Did you know that 92% of consumers trust referrals from people they know? Referral marketing, or word-of-mouth marketing, is said to generate four times more successful conversions than most other channels.
Why is referral marketing so powerful?
Referral marketing is a marketing strategy used by businesses to grow their customer base by encouraging their current customers to “refer” or recommend their services to others they know.
In exchange for bringing in new customers this way, the referrer is offered attractive incentives that act as a reward. Sometimes known as a “refer-a-friend program,” a customer referral program tends to be the least costly marketing strategy a business can use and often one of the most effective.
At the end of the day, the business gains free marketing and potential new customers, while existing customers opting for this program are rewarded for their efforts. It’s a win-win for everyone!
Is Starting a Referral Program Really Worth It?
In short, the answer is yes! While creating a successful referral program may seem challenging at first, it provides various benefits that prove to be well worth the time and effort put into it.
Here are the advantages for small businesses to consider when thinking of building a reward program:
- Self-sustaining and increased marketing reach (if effective): Building a referral campaign allows your business to grow its word-of-mouth marketing through happy customers who are satisfied with its services. A referral program, when successful and effective, can eventually become self-sustaining! The best customer you have can go out there and act as an advocate for your business, increasing the number of referrals that come your way. The best referral program has no limits to bringing in potential customers and continually attracting new business!
- Excellent ROI value: Referral marketing is a more cost-effective way for businesses to grow their customer base compared to other forms of digital marketing, such as social media ads. As a business owner, you might only have to pay the costs of gift cards, small prizes, or service discounts. In exchange for new leads, this is probably well worth the price!
- Increased brand awareness and reputation: Referral marketing allows for effective messaging where you are more in control of your brand story and can build your brand’s reputation. Today’s customers are more aware of brand identity and want to align themselves with businesses that stand for something important, positively impact local communities, and more. When you empower your existing customers to tell your brand’s story, that will resonate more with potential customers than the business directly advertising to them.
- Improved customer retention rate: If your business develops a solid referral marketing strategy, it can improve its customer relationships and create customers who are more likely to remain loyal to your business. Why? They’re bound to appreciate a business that rewards their referrals! When customers are appropriately rewarded and shown gratitude, it fortifies their loyalty and retains them in a way that perhaps traditional marketing might not.
- Build better trust and business practices all around: A successful business is built upon customer trust and loyalty. This is one of the best benefits that a referral program offers. Referrals are trusted on the same level as reviews and more than traditional ads. When your customers trust each other and find that their expectations are met, this helps build a better overall reputation and business infrastructure.
6 Customer Referral Program Ideas or Types Your Business Can Leverage Today
When looking for inspiration, the best thing to do is look at existing referral program examples that have been successful. There are many program ideas you can leverage, but here are six to get you started:
1. Social Gifting
What is it?
Unlike traditional tiered rewards in referral marketing programs, social gifting works off the unique concept that the referrer doesn’t technically receive any reward at all. Instead, the entire reward goes purely to the referred friend. The language is often structured similar to the below example:
In this referral campaign idea, the business provides the referrer a customer code they can then use to gift free trials to a friend of their choice, essentially acting as free products. The friend, happy upon receiving a gift, expresses gratitude to their friend (the referrer). This positive feeling in itself acts as a reward to the referrer, and for the business, it’s an excellent way to attract and convert a new customer!
How can this be applied to your home service business?
Unlike companies like Amazon that sell products, it can be challenging to apply the social gifting concept as a home service business. However, you have to think outside the box!
If your business provides services like plumbing or electrical work, consider structuring your social gifting to offer free home visits, a free month of initial services or maintenance (depending on the intensity of the project), or more.
You can tweak the social gifting concept in line with your business model easily.
2. The Mystery Gift Reward
What is it?
The mystery gift reward offers a unique twist to the social gifting concept. Customers that share and refer your business to others will receive a mystery gift as a reward. Usually, customers like to get specific with referral rewards and know what’s in it for them from the get-go. However, some customers might enjoy the sense of mystery.
How can this be applied to your home service business?
