Although customer referral programs are not a new idea, many consumers have been drowned in offers by businesses that offer perks for referrers. Everyone from boutique shops to auto repair now has a program to benefit you, one way or another, for using their service, as well as referring others. This is the nature of competition, and is unlikely to change.
However, customer referral programs, often called CRPs, have been known to be very effective in corralling customers from failing businesses, bad customer service experiences, and even those new to a business’s type of products or services. Before you can determine if your company can benefit from a customer referral program, it may be important to figure out any advantages to your business.
There are Four Distinct Advantages of Customer Referral Programs
A customer referral program indicates referrals that are generated from your existing consumers who are already familiar with those who promote your products or services. It is important to note that CRP’s differ from commission or affiliate types of referral plans.
When one of your current consumers refers your business, the implied endorsement comes along with that recommendation. Your referrer, obviously a fan of your business, is telling the prospective consumer that they have used your products or services, and have had a positive experience with them.
Your referrers already know your business as well as knowing who in their own social networks may benefit from your company’s products and services. In the case of existing customer referrals, you won’t need fully fleshed out analyses to understand your target market in this instance, your clients will do so innately.
Paying for Results
A lovely aspect of a customer referral program is that you will only pay for those referrals your business receives. As long as your CPA is structured appropriately, the reward to your referrer will be triggered by your business’s revenue generation, not from the initial introduction.
A Defined Customer Referral Program
A good referral program will enable your business to define the cost per acquisition. In this way, you will be specifying how much you are willing to pay for your referrals. Whether you choose to pay in cash, points, services or credits for any specific actions are entirely up to you.
CRP’s can be incredibly powerful tools. In our current competitive economic environment, customers are definitely worth their weight in gold since much of the risk involved with other forms of marketing and advertising is eliminated. Since not every business will directly benefit their bottom lines with customer referral programs, weighing the benefits versus the economic risk is the best course of action.
When the benefits are high and the organization and spending costs of the program are low, the risks are well worth the attempt. Before you determine that your business can directly benefit from a CRP, weigh all of the upsides against the down, and an informed decision after brainstorming your options will indicate whether or not you should delve into this form of referral marketing.
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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