Why are referral programs for small businesses so powerful?
Small businesses, just like larger businesses, can greatly benefit from referral programs. By allowing your customer base to market on your behalf, your small business can greatly increase its reach and ROI – without a spike in your marketing fees.
When we say “small business referral program,” we’re not talking about an informal program where customers hand out cards to their friends, and you do all the tracking manually. Rather, we’re talking about referrals that come from customers who use an official referral program – a digital one – that tracks their marketing for you.
A digital customer referral program (powered by referral software) might sound expensive at first. But just because it’s what the big companies use doesn’t mean it’s a huge expense. In fact, newly acquired customers will cover the costs of launching and running your small business referral program – and then some.
Today, we’ll take a look at how referral programs for small businesses can expand your company, including some successful examples to inspire you.
Why start a small business referral program?
There are many benefits that can come from referral programs for small businesses and startups. Here’s what you can cash in on by starting a small business referral program:
Referral programs for small businesses mobilize and track word of mouth
People are far more likely to trust the word of their friends than a stranger’s word or your company’s messaging. Thus, word of mouth among friends is extremely valuable for small businesses. But this sharing can be unpredictable and hard to track.
Thanks to referral programs for small businesses, though, it’s easy to motivate this word of mouth with referral rewards, simplify the sharing process, and track when your customers refer others.
Small business referral programs promote customer acquisition at a lower cost
Do you know how much it costs your small business to bring in another paying customer – your customer acquisition cost (CAC)? Chances are, this cost will lower when an existing customer does the work for you.
Instead of focusing on people who don’t know you yet, you’re focusing on mobilizing customers who already know and love your brand, and getting them to share genuine stories about why your brand is awesome. All this at little to no cost to you.
Yes, with a small business referral program, you pay out a reward for a referral, but only when you gain a paying customer. Because the new customer’s business pays for that referral reward, you are only profiting in the process. And since the reward you offer is up to you, you can always keep the reward cost well below your CAC.
This method can greatly reduce the CAC for small businesses. Instead of turning to pricey marketing campaigns, your brand can focus on pleasing current customers and allowing them to draw in business on your behalf.
Small business referral programs increase customer loyalty through trust
When a customer is referred to your small business by a peer, this makes them more likely to stick around. After all, they trust the word of their friends.
Referred customers are 18% more likely to remain loyal to your business. Since their friend’s recommendation is so valuable to them, and casts your business in such a positive light, the odds of them enjoying and continuing to buy from your business are far higher. As a result, referred customers have a higher lifetime value.
Referral programs for small businesses foster a repeat engine of referrals
Another benefit of a small business referral program is the ability to create consistent customer-advocates, leading to even more profits. As repeat consumers gain a reward for their referrals, they become even more invested in your business. They want to see it succeed, they want to keep gaining referral rewards, and as a result, their referrals are genuine. This prompts them to keep referring more customers (both for rewards and to help you), and therefore, continuing to bring in new, loyal customers.
Small business referral programs build strong customer relationships
Similar to what we described above, a referral reward program builds a strong bond with your customer. They feel comfortable coming to you and bringing their family and friends as new leads. They trust you and they want their friends to join in on the fun, increasing your number of referrals. Plus, they feel more invested in the success of your business.
Strong relationships with customers are vital for any business, but for small businesses, they’re your lifeblood. Customers love the personal care they receive from your small business, value the experience they have with you, and want to play a part in your success. By asking them for a referral, your small business gives customers a direct way to contribute to your business growth.
Referral marketing can accelerate the social media sharing cycle
Referral programs have the ability to greatly advance your marketing efforts, especially through online channels. This is where small business owners can really thrive – especially with social media referrals, where customers share referral links to many friends at once.
Social media referral posts give your small business the exposure it needs in order to quickly grow. The friends who see your customers’ social posts might be compelled to share with their own friends, creating a continuous “viral loop” of referrals.
How do I set up a referral program for my small business?
There are a few steps you can put into place in order to build the best small business referral program possible. Follow these best practices for setting up a small business referral program:
1. Make sharing easy
The easier it is to share via your referral program, the more often your business will be shared. It’s as simple as that.
- Make sure customers can easily find your program and share as quickly as possible. Promoting your referral program is key!
- Give multiple options for your customers to share their code, whether it’s via social, via email, or by copying and pasting their referral link anywhere. This simple step can get you far.
2. Keep your program copy concise
Don’t make customers read to find the info they need – make it short and sweet.
- Get to the point and let them know existing customers what they can earn (the incentive), and what they have to do to get it (share with friends). The headline is a great way to sum things up quickly!
- On the newly referred friend’s end, write a quick message about why the new customer should purchase from your brand.
3. Offer enticing but cost-effective rewards
Next, you should entice your customer by providing a referral reward – that’s the main reason why they’re referring, after all. What type of reward will excite your customer into sharing their referral link? What will get them wanting to earn? Store credit? Cash? A free product or service? Look at your customer base and their interests to find your best bet.
