A Guide to the Best Small Business Referral Program

Referral program ideas

There are many things to consider when selecting the most efficient incentives for your referral program. Besides raising brand awareness, referral programs can also generate leads and increase brand recognition.

These pointers will help you determine the best referral program incentive to maximize your return on investment, whether you want to acquire more clients with cash rewards or free trial offers.

What is Referral Program Marketing?

Referral marketing ideas

The process of a business getting new customers by word-of-mouth is known as referral marketing. A customer who knows the business can recommend their products and services to someone who needs them. Referral programs are common in many companies. They generally offer incentives to the referrer, to the referee, or both of them. It’s easy to evaluate referral marketing programs when you keep track of your referees and their incentives by using referral marketing software

Referral Marketing Benefits for Business Owners and Businesses

Referral program marketing is not only for major corporations. Small businesses can also gain more exposure and customers in their local communities. 

Increase Revenue by Word-of-Mouth Referrals

Referral program small business

As a business owner, you can earn money and generate leads passively by using referral marketing. This method of customer acquisition is a low-cost strategy and eliminates the need to actively sell yourself. 

Additionally, personal referrals are most powerful compared to any form of self-promotion. 92% of consumers trust referrals from friends and family, according to a Nielsen report. It is also easier to close deals with leads from referrals than with leads acquired through other channels. They are more likely to be qualified and require less time to “warm up” before closing.

Local Brand Awareness

For small businesses trying to reach out to local communities, referral programs are even more beneficial. Small businesses benefit more from referral programs since a positive testimonial from a trusted friend in the local community is much more likely to create trust than a cold call and advertising. Additionally, an existing customer who is converted in this way is more likely to make repeat purchases and refer a friend, resulting in a 16% higher customer lifetime value.

Cost-Effective Strategy to Win More Customers

For newer businesses, referral marketing programs are cost-effective strategies for establishing a client base at an early stage. For example, you can set up your referral program on referral software. Referral programs, especially those powered by referral software, make it so easy to share, they work like mini-advertisements for your business. 

Customers will see a short message from you along with your business logo. Having 30 people share your referral program automatically places you in front of new customers and saves you money on advertising.

What Makes a Successful Referral Program

Referral program guide

Referral programs that work depend on personal referrals, customer loyalty, and reliable two-way incentives to increase revenue and promote your business. 

Consistent Personal Referrals

A referred lead has a better chance of converting than a cold call because this individual already trusts you after hearing about your work from a trusted friend. After all, you’ve been offering high-quality products and services for someone they know and trust. 

When people find out about your brand from word-of-mouth referrals, you have an opportunity to grow your client base without incurring expenses for advertising. Whether you are brand new to your industry or a smaller business, you will appreciate the opportunity to expand your customer base.

Loyal Customers

Customer loyalty means your customers will spread the word about you. You will continue to gain and keep loyal customers by providing them with the best possible service. Positive customer experiences will lead to repeat business. Your company also provides a service that people require and represents a set of ideals that are aligned with what your customers value. Do not forget to thank a customer who referred you to a new lead by offering an incentive.

Two-Sided Referral Program

Customers usually enjoy incentives for referrals, and the same goes for their referees, so having a two-sided referral program can help you get more customers. This incentive is typically what keeps them referring over time. An example of a two-sided incentive would be a $75 gift card for the referrer and a discount of 20% for the customer.

How to Create a Referral Program: Start with Referral Program Offers

Before you focus on your referral marketing strategy, you need to ensure your customers enjoy your products and services and address any problems with your customer service. A superior product or service and exceptional customer service are essential. You can influence your customers’ experiences both positively and negatively, so consider the products and services you offer and the type of customer service. 

To gain more traction with your customers, you may want to consider implementing one of these referral program ideas as you retool your products and services if needed. 

Cash or Credit Rewards

If your customers do not make regular purchases, cash rewards are a good referral incentive. On the other hand, the excitement of cash incentives may motivate customers to refer your company to their friends. Make sure that your products are memorable enough that people will gladly refer your company to others even without incentives. 

Cash incentives can be used for anything your referrer wants, so these incentives can be useful for short-term growth, particularly if you’re in a new or up-and-coming market.

Gift Cards

Referral program gift cards are very popular incentives. By offering customers the option to choose their preferred rewards for referrals, gift cards give them a great deal of freedom. Don’t limit gift cards to products you sell. 

You can also offer gift cards from third-party companies such as Starbucks, Visa, and so forth. Gift cards are an excellent alternative to cash rewards, particularly if you are not expecting customers to make another purchase. 


You may also want to consider offering a discount through your referral program. Discounts offer value to returning customers, especially if your company sells a wide range of products.

Depending on the level of referrals, customers who return can receive a specific amount of discount, such as $20 off on their next purchase, or a percentage of discount, such as 25% off. You build client loyalty and increase sales with this incentive.

Subscriber Credits or Points as Incentives for Regulars

Keep the company’s value by only allowing your customers to buy with the credit you give them. Subscription credits and points can be useful for products and services that are “pay-per-use” or usually paid for on a regular basis. With this method, you will incur little to no cost, although the customer will think they’re saving a lot of money.

Company Merch for Every Referral Program Tier

Your consumers will truly feel like brand ambassadors when you give them company merchandise. You could structure the incentive progressively, offering more exclusive merchandise for more referrals.

Use websites that offer print-on-demand services for all-in-one graphic design and fulfillment services. If your budget permits, you can hire a graphic designer to come up with unique t-shirts, hats, and sweatshirts that will set your company apart from the competition. 

Having a tangible reward system means your customers will be able to see it every day, giving them a sense of attachment to the brand and helping you attain new customers.

What You Need To Do To Promote Your Referral Program

Referral program marketing guide

After you decide on a referral incentive, you must find a way to promote it. You could ask your staff for help in promoting it in person, but you also have other ways to do so.

Social Media

When you have a referral program, word of mouth can spread as quickly as a click of a button. A customer posts your referral program on their social media feeds to share with their followers. Imagine a few of those followers clicking on the link and becoming customers. You can see how the cycle can last for a while once you have these new customers letting their friends know about your referral program.

In-Store Shopping

When you sell a lot of products online, you can provide free in-store services for your referrers such as free in-store pickup and personalization of your products to encourage more online customers to come into your brick-and-mortar store if you have one.

You can make a positive first impression by creating a welcoming atmosphere that will build customer loyalty. In turn, these customers will remember your business, take part in your referral program, and refer others to your store, generating more customers.

Company Website

Make sure you have a section or menu item on your website with information about your referral program. This will help pique visitors’ interest, and greatly increase your chances of turning them into brand ambassadors.

The top of the site can include information about your program, and you can test and update the copy every two weeks to see what works best.

Use a Small Business Referral Program to Grow Your Business

When you invest in referral programs, your small business is more likely to be marketable. Referral programs are relatively affordable and a worthwhile alternative.

It is not always necessary to ask someone to refer you. Providing quality products and services along with excellent customer service will boost your business. If you have not yet made the most of customer service and your products, use referral programs to grow.

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