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Do customer referral schemes work?

September 19, 20225 min read

Word-of-mouth marketing is the most powerful form of marketing. A customer referral program is a systematic way to get more of it.

Andrew Chen, entrepreneur and investor

Customer referral schemes can be an effective way to generate new business and drive customer loyalty. Research has shown that referred customers are often more valuable and have higher retention rates than customers who are not referred. This is because referred customers are more likely to trust the recommendation of a friend or family member, and they may feel a sense of loyalty to the person who referred them.

However, it's important to design and execute a referral program carefully to ensure it is successful. This includes offering an incentive that is meaningful to customers, making the referral process easy and straightforward, and effectively communicating the value of the program. It's also important to track and measure the results of the referral program to identify areas for improvement.

Overall, if implemented effectively, customer referral schemes can be a powerful tool for driving new business and customer loyalty.

Here are our tips for creating a successful customer referral program:

  1. Offer an incentive: Offer a reward or incentive for customers who refer friends or family to your business. This could be a discount, free product, or other prize.

  2. Make it easy to refer: Make it easy for customers to refer others by providing clear instructions and a simple referral process. This could include a referral form or referral link that can be shared with friends and family.

  3. Communicate the value: Clearly communicate the value of your referral program to customers and encourage them to participate. This could include highlighting the benefits of the reward or incentive and how it will benefit them.

  4. Track and measure results: Use tracking and measurement tools to monitor the success of your referral program and identify areas for improvement. This could include tracking the number of referrals, the conversion rate of referred customers, and the overall value of the referral program to your business.

  5. Encourage sharing: Encourage customers to share their referral experiences and results on social media or other platforms. This can help create buzz and interest in your referral program.

  6. Follow up with referred customers: Make sure to follow up with referred customers to welcome them and thank them for their business. This can help build customer loyalty and encourage them to continue using your products or services.

A referral program is a win-win for both the company and the customer. The company gets a new customer and the customer gets a reward for introducing someone to the company.

Ryan Deiss, founder and CEO of Digital Marketer

What are the best incentives for a customer referral scheme?

When designing a customer referral scheme, it's important to consider what type of incentive will be most effective in driving referrals. The right incentive will depend on your business and your target audience. Here are a few types of incentives that can be effective in a customer referral scheme:

  1. Discounts: Offer a discount on a future purchase as a reward for referring a new customer.

  2. Free products or services: Offer a free product or service as a reward for referring a new customer. This could be a free trial, a free product, or a discount on a future purchase.

  3. Cash or gift cards: Offer a cash reward or gift card as a reward for referring a new customer.

  4. Exclusive access: Offer exclusive access to new products or services, or special events, as a reward for referring a new customer.

  5. Social recognition: Offer social recognition, such as featuring the referrer on your social media channels or in your newsletter, as a reward for referring a new customer.

It's important to consider what type of incentive will be most meaningful and valuable to your target audience. You may want to test different incentives to see which ones are most effective in driving referrals.

How do I promote my customer referral scheme?

There are a variety of ways to promote your customer referral program to ensure it is successful. Here are a few strategies you can use:

  1. Make it easy to refer: Make it easy for customers to refer others by providing clear instructions and a simple referral process. This could include a referral form or referral link that can be shared with friends and family.

  2. Use email marketing: Use email marketing to promote your referral program to your email list. Include information about the rewards and incentives, and make it easy for subscribers to refer their friends and family.

  3. Promote on social media: Use social media to promote your referral program and encourage customers to share their referral experiences and results.

  4. Use in-store marketing: If you have a physical store, use in-store marketing techniques such as signage, flyers, and brochures to promote your referral program.

  5. Include in your customer service process: Include information about your referral program in your customer service process, such as in your onboarding emails or in follow-up emails after a purchase.

Overall, it's important to be proactive in promoting your referral program and making it easy for customers to refer others. Take a look at our article on how to leverage your customer reviews and ratings.

The best marketing is when customers tell their friends and family about your business. A referral program is a way to encourage and reward them for doing so.

Neil Patel, digital marketer and entrepreneur

digital marketingcustomer loyalty
Tim has been in digital marketing for over 20 years and he loves to write about it.

Tim West

Tim has been in digital marketing for over 20 years and he loves to write about it.

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