A referral program is the term used to describe a business arrangement in which a company offers incentives to individuals or other businesses for referring customers to the merchant’s business, products or services.
Why Have a Referral Program?
There are many reasons to have a referral program for your business. Some of those reasons include:
“Word-of-Mouth” advertising, even in the digital age where referrals are given on any given social network at any time, is still a very critical element of many business’s consumer bases. There is simply no replacement for a consumer referred to a business from a friend, family, or co-worker. These referrals already come with a default sense of trust in you and your brand. It is only up to you to supply their needs for products or services, and to give them the highest-quality customer service to retain them.
Many consumers are bargain hunters. They will gladly work to find you new consumers if it means they will be rewarded, discounted or gifted with valuable products and services. Simply having a referral program in place may encourage others to actively work to your benefit, because of the benefit to themselves.
Many start-ups who fail to have a referral program in place early on, may find themselves in trouble during economical hardships if their business is not a consumer need but a consumer want. Referred customers are less likely to seek cheaper or less reputable services even if the services offer them more discounted rates than you do. Customer loyalty can mean the difference between continued business and bankruptcy in more desperate economical times.
Managing a Referral Program
It is vital to have a system for recording your referrals. If you fail to keep up with and keep in touch with your active referrers, you may find yourself in the position of having to do the footwork yourself. Cultivating referrals for your own business is a bit more difficult than having active referrers. The obvious difference being that an individual is expected to promote their own business, services and products. Referrals that come from business owners or employees can appear as biased as it can come. However, having others working to refer your business because of their own satisfaction with your services, is a much heavier talking point, and more likely to bring in the new consumers.
In order to properly manage a referral program, you should have some method for recording each referral you receive. Keeping a file or document of recorded information will also be vital when it comes time to pay out any referral bonuses or awards. The best way to ensure the management of your referral program continues to run smoothly is to make sure all employees in your businesses are trained on how to handle referrals that are incoming and outgoing. Keep a handy script around so that they too understand the right talking points for asking for referrals from current consumers or other businesses. Managing a professional referral program will require everyone to be on board.
Christian Fea is CEO of Synertegic, Inc. A Joint Venture and Referral Marketing firm. He exemplifies how to profit from Joint Venture and Referral relationships by creating profit centers with minimal risk and maximum profitability.
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