the more prosthetic limbs it can offer to veterans.

How to Create a Community Referral Program

Community referral programs are great for businesses and society. And since nearly everyone wants to contribute to the greater good, companies can design a robust strategy to leverage relationships, trust, and loyalty. So, how do you create a successful referral program that benefits the community?

Define your goals and target audience.

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Any endeavor, business, social, or otherwise, starts with a clear objective of what you want to accomplish. Goals set our priorities straight. And that works with community referral programs.

Most businesses with such programs aim to increase revenues. It might seem self-centered, but it makes sense. Supporting worthy causes would be next to impossible without adequate funds. Hence, boosting sales should be any business’s priority.

Of course, other objectives are equally important. For example, you could strive to improve customer relationship management and ensure brand loyalty. Others might focus on brand awareness, lead generation, customer retention, and other notable goals.

Next, clarify your target audience. Who can benefit the most from your offerings? Describing the ideal candidate lets you focus marketing and promotional strategies on these consumers.

Choose a relevant and impactful community cause.

Most companies support community causes that align with their values and philosophies. It can include what they are passionate about. Ideally, the cause must share some elements resonating with the business.

Researching worthy causes is essential. What happens to the community (or groups) if they don’t address the problem? How can you help? Are local resources available? For instance, are there non-profit or community organizations ready to support you?

More importantly, do your existing customers share the same vision? Do they see the cause as worthy of their support? Customers will only recommend your cause to their friends if they believe in it.

Develop a clear and easy-to-understand program structure.

Referral programs are more effective if you offer appealing rewards. There could be monetary rewards for every successful referral a customer delivers. Alternatively, you can give store discounts or credits.

You can also consider giving additional rewards to referred friends. Experts call this double-sided rewards. This scheme benefits both referrers and referees. For instance, you could give customers a 10% discount on their next purchase. Meanwhile, their referred friends can get a $10 price off on the initial purchase.

Customers must find referring friends hassle-free. You can create attention-grabbing referral widgets and easy-to-accomplish referral forms on landing pages. Leverage social media by adding social sharing buttons across multiple platforms.

The idea is to make referring friends and social contacts as effortless and fulfilling as possible.

Promote the program effectively through various channels.

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Please don’t limit your marketing and promotional activities to your website. Although this channel reflects your official business, most customers don’t visit often. They might not even interact with you unless they buy something.

Promote your program through other marketing methods. You can post on social media or leverage email marketing’s effectiveness. After all, 87% of companies consider this strategy crucial to success. You can even include a gift card in your email to entice targeted customers.

Track results and measure the program’s impact.

Evaluating any program is necessary to determine effectiveness or success. Monitoring crucial metrics (i.e., customer acquisition cost, conversion, and referral rates) lets you identify if you met the objectives. Otherwise, you might want to modify your strategies and tactics to ensure success.

Referral marketing software is indispensable for businesses that want to ensure a successful program.

Conclusion

We’re not surprised to see many companies develop, launch, and manage community referral programs. Neither should you. These strategies are two-pronged. They empower brands to give back to society, helping those in need or supporting noble causes. These programs also benefit businesses, making them stand out.

Designing such a strategy shouldn’t be difficult if you already have an existing referral program. The only question is what noble cause or community good you must support.

Ellie Tran, a seasoned SEO content writer with three years of experience in the eCommerce world. Being a part of the UpPromote team, Ellie wants to assist Shopify merchants in achieving success through useful content & actionable insights. Ellie's commitment to learning never stops; she's always eager to gain more knowledge about SEO and content marketing to create valuable content for users. When she's not working on content, Ellie enjoys baking and exploring new places.