Most home service businesses don’t have “traditional” offerings in the form of products or merchandise like most ecommerce businesses. A home service business can’t exactly package and wrap their gift up in a box for their customers. Instead, your business can offer a mystery gift in the form of discounts, promos, or service/store credit.
Consider implementing a spin-the-wheel type mystery gift. You can build a custom wheel for your business using free spin-the-wheel tools online. For every successful referral, a customer could receive anything from 25% off the next time they avail your service to a totally free consultation!
You could also send them goody bags filled with branded swag, such as a company-branded t-shirt, stickers, mugs, or more! This combines referral and brand marketing into your business’s overall strategy.
3. Charity or Non-profit Donations
What is it?
This referral marketing idea operates on philanthropy and giving back! Today, customers look deeper when they assess a brand’s image and a company. Depending on the nature of your local community and the kind of customers you have, you may be able to boost your business’s reputation by contributing to local causes in exchange for successful referrals.
Such customers would be more incentivized, not by traditional rewards, but by seeing the business itself give back to the community or a specific cause.
In fact, 66% of respondents to a survey believe it’s important for businesses and companies to be philanthropic and charitable. A great way to incorporate this into referral marketing is by choosing a charity or non-profit to partner with and donate to.
How can this be applied to your home service business?
Do a little market research into your existing customer base and the local community your business caters its services to. Do you have customers that concentrate on the goodwill efforts of the businesses they align with? Ask them what causes they support.
Then, integrate a donation reward into the referral program. For example, for every successful referral, $100 could be donated in their name to their charity of choice.
4. Referral Contests with Grand Prizes
What is it?
Referral contests are a common referral method. In this strategy, businesses set up a social media contest or even a live, in-person contest where contestants are rewarded for completing specific tasks.
These tasks are usually connected to sharing your business on different social media platforms like Facebook and Instagram. For each completed task, the customer gains points and racks up more chances to win a grand prize.
How can this be applied to your home service business?
Let’s say you’re an HVAC contractor. You might implement a referral contest where you ask your existing customers to tag friends in a Facebook post of yours and leave a glowing online review. Every tagged friend and review can be worth a point, and every point helps that customer increase his/her chances of winning a grand prize.
How you select the winner can be up to you! When the winner is selected, they might gain anything from a free consultation to a $250 gift card to a store of their choice.
5. Service or Product Upgrades
What is it?
Offer your customers something they already know and love: more of your service!
In exchange for a successful referral, you could reward customers with a free service or product upgrade. This is perfect for customers who don’t necessarily want free swag or even a gift card. What they want is upgraded, top-notch service and parts—and your business can give it to them.
How can this be applied to your home service business?
If you’re a plumbing or electrical service, you can offer a more extensive package for a full house maintenance check at lower rates. Or, your business might consider upgrading the parts involved in a service.
If you’re a plumber, consider upgrading the pipe material free of charge. You might also offer the “deluxe” version of a service package for a customer who brings in a successful referral. The possibilities are endless! Just make sure you bring your business the very best value.
6. Affiliate or Partner Programs with Other Home Service Businesses
What is it?
With an affiliate program, you can incentivize other businesses in your network to promote your services.
Partner programs are more personal, and for them to be successful, you should have a solid relationship with the partner business. If you’re already dealing with other companies in your daily activities, this is a great option.
How can this be applied to your home service business?
Look into the businesses you work with regularly—both from a supplier and provider angle, whichever suits your business offering more. Who can you work with more strategically in the long run?
If you’re in the roofing business and always seem to cross paths (and share customers) with an electrical business, consider partnering with that business and establishing a referral program. Many home service providers work with realtors, which are also a great source of referrals. Propose sending each other referrals when the opportunity presents itself and become each other’s exclusive partners in their service area. Yet another win-win!
How Signpost Helps Businesses Get to the Next Level
To be even more successful, your business needs to build a referral marketing program that incentivizes your customers in an appealing way.
It’s essential to understand their mindset so that you can offer the appropriate referral incentives and gain even more loyal customers.
As you focus on delighting your customers and growing your clientele, Signpost can help you manage other elements of your home service business.
Work with us today to automate your marketing more effectively, grow your customer reviews, and build a strong, integrated business. Leverage our marketing tools to take your business to the next level today.