Digital marketing is a great tool to generate sales leads, but in a new landscape brought on by the pandemic, word-of-mouth marketing can drive additional sustainable business growth.
Small businesses can bring in new and likely-to-be-loyal clientele by reaching out to their existing customers. Customers pleased with a product or service and the customer service they receive will recommend that business to their family and friends – this can happen spontaneously in a conversation or through referral marketing efforts.
Referral marketing builds on itself as businesses tap into the social circles of those making referrals. Customers come in warmer, since they have a vote of confidence for the business’s offerings, and know and trust the referrer. They may even begin making their own referrals, causing the customer base to grow exponentially and leading to repeat business.
In fact, 92% of consumers trust referrals from people they know, according to Nielsen, and word of mouth can improve marketing effectiveness by as much as 54%, according to a Marketshare report. Other stats show that 65% of new business comes from referrals, and referred customers are 18% less likely to go the way of attrition than other customers.
What can a small business do to encourage referrals from their existing and potential new customers? They can start with a referral plan, using a few easy-to-implement ideas:
Create a referral campaign – Businesses can ask existing customers and business contacts for referrals, but should avoid making too many asks or bothering an unhappy customer. To do this, set up an automated process to generate referrals, such as through an email system or website. For example, ask customers to rate their shopping experience at the bottom of order confirmation emails or add a line about seeking referrals in the email signature. For those customers coming into the storefront, businesses can print out small cards with a request for a referral, which can be placed in the bag or attached to the receipt.
Offer a two-sided referral incentive – Businesses can create a two-sided referral program that incentivizes both the new customer and the customer making the referral. Referrers can share a discount or reward with their family and friends and are motivated to do so by getting a reward, too. For example, offer the referrer’s friend a discount, and if the friend buys something, the referrer gets store credit or a discount off the next purchase.
Launch a referral contest – Create a social media contest with a prize for the customer who brings in the most referrals. Contest participants can compete by seeing who gets the largest number of referrals by a certain deadline, such as one week or one month. Or offer a tag-and-follow competition where participants can earn entries for prizes for tagging their friends on the business’s posts. Another idea is to create a referral page linked to the business’s social media pages. For every new referral, the customer earns a free prize entry, and the referral client receives a discount, or both the customer and the referral client get that discount. Be sure to include a link, such as “Share with a Friend,” on emails and social media pages.
Partner with a similar business – Small businesses can find another business that’s complimentary to theirs for referral trades. The two businesses, such as a coffee shop and a locally owned grocery store carrying the shop’s products, could trade coupons and promote discounts to each other’s businesses. Or they can create a combined package discount with offerings from both businesses. A business can have multiple partners that set up recommendation pages on their respective websites listing the different partners and the services they offer, as well as any possible discounts.
Develop a customer loyalty program – Reward loyal customers who make multiple referrals with a customer loyalty program. The program can be point-based, a stamp card (popular at coffee shops), a premium level of membership or an exclusive offer. Other offerings can include free swag, discounts or vouchers. Customers also can be rewarded with simple things like tweeting their names, citing them in a blog or adding a section to the business’s website that recognizes those who give referrals.
Be sure to involve staff – A business’s employees also can be that business’s biggest fan base, since they often work for those companies where they believe in the product or service. Businesses can reward employees for referrals that end in a purchase through discounts, free products or monetary bonuses. At the same time, employees have friends and family who are interested in what they do and want to be supportive, and word of mouth will encourage them to also be a customer.
By generating honest and trustworthy referrals, businesses can turn their existing and new customers, as well as their employees, into brand ambassadors. Implementing a referral plan or even choosing just one referral method is a way to grow a business’s relationship with the customer, while also encouraging crucial word-of-mouth marketing that is the foundation of a good business.
One of the best referrals for a small business is BBB Accreditation (to learn more, visit BBB.org/get-accredited). Accredited businesses adhere to the Standards for Trust, the eight principles summarizing how to create and maintain trust in business. Those principles include: building trust by establishing and maintaining a positive track record in the marketplace; advertising and selling honestly; telling the truth about products and services; being transparent about logistics and policies; honoring promises; being responsive to marketplace disputes; safeguarding privacy, and embodying integrity in business dealings and transactions.
A well thought-out referral plan will help customers feel comfortable and confident in sharing a business’ offerings with their friends and family. Referral programs improve the business’s credibility and help build that trust with existing and new customers.
For more tips and information, visit bbb.org.
Shelley Polansky is president/CEO of BBB Serving Northern Colorado and Wyoming.