Don’t break the bank in doing so, however. Your small business should be able to afford the reward each time around. Keep it within your budget so you aren’t overpaying for warm leads.
- If you’re giving rewards for every referral, the referral reward should cost much less than your average customer acquisition cost. Discounts, small-amount gift cards, and store credits are good bets here.
- If you want to give a more valuable reward, such as a free product or service upgrade, require someone to make several referrals first. Use a referral tracker so customers can see how many referrals they are away from this award.
- Or, you could give the more valuable reward to the winner of a referral raffle, where every referral means one entry into the drawing for the big prize.
4. Tie the rewards back to your business
Another best practice is to tie your reward back into your business. By offering credit to your business or a percentage off of an order, you can entice the customer to purchase even more. If you’re service-based, you could also offer a free upgrade of your service to show customers what all you can do and give them a shot at top-tier services.
5. Use an eye-catching call-to-action
Next, grab their attention with a call-to-action – a CTA – that will entice them to take the next step. A clickable button or link with a CTA attached clearly shows customers what they should do next (share now!) and how they can move forward toward their reward.
The best CTAs are easy to find, above the fold so customers don’t have to scroll down, and concise, with just 1-3 words.
6. Showcase what makes you unique as a small business
Don’t miss the opportunity to show customers what you’re about. Why should existing customers sign up for the program and make referrals? Why should new customers order from you? What sets you apart from bigger businesses?
Keep it short, but tell the world what’s unique about your company so they have a better idea of who they’re doing business with. Bring your small company’s personality into the referral program with images, voice, and tone. Or, you could even use customer reviews in your program messaging.
7. Focus on friendship in your messaging
Another way to reach customers is by showing them what a good friend they will be for their referral. They’re rewarding a friend, giving them a gift, or becoming closer in their friendship – all thanks to their referral. This can be done with language, saying something like “Give your friend $20,” or with images, such as pictures of friends enjoying time together.
8. Make a community connection
Since you’re a small business, you have a connection to your community that most larger businesses can’t match. So, if you include a community element in your referral program (such as referencing how you serve your local area, or including donations to a local charity in your program), this will be to your advantage.
Thanking customers for building up your small business through referrals is another effective “community” element, because it shows customers how they contribute to your success.
8 small business referral program examples
Looking for inspiration as you build a referral program for your small business? We’ve gathered several examples of stellar small business referral programs to help you out. This will give you a feel for what works in these campaigns, and show you how you can incorporate best practices into your own referral campaign.
1. Tomlinson Bomberger
With their catchy headline, Tomlinson Bomberger doesn’t make customers search for their reward – it’s right there in the text. Customers know what they can earn ($50), and they quickly find out how to earn it. By adding the friend’s info, customers can earn with this rewards program. The company also focuses on friendship with their image, reminding us just how satisfying it is to help a friend (including through a referral). Finally, they close out with a clear, easy-to-spot CTA button. No messing that one up! It’s just click and refer.
2. Camp Young Judea Texas
Next up, it’s Camp Young Judea Texas. This brand takes the friendship aspect to the next level, outfitting their referral page with plenty of kids having fun at camp. (Great ploy, right?)
They’re also hyper-focused on how their community contributes to their success through referrals, and very thankful for this: “When a prospective parent calls us to learn more about Camp, there’s a very good chance it’s because a camp parent recommended us to them. It’s clear to us that YOU, our camp families, are our best recruiters and biggest cheerleaders!”
A jumping arrow even shows users where to go to start their referral process. There’s no messing this one up – just scroll and get the info on how to refer a friend to this small business.
3. Morgan & Morgan Attorneys at Law
You might be wondering how a law firm can have a referral program, but the company actually offers charitable donations on referring customers’ behalf. We love this as it pulls at customers’ heartstrings, enticing them to refer for a good cause. Morgan & Morgan donates books to children of low-income families, on their customers’ behalf, with each referral. Users can easily scroll down, type in the case description, and find the clickable link to submit. Because there are only a few form fields, this process is simple and can be done quickly, further enticing customers to make a referral.
4. Weed Man Lancaster
It doesn’t get any simpler than this … in a good way! Users referring Weed Man Lancaster can fill out only a small amount of info and then click “take me to the next step.” We love the simplicity! With steps like these, more customers are likely to refer their friends and family members going forward. The page’s text also explains what customers should do (“invite a friend and earn rewards”), and how many steps it takes. And with “refer a friend” buttons available in the top and bottom menus, on every page of the website, it’s also super simple for loyal customers to get to the page and share.
5. Spa Bar Orlando
Spa Bar Orlando does a good job of laying it all out there for the customer – their terms and conditions are even listed on the referral page. That way, customers can learn the ins and outs of the program, before they ever get started. A smart image and short text also explain what’s ahead as the customer refers. And we love that both the referrer and their friend earn Spa Bar bucks when the friend first uses the Spa Bar services!
6. Bagnall Shaw Insurance
Bagnall Shaw, an independent insurance agency in Pennsylvania, leads with thanks in their referral program: “There is no greater compliment you could give us than referring a friend or family member to our agency.”
