How to Implement a Referral Marketing Strategy for Your Company


Isn’t it great when the phone rings and a customer says, “My friend Alice told me about your widget flatteners, and I need some? Please take my order for a dozen or so.

You’re a fan. You feel fortunate to have a repeat customer who is satisfied enough to tell a colleague about you. You get a thrill from closing a simple, low-effort sale. You’re thrilled since you know this new client didn’t require any further advertising. There is no need to make a commercial, buy airtime, send a letter, make a phone call, or pay someone to make a call. That’s the beauty of recommendations, right?

So, if referrals are so helpful, why don’t more people use them?

For some reason, we have a twisted mindset that says, “Duh… I just got these nice guys to lend me their money. They don’t want to worry about me bugging them to refer me to their friends to steal part of their money.


They don’t think of you as someone who stole their money. They look at you as if you’ve just addressed a crucial problem for them. They will feel more responsible to you at the point of sale than at any other time. They will be more likely to provide the recommendations you need now. However, there is an appropriate and inappropriate manner to make such a request. Take this approach…

Think about the positive results that using your product or service had for your client. Be sure to highlight how your product or service has benefited your client, whether providing them with peace of mind, saving them money, or relieving them of a persistent issue.

Try to convince the buyer that your service is worthwhile.

It’s important to remind your customer that he or she likely has acquaintances, family members, and friends that share similar issues, concerns, and wants.

The final piece of evidence is…

Remind them that it’s the neighborly, loving, moral thing to do to at least put these people in touch with you so they can decide for themselves if what you have is right for them, especially if they value the relationships they have with these other people who share the exact needs and stand to lose or gain in the same way your customer did.

Do you appreciate the charm of this? They are no longer paying attention to you or your request. You’ve successfully piqued their interest in assisting their pals.

Both passive and active referral networks exist.

Mechanisms for Passive Referrals

In passive referral schemes, you have an intermediary between yourself and the potential client. You’ve done your job right if a satisfied client goes out of his way to recommend your company to others. If the person refers to you, “looks you up,” and effectively asks, “Can I do business with you?” then you’ve got a customer for life.

The likelihood of that occurring can be boosted by including incentives.
Customers can show their appreciation by giving certificates to others. After their friends make purchases, you provide the referrer a gift certificate as a token of appreciation.

Depending on the magnitude of the referral’s transaction, Sierra West Jewelry’s Tim Branscomb will provide the referring customer a product credit ranging from $50 to $250 to use in the store.

When a patient they referred joins Dentist Dave Miller’s office, he takes them out for a romantic meal and a movie.

Naturally, passive methods produce the best and most motivated referrals. However, there is a catch…

Due to being two levels removed, you can never effectively market to these recommendations. Still, you have to hope that satisfied customers will spread the word about your business in such a way that brings in new customers.

As a result, you must set up proactive recommendation networks for your company. Customers are asked for suggestions on who to contact in proactive referral systems. And it’s on you to make sure those people get communicated with.

Systems for Active Referrals

Referral systems that are actively pursued differ slightly in dynamics from passive systems. Any incentive should be relevant enough to entice the consumer but not so valuable that you get hordes of unqualified recommendations you can never convert, even if none of the names your client provides end up profitable.

For instance, I return newsletter issues to subscribers with audio recordings included so that I can collect customer names. I’m not out much money, but our referred consumer could save or make thousands of dollars thanks to the advice in the email.

There are other excellent and low-cost incentives to consider. Referral incentives can take whatever form you like: free movie rentals, free desserts at local eateries, buy one, get one voucher, or anything else you might dream up.

Let’s go on to the most plush of referral programs. The “Graduated Incentive” system for gaining referrals.

Systematized Rewards for Direct Referrals

The goal is to increase the value of referral incentives for repeat business.

Here’s a case in point:

When you refer a friend for the first time, we’ll give you a $25 gift certificate. If they refer you again, send them a $75 gift certificate to a nearby eatery. After the third time, you may treat them to a day at the spa. Perhaps you establish a reward system where they can earn a free trip to Hawaii for a week.

Businesses as diverse as real estate agencies, chiropractic clinics, carpet cleaning companies, HVAC firms, and many more have succeeded in using this method.

One last thought on proactive systems in general.

You should reassure your clients that you will not use their referral information for any purpose other than expanding your customer base…

First, assure the person who referred you that you will contact them.
Second, assure them that the offer they send your way will be even more significant than the ones you make to random people on the street.

Lastly, assure them you will never put them in an awkward situation by using pressure techniques to get a reference. You should promise to reach out and present your offer, but you shouldn’t be overly aggressive about it.

Having other recommendation systems will lead to more referral business, which is excellent for your bottom line.

Small and medium-sized business owners can benefit from Derek Viveiros’ expertise as a Certified Marketing Coach. He has helped business owners significantly boost their earnings through his unconventional one-on-one coaching approach. The Daily 30-Second Marketing Tip will help you keep marketing in mind 24/7. To sign up for no cost, please click here.

Jim Ackerman runs the show at Salt Lake City’s Ascend Marketing, Inc. The Principle-Centered Marketing CoachingTM Program he created and implemented earned him membership in the National Speakers Association. Jim Ackerman, 2006. Forbidden to disclose.

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