How To Get Customer Referrals: 5 Proven Ideas
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Good “word of mouth” is indisputably the most effective marketing device available to small companies and customer referrals are vital. In this post, you’ll find creative, proven, and effective methods your shop can use to retain repeat buyers and, more importantly, build your business through referrals by your best customers.
Retention vs acquisition costs
- Average customer attrition is 10% each year
- Businesses typically lose 50% of their customer base within 5 years
- A 5% improvement in your customer retention rate will increase revenue by 25%-95%
- It cost 600%-700% more to find a new customer than it does to keep an existing customer
Table of contents
- What are customer referrals?
- Why customer referrals matter for small businesses
- How to get more customer referrals
- Customer referral ideas that work
- How to turn customers into VIP advocates
- Referral marketing best practices
- How to build great customer service with employee tools
- Customer referral FAQs
What are customer referrals
Customer referrals are the backbone of a small business’ survival. It’s when someone asks their friend, neighbor, or family member for a recommendation of a place to shop, get a service, or eat. And that person gives them the name of your business. It’s the most simple marketing concept, and it’s the most important way for your business’ name to get out there.
Why customer referrals matter for small businesses
Happy customers are the folks most likely to recommend your business to their friends, family, neighbors and coworkers. Was there something different or special you said or did for these particular patrons? Or are they just the type of people who like to show their appreciation for a satisfying experience?
According to customer service consultants Bain & Company, a typical business will lose upwards of 50% of its customer base within five years if they’re left alone, an attrition rate of 10% a year. Therefore, it is of the utmost importance for you to delve into these questions so you can understand your clientele’s needs and duplicate the successful process with every customer.
A recent survey by Harvard Business School (HBS) reported that a 5% improvement in your customer retention rate will increase revenue 25% to 95%.
The acquisition costs of finding, marketing, selling and converting a new customer is 600% to 700% of what it costs to retain good, current, repeat-buying VIPs. And, bear in mind that it costs you nothing to acquire new customers through referrals.
How to get more customer referrals
There are many methods and techniques businesses can use to build a customer base over time. Undoubtedly, the best and most important strategies are the ones that focus on investing in current customers as a way to encourage them to refer new prospects. Business owners and managers who keep their customers happy keep their businesses afloat.
The best way to generate more customer referrals is to consistently deliver exceptional service that exceeds expectations and make the process of repeat buying as effortless as possible.
Creative referral ideas that work
Most people are familiar with the traditional methods of providing good customer service, but here are five proven ways that are simple and will help you get more customer referrals:
- Greet your customers with a smile. It establishes a friendly atmosphere and creates a warm feeling from the beginning.
- Provide a quick response to issues so your customers know that they are your top priority and you’ll do what it takes to make things right.
- Follow up with the customer after every sale with a phone call, text, or email to check in on how the service went or how the product is working.
- Invite your most valued customers and their guests to exclusive events like a dance, cocktail party or barbecue to continue fostering the relationship.
- Set up an automatic, continuous contact system for every customer and send them greetings on their birthday, anniversary, or national holidays.
How to turn customers into VIP advocates
Although a small percentage of one-time buyers will refer you, the fact remains that your repeat buyers are responsible for four out of five referrals. Therefore, in order to maximize your number of customer introductions, you must first maximize conversions to VIP status. Try some of these creative ideas to turn one-time customers into VIPs:
- Follow up after every sale. Preferably with a phone call from the owner or at least the salesperson, waiter, service technician, etc. who was involved in the transaction.
- Include a free gift with every sale. This will be a total surprise and far beyond the customer’s expectation. It doesn’t have to be expensive. In a diner, the server can bring several extra mints at the conclusion of the meal, an auto repair shop can give customers an air freshener to hang on their mirror and a dentist can give customers a home care package that includes things like a toothbrush, toothpaste and floss. These items can cost as little as a few dollars but can be worth thousands in repeat business and referrals.
- Consider writing a Service Level Agreement (SLA). An SLA is a written policy stating exactly what services and benefits the customer should expect. For example, a transmission shop could guarantee a 72-hour turnaround on an overhaul, a furniture store could offer 2-day home delivery or a gourmet food store could promise delivery of specially ordered items within 10 days. To make the SLA work for your business, always over-deliver on the promise. This way, you’ll ensure that you always exceed customer expectations, and they’ll love you forever.
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Referral marketing best practices
To make the most of referral marketing, you have to treat it as a deliberate marketing channel. Your success depends on two things, timing and visibility.
Make sure you ask for the referral when the customer is at their peak happiness moment, like immediately after the purchase or a positive support interaction.
How to build a referral program
To take your referral marketing to the next level, you need to provide value to both the person referring your business and the person receiving the referral. A few easy ways to do this are to:
- Offer rewards to both for the referral so that they both get something out of value
- Make it easy to share your business in a few clicks with shareable links and pre-written social media posts
- Acknowledge and thank both the sender and the recipient so they both feel valued
Referral program example
The quickest, easiest way to get referrals is through social media. You can provide a shareable link through an email and offer a pre-written social media post for customers to use. Here’s a template you can use to get started!
| Offer | Sample email | Sample social media post |
| Give $XX, get $XXExample: Give a friend $20 off their first order and get $20 off your next order. | Subject line: Get rewarded for introducing us to your friends! Hi [Customer name]! If you’re enjoying [product/service] name, share it with your friends! Just send this [unique link] or post it to your social media. They’ll get $XX off their first order, and you’ll get $XX off your next order. It’s that simple. Thanks for your business! | If you’ve been using [product/service name] or want to try, use my [unique link] to get $XX off your first order! |
Common mistakes in referral marketing
One major pitfall most companies face in referral marketing is making the process to get customer referrals too complicated, which discourages even your most loyal fans from participating.
The other reason most referral marketing programs fail is businesses tend to take a “set it and forget it” approach to this idea, which is not ideal. Make sure you’re updating and reminding your customers about your referral program and rewards to keep them engaged and coming back.
How to build great customer service with employee tools
Good customers will refer businesses with great customer service. And you can create a culture of good customer service with happier employees. All you have to do is invest in employee engagement, incentive programs, and tools that make work easier. You’ll boost customer satisfaction by motivating employees to give the kind of service people will talk about.
Start with something simple, like employee scheduling and team messaging, that gives everyone everything they need to be successful at work. Sign up for your free trial of When I Work today and see how much it can help your business.
Customer referral FAQs
Q: How do you ask customers for referrals?
A: The easiest, most effective way to ask customers for referrals is to wait until they’re the most happy with your product or service, like after a positive review, and then directly invite them to share their experience with others using an incentivized, shareable link.
Q: What is a referral program?
A: A customer referral program is a marketing strategy that offers rewards to existing customers to recommend a business to their friends, family, and social media network. This effectively turns loyal customers into a lead generation channel.
Q: How do you reward customer referrals?
A: You can reward customer referrals by offering double-sided incentives that provide value to both the referring customer and the friend they invite. These could be store credit, discounts, or exclusive gifts, the choice is yours.
