The Complete Guide to Creating a Customer Referral Program That Boosts Sales and Loyalty

Many business owners don't realize the power their own customers have in marketing.

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By Parwinder Singh

Opinions expressed by Entrepreneur contributors are their own.

According to scholars' research, customers possess tangible and intangible assets such as apprehensive networks, persuasion tactics, knowledge, and vision. These factors can create the business's most promising consumer base and make a positive brand persona when aligned correctly.

Customer referral marketing, one of the most potent tools under customer engagement, must be considered long-term plans. This method gives marketers the chance to consolidate customers and reinforce brand loyalty, increasing revenues. These 1:1 customer referral programs have been more successful compared to broadly advertised campaigns.

Why should you consider referral marketing programs?

Various companies are able to grow rapidly, and some of them doubled their user base every three months by just implementing a simple referral program strategy. Dropbox grew 3900% in a year with their simple referral program, which rewarded users more cloud space for inviting other users. Dropbox made referrals easier and allowed users to track their invitation if their friend has accepted it or not. But they are not alone, Airbnb had 20k users in 2009, and by 2016 they grew to 20 million users on their platform. Just by rewarding users $25 for every user they invite

There are countless examples of businesses using referral marketing to skyrocket their growth, and even I am using referral marketing to get thousands of leads every month for my business. Today, I will share the method I followed to create, promote, and track my referral program.

How to build a referral program

Building a referral program (RP) from scratch can be one of the most challenging tasks for businesses, especially small businesses with limited employees and budgets. I faced the same scenario when creating my referral program, but I found there are many marketing software options that offer a straightforward way to make an RP. I used Viral Loops, which allows you to create referral programs using the templates that companies like Dropbox, Airbnb, Robinhood, and many others are used in their referral programs without programming knowledge.

What rewards should you offer on your referral program

Rewards are essential parts of a referral program, and many business owners get it wrong. They can easily make or break your campaign. Here are a few dos and don'ts to follow while decoding your best reward for your campaign.

Don't choose a reward that is not directly or indirectly related to your business. It's one of the most common mistakes business owners make in their referral campaign; a referral campaign should be considered a way to build a more loyal customer base. That's why we should be providing rewards that directly or indirectly link back to our business instead of rewarding something that helps other companies, like rewarding someone a gift card for another app or business.

Related: 9 Marketing Trends You Need to Jump on in 2022

Choose a reward that directly aligns with your business model, like how Dropbox rewarded users with more storage for the referral. Your referral campaign should ultimately increase your user or customer base. It should lead your user in a position where they are speaking well about you. Finally, it's helping them, will help another person too, and both stay under your customer base.

Examples of great rewards or perks

1. Free Product/Service is one of the best rewards for your campaign, as it will allow you to grow your customer base while allowing existing users to add additional products or services to their accounts.

2. Company merch can help you increase your loyal customer base and enable your customers to feel that they are part of a Community. Company merch will also promote your product or service to others who stare at them and will help them remember your company.

3. Internal currency, using them as a reward can be a significant cost-effective way to reward your users without losing money from your profits. You can reward users with internal currency, which they can use to unlock certain perks in your product or service.

4. Exclusive content, small businesses may not have money to offer their customers expensive rewards or exclusive access. That's where being creative can help. Simply create free valued info for your ambassadors by regularly rewarding them with new content about your product.

Related: Why So Many Entrepreneurs Don't Know Their Digital Marketing ROI

5. Early Access is widespread among pre-release campaigns. You incentivize users by giving them an exclusive experience that makes them feel like part of a community. This way, you will build a loyal customer base while adding new customers to your team without spending any money on the campaign.

How to introduce and promote your referral program

Creating a referral campaign can be one of the most critical tasks, but if our existing customer base is unaware of it, it won't add any value to our business. I will be sharing ways I used to introduce my referral marketing campaign to my users and promote it to my potential users.

1. Email

Email can be the fastest way to introduce your customer base to your new referral campaign. The email should be only sent to your current users who have subscribed to your email newsletter, so it's get reported as spam by other users. The email must contain more about your campaign, rewards, and an easy process to earn rewards.

2. Website Pop-up

In Web 2.0, the website is one of the essential parts of your business, and it's where 90% of your customers go to get more information about your business. It will allow you to introduce the campaign to your current customer base and potential users. Leveraging this opportunity can be an excellent marketing strategy because it will automatically convert a potential customer to a potential brand ambassador.

3. Facebook Ads

Use Facebook ads to help you leverage ads to your customer's friends. With a click of a button, you enter the email addresses of your current users on Facebook, and it will search for people who share the same interests. Your promotion is more likely to resonate with their buying habits with this targeting method.

4. Google Ads

The first step includes creating a landing page to introduce the referral campaign to your users, which you can promote using Google Ads, and use a headline, for example, "Get free cloud space." Using a catchy headline like this helps you convert potential users by incentivizing them to invite other users. It will help you double your conversion rate without increasing your marketing budget.

Related: This Is the New Standard When It Comes to Newsletter Content

Referral marketing is a proven method that businesses have used for decades. It works because it taps into the same social and emotional benefits that have made word-of-mouth marketing effective for so long. With substantial websites available around the internet, you can create extraordinary templates with a few clicks.

Many businesses work to aid other companies, often working on a model that deprives them of actively investing in marketing. Referral marketing has become a significant part of them since it has become the primary way of customer acquisition. In such a situation, building a name, providing quality services, and optimizing referral programs will come in handy to scale your business. If you identify as one of them and are ready to accommodate a broader consumer base, you can start creating your first referral campaign today.

Parwinder Singh

CEO & Founder of InstaEASY LLC

Parwinder Singh, aka ProSingh, is an entrepreneur, writer and social-media manager. Driven by his passion for technology, he takes pride in providing the best growth hacks possible. As a founder of InstaEASY, his skills include website development, ad campaigns and client acquisition.

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