Questions to Ask Before Starting a Referral Program

December 30, 2019
WHERK Blog: Referral Program Best Practices

The most successful small businesses are usually those that stick to well-defined processes that run like clockwork. Whether it’s over the course of bidding, product development, customer service or invoicing, developing a proven and effective flow for how, when, where and why things happen can be the difference in a company thriving and not surviving.

While many leaders of small businesses recognize the value in a referral program as a lead generation source, less will realize the importance of process planning. In the same way, a lack of control can cause chaos in product development or in customer service, let’s say, the same can be said about a referral program. If you really want to do it right, here are four questions to ask yourself before starting a referral program.

What are my goals in starting a referral program?

Before you start inviting fans of your business to refer their friends and family, you’ll need to decide exactly what you hope to get out of the program. Is it a pure numbers game where you want all the leads you can get? Are you hoping for a specific kind of lead that fits within the parameters of your ideal customer? Are you hoping to grow your brand presence or increase revenue? The answers to those questions, and others like them, can help shape what your referral program will look like.

Ask yourself if it’s fiscally responsible to have a referral program. A good conversion rate for referrals is around 10%. Can your business afford to dole out discounts or points to existing customers if it isn’t going to net you many new conversions?

Part of this goal-setting session should also include some number crunching. Also, ask yourself whether or not it’s even fiscally responsible to have a referral program. A good conversion rate for referrals is around 10%, so can your business afford to dole out discounts or points to existing customers if it isn’t going to net you many new conversions? You’ll also need to account for your time or that of another employee to manage the referral program. These points certainly aren’t to dissuade you but think of them as food for thought during the planning phase.

Where are my customers coming from now?

This exercise is another that you should commit to taking on before rolling out your new referral program. Do you know where your customers are coming from currently? Are they primarily from your advertising efforts? Are they finding you organically through a Google search? And, maybe, more importantly, have you been tracking this information in any way? If not, you should take a few months to assess your customer base. It’s critical that you understand the results. Even if it’s just a brief question by phone or in person, ask every new lead you talk to how they heard about you. If you have a form on your website, make sure that you add that question.

After you have a solid amount of data to review, examine how your customers are finding you. If most of them are coming from word-of-mouth referrals, that’s a good sign. Your brand has the heft needed to drive a referral program. Also, it should help reinforce that you’re doing an excellent job.  Both providing a good or service and meeting customers’ expectations.

If the bulk of your leads are coming from elsewhere, think about increasing your presence in those channels. For instance, if the data showed social media as a big lead driver, you could explore a cost-effective Facebook ad campaign idea.

What kind of referral program will I have?

Once you’ve done the groundwork of outlining goals and digging into where your current customers are coming from, it’s time to outline the mechanics of how the program will work. First, you’ll need to determine who you want to be the ones referring your business. Is it your customers? Employees? Vendors? You could easily build a referral program around each of those groups, but it’s best to start slow.  Focus on one first.

Read on to get our suggested ideas for your referral program.

One of the most common methods used with referral programs is what’s known as a points-based system. With this approach, the person referring their friend or family member would receive a set allotment of points. They can exchange the points for prizes, discounts or even money off their next bill. Another popular tactic is a “referral for good” program. Where the business will donate money, goods or services to a philanthropic cause whenever someone submits a referral. You should also consider creating a landing page on your website. That makes it easy for someone to refer your business to another person.

Before you launch your program, it might be a good idea to conduct a small focus group with some of your best customers to ask for opinions. Some customers love the idea of exclusive discounts for referrals.  Others would prefer the chance to pick up some branded gear like a hat or tote bag.  If you’re still stuck on how to set up your referral program, check out this post on the pros and cons of some of our favorite types.

How will I spread the word about my referral program?

The answer to this question is somewhat dependent on who you’re targeting to drive referrals. If you have a shortlist, feel free to personally invite them to the landing page you’ve created. If you have a dedicated email list, make sure to include links to that landing page with each new email you send. For businesses with an e-commerce platform, a post-purchase page is another smart place for a link to the referral landing page.

Businesses with brick and mortar locations should train employees to talk about the merits of the referral program. Especially when they’re interacting with customers in the store. Clings on the windows or framed notices near the register are also effective ways to inform customers about what they can receive by referring someone. 

Remember, it’s much easier to keep track of customer interactions, log new referral members, and update current members’ loyalty statuses if you have a digital system in place. For more information about how to stay efficient, check out WHERK today!