The reward is front and center, including in the headline: customers earn a $20 Amazon gift card for every successful referral. The terms are clear as well, so clients know exactly what their friend must do (activate a new policy for at least a month) for them to earn the reward. And there’s no limit to the gift cards an existing client can earn!
Referrals have been integral to Bagnall Shaw’s success, a fact they also mention on their referral program page: “Our business has grown to over 8000 customers… only through our client referrals and positive recommendations.” Bagnall Shaw stands as proof that a satisfied customer base and a way to mobilize sharing can pay dividends for almost any small business.
7. Thirty Hair
Thirty Hair knows how to encourage a personal touch to customer referrals. The referral program stands out because the small business lets customers write their own message about why they love Thirty Hair, tailored especially for their friend. And instead of just leaving customers to their own devices, there are a few suggestions for what customers could share in the message.
The referral program’s rewards are also expertly tied back to the business – the referred friend gets $20 off their first appointment, and the existing customer earns $25 towards an Aveda product purchase at Thirty Hair. And the small amount of form fields means referring is a breeze for Thirty Hair clients, making them much less likely to back out.
8. Fitness Hub FL
Fitness Hub FL offers a referral reward of a free membership month whenever a friend signs up for their first membership plan.
Customers can also receive a branded metal water bottle after sending any five friends’ emails to Fitness Hub. As long as their referred friends aren’t members yet, the existing customer receives the bottle as thanks, even if these friends don’t sign up for a monthly membership. Not only is this bottle great for working out, it’s also a free promotion for Fitness Hub when customers simply carry the bottle around.
But where the program really shines is how it highlights the intrinsic benefits of referring friends on the landing page. This is a smart play for the gym, because exercise really is more fun – and motivating – with a buddy around. It’s true that “the added accountability, fun, different exercises and competition that a friend brings to your workout session will help keep you motivated and on the right track!”
The list of community-building benefits, coupled with authentic pictures of friends having fun at Fitness Hub together, complete this effective recipe for generating referrals.
Small business referral program software
A great way to keep up with your small business referral program is with the use of referral software. This simple addition to your referral program can help you keep track of incoming referrals, rewards, best customers, and more.
Don’t lose peace of mind. Know what your program costs – and how much revenue it brings in – all with smart software that’s designed to keep your referral program in check.
Plus, keep your customers happy by instantly giving out rewards when they’re earned. No more hassles of remembering a card!
Take a look at these examples of referral software and learn how they could help your small business thrive with your word-of-mouth marketing efforts. For more info, check out our epic list of referral program software, and look for our choices marked as “best for small businesses.”
A great way to manage your referrals with smart software is through Referral Rock. This program allows your small business to completely customize its referral program and create an amazing setup that works for your brand. It’s a great option for those who don’t have technical expertise, as there’s no coding required. Plus, Referral Rock integrates with several types of business software, so you can keep all your software programs working together.
Smoothly turn customers into your brand’s advocates, and generate more business, by accelerating sharing via email, social media, and more. Plus, it works for all types of small businesses (not just ecommerce), is cost-effective for smaller companies, and can easily grow with you as your business grows.
Consider signing up for a free trial for a no-risk way to test out this product.
Another software option for your small business referral program is Genius Referrals. This program is widely used by companies and allows customers to integrate their referral programs into other processes. Keep in mind that this program limits the number of rewards and users you can gain, such as gift cards earned, so there may be upcharges as your company grows.
HelloReferrals is another program that allows users to send and track referrals for their company. Because of its setup, Hello Referrals is best used for small business and membership networking, such as chamber of commerce groups, Rotary clubs, and small business associations and their referred customers.
As its name states, Incentivefox is all about creating customer incentives for sharing. This reward platform helps businesses create and track their referrals for continued growth. Although it bills itself as a small business option, it’s likely most suited for larger businesses, as it doesn’t make its pricing public.
InviteBox is a software program that allows companies to create their own referral program from scratch to entice existing customers. When going this route, be sure to count how many users you’ll reach, as there are tight limits within each tier that the company offers.
ReferralCandy referral software focuses on ecommerce business referral programs. One caution to keep in mind with ReferralCandy is that they charge extra commissions for every referral, so costs can ramp up far more quickly than your small business may be able to afford. And if you’re not an ecommerce business, ReferralCandy definitely won’t be the best fit for your needs.
Summing it up
You don’t have to be a big brand in order to benefit from a referral program. Small businesses, too, can find growth in using word-of-mouth marketing. Compared to more traditional marketing methods, referral programs for small businesses can be a far more cost-effective way to reach new consumers, and get them to invest in your brand.
Consider implementing a small business referral program to allow your company to grow. And with the addition of referral tracking software, you can gain peace of mind with a program that tracks referrals for you.
To learn more about setting up your own referral program for your small business, check out this comprehensive guide to starting a referral program.
And once you’ve launched, check out these referral program promotion ideas to make sure your customers know about your program.