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Types of Referral Systems: Everything You Need to Know (+10 Strategies) 

By  Jack

Have you ever wished you could clone your best customers — potentially doubling the number of people just like them who come through your door?

The closest way to be able to do that is through referrals and organic word of mouth.

Customer referrals are one of the best sources of new business. Why? Because potential customers trust their friends and family more than they trust advertisements. According to Nielsen, 92% of consumers said they trust recommendations from friends and family, above all other forms of advertising. Even better, Annex Cloud shares that referrals generate 3-5x higher conversion rates than any other channel.

It’s also been proven that a referral-generated customer will spend more money and be the most profitable and loyal portion of your client base. Client referrals bring in warm, highly qualified leads while requiring a near-zero financial investment.

There’s a good chance that your best customers are already referring friends and family to you sometimes. Most businesses I see settle for the small number of passive referrals they see, without ever actively soliciting referrals from their customers.

Some businesses actually do ask for referrals – but many just do it occasionally. If you are one of those businesses, I hope to make a strong enough case in this post to convince you to kickstart your referral strategy.

So, how do you get more referrals from your customers and clients?

We’ll cover everything you need to know. We’ll start by explaining customer referral value, walk through a step-by-step process of how to get them, and wrap up with 10 creative ways to get referrals.

Client Referrals

Customer Referral Value – Why Are Referrals So Valuable?

Here are a few more eye-popping stats about referrals:

  • Word of mouth is the primary factor behind 20% to 50% of all purchasing decisions. (McKinsey)
  • The lifetime value of a new referral customer is 16% higher than your average customer. (Wharton School of Business)
  • Customers acquired through referrals have a 37% higher retention rate. (Forbes)

When satisfied customers refer their friends or family to your business, they are vouching for your products or services. They are saying “I trust this business, and I think you should too.” This social proof is incredibly powerful, and it can be the deciding factor in whether or not a customer decides to do business with you. 

In addition, customer referrals tend to result in higher quality leads. Because customers only refer their friends and family to businesses they trust and feel confident in, these leads are more likely to convert into paying customers than leads that come from other sources. 

Finally, as mentioned above, customer referrals tend to be more loyal and have a higher lifetime value than other types of customers. Because they’ve been referred by someone they know and trust, they are more likely to stick around for the long haul. 

Customer Referral Value

Client Referral Process: Step By Step

The basics of any referral system have three simple parts:

1. Earn the referral by giving your clients a ‘wow’ experience

It all starts with providing world-class service and building strong relationships with your existing customers. If they’re happy with your product or service, it’s no surprise that they’ll be more likely to refer you to their friends and family.

2. Ask for the referral – if you don’t ask, you don’t receive

Send them an email thanking them for their business and offering them a reward for being such a loyal customer and giving us some help.

Here’s the essence of the business referral email: “We would like your help, and we would like to give you something in exchange for your help, and this is how it works.”

You can accomplish the same approach with a letter or even calling your customers.

The key is that you tell them exactly what you want, you tell your loyal customers exactly what you want from them, you provide a mechanism for them to do it, which does not require a whole lot of effort on their part.

Similar to what I included in my post about generating more reviews, making it easy for customers to refer you if absolutely critical. We want to remove friction and make it as simple as possible for folks to be a referral source.

Referral card ideas can be anything range from greeting cards to a link they can share with their contacts. Make sure your website and social media channels are up-to-date and easy to find.

3. Reward the client for giving the referral

Show your appreciation for personal referrals by offering a discount or other incentives. This will show your customers that you value their recommendations and help to build loyalty.

Make the reward meaningful enough for them to pass it along – this could be anything (Amazon gift card, discount, movie tickets, etc.). If you know your numbers (lifetime customer value and cost to acquire a customer) you can likely offer a very compelling incentive.

Client Referral Process

Types of Referral Systems

When you have a structured referral system, it is like having a viral marketing campaign for your business spread via organic word of mouth. Before what happened sporadically now happens on a continual basis. 

Most of the business owners don’t know how many of their clients are coming from tangible referrals and they definitely don’t know how many existing clients the average person refers to them. They just believe that if you do a good enough job, people will refer others.

That’s not the way it works…don’t leave your referrals to chance. Instead of thinking about how to get implied referrals without asking, I’d like you to consider being intentional about this.

What I want you to do is put a system (or multiple systems) in place designed to generate your consistent and regular referral results.

The goal is for this to get more referrals in a direct referral program – on autopilot, with no continual involvement on your part.

Types of Referral Systems

Here are 10 examples to kickstart the brainstorming process for you:

  • Call 20 of your best customers and tell them how much you appreciate the business they do with you. Tell them you’re trying to find more customers just like them, and you want their help recruiting these potential customers.

An example script you can use:

“The majority of my business is generated from direct referrals by clients just like you. I have a choice….I can either concentrate on providing you with the absolute best service at an affordable price, or I can refocus more of my money and energy on advertising to find new clients. By saving time and expenses, I’m able to pass better service and pricing on to you. Who are two other folks you feel would be the same quality customer you are with us?”

  • Free offer: “Refer 3 clients, you get my product/service for free”
  • Ask other business owners to recommend you to their customers – you could consider offering profit share deals to those that send you referral business
  • Ask for referrals when customers are most receptive. When they have just bought your product/service or when you have done something great for them (such as deliver excellent customer service)
  • Make it part of “the deal” when you first generate a new customer. You could say something like this, “If we’re able to fix your problem to your satisfaction today, would you be willing to tell at least 2 of your friends about what we do?”
  • Sent out greeting cards to your customers (you can do this for every imaginable holiday and birthdays). These can either be personally addressed with a handwritten note or you could use an automated system
  • Host a Special Event (Client Appreciation Day) – invite all your clients and tell them to bring their friends to completely free event with music and food (with a added bonus of publicity)
  • Customer Appreciation Gift – give clients a thank you gift for doing business with you. The key here is to send it to them at wherever they work when possible (balloons, coffee mug, gift basket). Send balloons to them at work. If you send a nice gift basket or set of balloons to someone at work, everyone around them will ask them where they got them.
  • Pre-Written Referral Postcards – all customer has to do is address and sign something you’ve already written (some type of referral letter). Have postcards ready throughout your office and train your staff to have people fill out a referral postcard as part of their normal procedures, especially whenever anyone expresses appreciation for the service they’ve received.
  • Run a contest for the next 30 to 90 days where you give away a great prize for the person who sends you the most referrals. Send a letter to all your current clients along with notifying everyone you come in contact with as well as the media. 

Make Referrals Part of Your DNA

With what we covered in this post, you can significantly boost the numbers of direct referrals you receive from customers and clients.

As we discussed, referrals are incredibly valuable and if they aren’t already, should be a critical element of your marketing and growth strategy. I’d recommend you look for ways to make referrals a fundamental way of how you do business.

I hope this helps guide you in the right direction and that the examples sparked some ideas around how you can implement referrals more consistently.

Have you historically used referral programs in your business? Will you be rolling out any new strategies?

Let me know in the comments below.

Jack


Investor & Mentor

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