Referral programs are a tried and true lead generation service and method for businesses to attract new clients and clients, and they've been around for years. Many companies across all sorts of industries use referral programs to grow their client base and reward loyal clients.

So, let's dive into what exactly a referral program is and how it works in a bit more detail.

What is a referral and how valuable is it?

A referral is when someone recommends a product or service to someone else. Referrals are valuable to businesses because they come from trusted sources - friends, family, or even influencers you follow online. When someone you know and trust recommends something, you're more likely to give it a try. This word-of-mouth marketing is incredibly powerful because it can lead to new clients who are already interested in what the business has to offer.

Each referral is like a little gold nugget for a business. According to Oberlo, a happy client or client brings nine more leads into your business. It's a way to attract new clients without spending a ton of money on advertising. Plus, clients who come through referrals tend to be more loyal and have a higher lifetime value, meaning they keep coming back and spending more over time. Before we dive into referral programs, did you know that you can hire a professional digital marketing agency in Edmonton to help you establish one?

What is a referral program?

A referral program is a way for businesses to reward you for spreading the word about their products or services to your friends and family.

So, let's say you really love a certain brand of clothing and you tell your best friend about it. If your friend goes and buys something from that brand because of your recommendation, the company might give you a little something as a thank you, like a discount on your next purchase or some free goodies.

It's a win-win situation - you get rewarded for sharing something you love, and the company gets new clients thanks to your referral. No wonder why a referral program is one of the lead generation channels with the highest conversion rates, according to Marketo.

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What is referral marketing?

Is referral marketing different from a referral program? In a way, yes! Referral marketing is the strategy or process of actively encouraging and incentivizing clients to refer their friends, family, or contacts to a business. It involves creating campaigns, promotions, or rewards to motivate clients to spread the word about a product or service.

On the other hand, a referral program is a specific system put in place by a business to track and manage referrals. It often includes a structured process for clients to refer others, as well as rewards or incentives for successful referrals.

So, in simple terms, referral marketing is the overall lead generation service of getting clients to refer others, while a referral program is the specific way a business organizes and rewards those referrals.

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What are the different types of referral programs?

There are many types of referral programs businesses use. But we listed the 5 most common referral programs that are applicable to both retail, e-commerce, and service-based businesses.

1. Discount or Cash Incentives

Offer a discount or cash reward to both the existing client who refers a friend and the new client who makes a purchase. This is a simple and effective way to motivate clients to refer others.

2. Points-Based System

Create a points-based referral system where clients earn points for each successful referral. These points can be redeemed for discounts, free products, or other rewards. It's a great way to encourage repeat referrals.

3. Exclusive Events or Early Access

Give clients who refer others exclusive access to events, sales, or new product launches. This creates a sense of exclusivity and makes clients feel special for being brand advocates.

4. Gift with Purchase

Offer a free gift or bonus item to clients who refer a certain number of friends. This not only incentivizes referrals but also encourages repeat purchases from the existing client.

5. Tiered Rewards Program

Create a tiered referral program where clients earn increasing rewards for each referral they make. For example, they might receive a small discount for the first referral, a bigger discount for the second, and so on. This can encourage clients to continue referring others to unlock more rewards.

Remember, referral programs are not limited to these five. You can be creative as much as you want. Find ways to make your program more motivating and interactive to keep your clients engaged! The Digital Firm, a professional digital marketing agency in Edmonton, can help you create one!

How to Create a Client Referral Program

1. Clarify Your Goals

Before diving into a referral program, make sure you know what you want to achieve. Whether it's getting more clients, boosting sales, or making your existing clients happier, having clear goals will help you plan your program better.

2. Look at How People Refer to You

Take a peek at how people currently refer others to your business. Understanding where referrals are coming from can help you figure out the best ways to encourage more referrals in the future.

3. Find Your Ideal clients

Think about who your best clients are and what makes them likely to refer others. Targeting these awesome clients can make your referral program more successful and bring in referrals that are a great fit for your business.

4. Make a List of Potential Referral Sources

Write down all the people or places that could send referrals your way. This could be your current clients, business buddies, social media pals, or influencers in your industry. Knowing your sources can help you focus your efforts on getting more referrals.

5. Pick Where to Run Your Referral Program

Decide where you want to set up your referral program, like in emails, on social media, or through a special referral app. Choose platforms that your clients like using so you can get their attention and make it easy for them to refer others.

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6. Plan How to Reach Out

Come up with a plan to talk to potential referrers and get them excited about your referral program. You might send friendly messages, offer rewards, or run special promotions to encourage people to refer others and make your program a success.

I run a startup business, can I afford setting up referral programs?

As a startup company looking to gain more leads or boost sales through a referral program, it's definitely feasible and can be a smart move for your business. Referral programs are a cost-effective way to attract new clients and leverage the power of word-of-mouth marketing.

Even as a startup, you can start small and simple with your referral program. You don't need a huge budget or complex systems to get started. You can use tools like email marketing, social media, or word-of-mouth to spread the word about your program.

Additionally, referral programs can help you tap into your existing network of clients, friends, and supporters who already believe in your business. By offering them incentives to refer others, you can turn your loyal fans into brand advocates who can help you grow.

Takeaway

Setting up a referral program for your startup business can be a feasible and effective way to gain more leads and boost sales. By leveraging the power of word-of-mouth marketing and incentivizing your existing network of clients and supporters, you can create a cost-effective strategy to attract new clients and grow your business. 

With a clear plan, simple implementation, and a focus on engaging your loyal fans, a referral program can be a valuable tool to drive growth and success for your startup. So, don't hesitate to explore the possibilities of a referral program and harness the potential of your network to take your business to the next level.

Are you ready to level up your marketing campaign by incorporating referral programs as your lead generation strategy? Let The Digital Firm, a trusted professional digital marketing agency in Edmonton, help you plan and get it rolling! Contact us today!