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CPR Level UP: Referral Programs

Updated: Dec 4, 2023

Customer referrals are one of the most trusted forms of marketing. We know the adage that a satisfied customer is likely to refer about six potential clients; however, dissatisfied clients are more than likely to communicate their concerns to about fifty others, which may affect how potential clients view your company. With that, the power of negative press can weigh down a business. While it is not impossible to remove a negative image, scrubbing away an adverse profile takes due diligence. As a business owner or leader, the goal is to avoid negative press, go beyond your call of duty, which means doing more than less, and allow your company's actions to speak for themselves.

With the possibility of negative press or Leveling Up your business, an organization can construct a robust referral program with many benefits. An October 2023 article by Referral Rock cited sixteen reasons why referral programs work in today's marketplace.

1. Encourages customers to share

About 83% of customers are willing to refer after a positive experience. However, only 29% do. A referral program can motivate customers to action with timely messages and attractive rewards. It’s best to invite customers to your program during “aha” moments or when they experience the most value from your brand, for example, right after purchasing or receiving their product in the mail. You can also provide a pre-filled message that makes sharing easy for them in just a few clicks. Offering an attractive reward is a great way to encourage referrals and show customers you appreciate their support.

2. Boosts the referrals you’re already getting

Are customers already referring others to your brand? If you find new customers are hearing about you from your existing base, it’s a good sign that your business is ready for a referral program. A formal process with easy messaging options and attractive incentives can grow the referrals you’re already receiving. You can start by manually trying out a referral program, using manual referral tracking and spreadsheets. Or you can quickly test out referral marketing software that streamlines and automates the process and lets customers.

3. Fosters greater trust in your market

A study by Nielsen reveals that 92% of consumers are more inclined to trust personal recommendations over traditional marketing. This includes reading reviews and testimonials and hearing about new products from friends and family. Consumer trust is becoming even more critical, as people are becoming desensitized to mass marketing ads and even using ad-blockers to prevent them from popping up when they’re online. With so many ads trying to grab our attention, an authentic recommendation from someone who has already tried the product or service can be an invaluable way to cut through all the noise.

4. Gains presence on the same platforms as potential customers

A referral program enables your customers to share on the platforms they use most, which makes it one of the most accessible campaigns to promote. Every customer in your program is given a referral link they can easily send to friends and family. Most referral software will also offer a variety of templates that can be shared through Twitter, Facebook, and other popular social media platforms.

5. Invites customers to feel like part of your business

Want your customers to have a deeper connection with your brand? Invite them to join your referral program. Customers already fans of your brand will enjoy contributing to your success. They’ll also be proud of sharing such a great product with others who may not have heard of you yet. Referral programs also allow customers exclusive rewards, like access to private sales and events, branded swag, or even pre-release products they can try before anyone else.

6. Gauges how well your business is doing

Not even the most loyal customers will send re-customers to purchase unless they are convicted of doing so. People won’t risk their reputation and social currency to promote a questionable brand. The fact that a customer refers others and speaks well of your business is already a great sign. If you have customers actively sharing your brand and participating in a referral program, your business is on the right track.

7. Reminds customers why they love your brand

When customers refer a particular someone to a specific product or service, they usually share why they prefer your brand – why purchasing from your business is the best option.

This conversation reinforces a customer’s feelings toward your brand (even more if they refer several others). And if their referrals become new customers, they’ll all share an interest in your brand.

8. Drives repeat customer purchases

A referral program naturally increases the number of repeat purchases for your business. The most popular incentives are cash-based, such as store credit and discounts. These are all rewards that go toward a customer’s next purchase. By making it easy to continue purchasing from your company, a referral program invites new customers and encourages existing ones to stay loyal.

9. Increases overall customer engagement

An added benefit of referral marketing is it builds a solid online presence for your business. Most referrals will want to learn more about your brand and products before purchasing, so they’re actively visiting your website and social media pages. Similarly, your existing customers will also frequent your website to check their referral points or reward status. Increased visits to your site naturally lead to increased brand awareness, potential sales, and more social media shares.

10. Shines light on your best customers and advocates

Customers enjoy being recognized by their favorite brands. Referral programs allow you to identify your most loyal customers – those with many referrals who share your brand most often or leave rave reviews about your product. By knowing who your best advocates are, you can reach out to them individually and offer exclusive rewards, such as access to members-only content or events, trials for new products, or even a thoughtful handwritten note of thanks.

11. Grows your total audience reach

Referral marketing allows your marketing team to reach potential clients quickly and at a faster rate. Take one person who interacts with several other people daily. If this one person tells ten people about your brand, and then the initial ten people tell the other ten people, in just a short amount of time, an exponential number of people will have heard about you.

This type of earned media (i.e., word of mouth, peer-to-peer referrals) helps increase your credibility and reach your target audience directly.

12. Increases your customer retention rate

Customers who participate in referral programs are more obliged to stay with your business. They already use, and like your brand, and by offering rewards they can use toward their next purchase (i.e., 25% off, $50 store credit), you can encourage them to remain loyal customers. Data shows that acquiring new customers is five to twenty-five times more expensive than retaining existing ones.

13. Gets a higher lifetime value from referred customers

Customers referred by someone they trust already come in with a positive attitude. They’ve heard about your brand and its benefits and are likelier to repeat purchases or refer others. In the long run, referred customers are 18% more likely to stay loyal and offer a 16-25% higher lifetime value than other customers.

14. Receives a greater return on investment (ROI)

Cashback and store credit are small prices for your referral marketing sales. Aside from cash incentives, you can also award points for every referral. These points can then be accumulated and exchanged for greater rewards, encouraging customers to share with more people. Plus, you only have to pay rewards when a sale is generated. The result? Your business generates leads and grows its customer base at a much lower expense than other marketing campaigns.

15. Automates and monitors sales growth

Most successful referral marketing uses software to monitor and automate the success of their program. After a quick initial setup, referral software automates most of the routine steps, from inviting customers at the optimal moments to sending them rewards for every successful referral. The best part is that all this happens in the background, leaving you free to grow other business areas. All you have to do is monitor and analyze the collected data.

16. Helps you track word of mouth more easily

Referral marketing can help your business generate leads and close more sales per customer. However, without a formal method to track and attribute where all your new customers are coming from. Dedicated referral program software can track and monitor every step of the way and tell you which customers are generating more leads for your business. You can also set up the software to handle all customer registrations, sales tracking, and reward fulfillment so you have more visibility into what works best for your business.

In conclusion, referral programs work because people instinctively trust recommendations from someone; they know more than mass advertising messages. One of the best parts of referral marketing is a program can be easily automated to run alongside other marketing efforts. By having a simple way to track all your referrals and sales, you can start seeing the benefits of increased word of mouth and find new ways to grow your business.

Warm Regards,


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