I often ask my clients to come up with an offer they can live with to previous customers for referrals. The concept is easy enough. When a customer refers someone, take a discount off something you offer that people want. If you can’t because of how your process works, then use a gift card right. Yes you should is the answer. “Referral Marketing” is not only easy to implement but it’s also successful. According to the article: “8 Referral Program Examples (& The Referral Marketing Strategies You Can Steal)”, the electric car company Tesla attributed 25% of its sales in Q4 2015 to referrals. As the article demonstrates there are plenty of other examples too showing the general effectiveness of referral programs.

 Now that we have established that at least eight companies you may know use referral marketing as a key component to success, how do we bring it down to us in the small business world? The first way is to consider doing it at all and incorporating it into your strategy. While this sounds obvious, think about how many small businesses you encounter who do, or do not, use referrals. Then for those who do, how active are they about promoting it? Businesses who use referrals value customer relationships and find ways, either directly or indirectly, to reward people who bring them business.

If you do offer rewards or referrals, be intentional about it. Post signs, discuss with your customers, hand out extra business cards, post on social media pages or your Google My Business page you should already have. Let your customers know even, and especially, if you do not reward until that referral becomes a customer…which is perfectly acceptable and better for all concerned.

If you decide to do referrals, what form should that take? Thee should be something for both parties (referrer and referee) and it can be a small percentage discount or perhaps a gift card. One of the suggestions from the article above promotes a “tiered” approach where the more successful referrals get a little more (for the referring person) which rewards continued successful referrals. You can get ideas from that article or search “referral marketing ideas” for suggestions. Your local small business group may also have ideas. Whatever you decide to do, make it something you can live with that does not devalue the product or service so much that you can’t make it up in business. This is why a 25%-30% for referrals isn’t always practical when you have small margins, but 5% off could be for both sides.

Referral Marketing is proven to work with a long history of success by forward-thinking companies. In fact an entire industry of direct selling is based on it. Give some thought to how you would structure it for your business and be intentional about putting it out there if you do. This is guaranteed to grow your bottom line and grow your customer community at the same time in ways you can’t duplicate with other methods.