Reasons Why You Need a Referral Program

Do you need a referral program? If not sure whether you need one keeping reading to learn why small and large businesses value referral programs and use them extensively. About 82% of consumers proactively look for referrals from peers before making a purchasing decision. This explains why it is crucial to have a referral program.

Without further ado, let’s find why your business needs a referral program. Ready? Let’s get started.

Information from friends is trusted more


It is natural people are inclined to trust those close to them or in their circle. According to Nielsen, roughly 92% of consumers consult those close to them before making a purchase decision. Additionally, 20-50% of all purchasing decisions are a result of peer-to-peer marketing. This simply shows how a referral program can grow a business.

Easy promotion opportunities

Why struggle to promote your alarm and security products and services a an example, while you can do that effortlessly? Social media presents tons of promotions opportunities you can leverage. Nielsen put it clearly that about 65% of social media users learn about products, services, and brands through social networks. Another report reveals that roughly 70% of social media users hear about their colleagues’ and friends’ experience using products and services. 

Not forgetting that 28% of millennials won’t purchase if their friends don’t recommend or approve a product or services. Looking at these figures, it makes sense to have a referral program that promotes sharing. A referral program empowers your customers to promote your products and services to others, and that helps your business to thrive.

Reminds customers why they choose to buy with your company


Every time a customer refers a friend or family, he takes time to explain why purchasing from you is a good idea. That reminds him of why your brand is valuable. Making your customers feel appreciated by giving them incentives is one excellent way of encouraging them to remember your business and refer more people. You can offer both cash and non-cash incentives, just make sure to pick one that works best for you. 

Consider nurturing customer advocacy as it can go a long way in making every customer feel part of your company. More satisfied customers mean much potential growth for your business. Is that not something you want? 

Boosts your rate of customer retention

Referral programs make it easier for your business to retain more customers. According to Bain & Company, growing customer retention by 5% results in an increase in profits of 25%-95%. See how a referral can make you good money easily?

An increase in customer engagement

happy customers

Referred customers without a doubt will want to learn more about your business, and the easiest way to do that is by visiting your social pages or website. That will lead to increased purchase and potential revenue. Referred customers can also visit your website or social pages to check their rewards and discounts. 

They show your business is doing well

Your customers speaking well about your business to others is an indicator your business is good and reputable. Imagine every customer who chooses to buy with you promoting your business. Soon you will be large if you continue to offer outstanding services. If you treat your customers well, roughly 83% of them will refer others to your business. 

Increased marketing scope 


Consider this. One client speaks positively about your pest control business to five people. Those five, each talk to five people about you, and the cycle continues. Just that one advocate can get the message about your brand far than you think. It is that valuable to have a referral program.

Referral customers are more valuable to your business

Referred clients already know why your business is valuable even before making purchases. They have a positive attitude toward your business, and that means it will be easier to convert them to loyal and paying customers. In fact, such customers have an average lifetime value that amounts to 16% more than the value of the other clients.

Simple to operate, easy to execute

It is effortless to manage and automated referral program. Once you configure, it will do the heavy lifting efficiently. For example, it will automatically track the effort of every customer and help you reward top advocates. You don’t have to use complex referral programs. Simple ones will also get the job done.

Drives repeatable purchases 

With a referral program, it is easier to increase the rate of repeat customers. For example, a customer who wants to enjoy more discounts or get more rewards will definitely buy again. Repeat purchases will also occur again because your clients also like you, and you are too happy not to share yours. 

Increased return on investment 

Look on the brighter side. Referrals make you more profits compared to the small price you pay on rewards and gifts. Besides, you don’t need to implement an expensive referral program. For example, you can run one that awards points for every referral. That way, you get more customers without spending a lot. 

Make it easier to identify and reward loyal customers

How? For example, if your referral program awards points, you can tell which clients are loyal to your business by checking who has accumulated more points. That way, you can offer them more reward for the good work. This will help you build exclusivity. Roughly 47% of consumers say receiving an exclusive offer made them feel happier. The study further reveals that 51% of Americans eligible for such an exclusive offer prefer receiving it over a loyalty program accessible to anyone.  Here are more reactions:

  • Rewarded (54%),
  • Special (36%),
  • Honored (34%),
  • Recognized (33%),
  • Proud (27%),
  • Chosen (24%),
  • Smart (21%),
  • Deserving (18%),
  • Justified (11%)
  • And Superior (10%)

When do you need a referral program?


Below are some signs to look for to determine whether you need a program in place.

  • Customers are asking for it

Your customers can ask for a referral program directly or indirectly. Giving them your ears can help you understand what they are looking for. Sometimes you may not be sure whether they are looking for a referral program, and it is ok to give them one and keep a close eye to see whether it is what they need. If you notice they needed one, don’t hesitate to tailor it well.

  • When asking for sales is difficult

If you find it challenging to ask for sales that could be an indicator you need a referral program. Even customers who are not ready to act immediately may be willing to recommend those who could act instantly. With a referral program, it much easier to ask your customers to suggest others who will make instant purchases. 

  • Clients are hesitant to give referrals 

If you notice your customers are reluctant to give referrals, that could be another sign you need a referral program in place. An automated referral program is ideal as it can help you accomplish the following:

Help send reminders to people who click a link to your referral program but did not complete the action.

Schedule a reminder notification to be sent to inactive users after a certain period.

Send reminders every quarter to all users.

  • Experiencing high closing rates with data

Figures from the Huffington Post show that approximately 80% of closings are experienced by businesses that made sales from prevailing customer referrals. These referral programs help such businesses generate more money. That said, if experiencing high closing rates, it makes sense to have a referral program in place than depending on spreadsheets.

Wrap up

By now, there is no doubt you are convinced that referrals programs do really pay off. Having one is a great idea and something you need to consider very seriously. And as you can see, various studies support the use of referral programs. The ball now is in your court.


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