Referral programs can be a game-changer, but let’s face it—yours might not be hitting the mark. Here’s why:
Brand loyalists (people who have made a purchase from you in the past and could potentially be a referral source) are an extremely important but often forgotten part of the funnel. They are pure gold for a brand because they feed the awareness phase (the hardest phase of the funnel) with digital or in-person word of mouth.
Referrals are a go-to strategy for me when I serve my clients, but suggesting it gets me a lot of raised eyebrows at first. In short, people don’t think referral programs work… and it’s true, many don’t, but for one reason: Most marketers underfund them.
A thank you card with a $10 Amazon gift card isn’t really an incentive to make folks act. I mean, does a $10 Amazon gift card in return for convincing someone to buy someone else’s services really get you excited?
The good news is, you can fix this problem with simple math. Ask yourself:
- How much do you net on a conversion after you take into account labor, materials, etc.?
- Then, what’s the largest meaningful amount you can give to someone who refers someone else to you? An Amazon gift card for $100 is a lot more powerful than a $10 one, right? If you can still make money, why not try it?
It feels scary at first to promise so much in return for referrals, but it will yield amazing results. I once had a client who gave up 25% of her profit margins per sale on her referrals and she had a banner month. She felt comfortable to do that because she took time to answer those two questions and do the math. New customers came in droves as a reward.
Still unconvinced? Calculate the cost per customer acquisition that you spend on average when you think of all the other things you do in the awareness phase that aren’t nearly as powerful as word of mouth. I’m not suggesting to stop doing those things, but reallocating wouldn’t hurt. After all — word of mouth is the most effective form of marketing there is.
What if you aren’t selling anything and simply trying to amplify your online presence? That goes back to creating valuable content that creates a pull marketing effect. More on that here.
Are you ready to make your referral program soar? Do the math and enjoy the success!