This article was adapted from The Small Business Online Marketing Handbook: Converting Online Conversations to Offline Sales, by Annie Tsai. Reprinted by permission of John Wiley & Sons Inc., 2013. Copyright 2014 by Annie Tsai.
Businesses are frequently so busy focusing their energy on acquiring new customers and delivering a consistent experience to their customer base that they often neglect their most valuable customer segment: active referrers.
Though this might be just a small percentage of your customer segment, it's critical that you have at least a basic program in place to support and encourage their activity.
The benefit of acquiring a new customer through your referral channel is that these customers already have a vested interest in your success; it's been channeled through the referrer. They will therefore be more likely to work with you if they encounter a problem during their purchase experience, and may also be more apt to tell others about their (hopefully positive) experiences.
In the meantime, consider the following five initial tips for designing offers that continue to nurture your most valuable customers:
1. Reward the referrer and the referee. This should be an easy modification if you already have a new customer acquisition deal in place. Even if you don't have a formal offer that rewards the existing customer for bringing in new business, find a way to say thank you. Put a note on that person's account to give them a little something the next time they come in. The gift could be as small as a coupon for their next purchase, a Starbucks gift card, or gift card for a future service.
2. Provide an incentive to get the referred customer back a second time as a part of the referral program. It's the same as when you're designing deal site promotions or any other new customer acquisition program: building in a strategy that incentivizes that new customer to return a second time provides you with additional leeway and a captive audience. New customer acquisition through your referral channel is no exception to this rule.
3. Reward customers with retail products instead of services offered to increase perceived value. If you have a retail component to your business, make sure you find ways to leverage this channel. Offering retail items is a great way to increase perceived value due to the built-in mark up from cost.
For example, at a salon, the retail price of a bottle of shampoo may be $22, but the wholesale price is half that at $11. Including the bottle of shampoo or any other product with a 100 per cent markup significantly increases the value of the service delivered to the customer without impacting your bottom line.
4. Encourage gift card purchases into your customer base as a key driver of referral business. This is a great way to broaden the scope of your actively referring customer base. Gift cards are an easy and thoughtful way of giving for those who may not necessarily know exactly what to get for a specific occasion or person. For those customers who are evangelists for your business in the offline or online world, gift cards are also an easy way for them to introduce their friends and family to a business they love.
In addition, if you don't have a solid handle on precisely which customers are referring business to you, putting an aggressive gift card promotion out there is a great first step. For tracking purposes, you can append the gift cards with some internal coding; if you're printing them out, simply use a different color for easy coding.
5. Don't discount the power of handing out some business cards to your favorite customers. Asking for the referral is often the most difficult part of building a referral program; however, you need to educate your customers on how they can help support your business, especially in the beginning.
Even if you don't establish a formal referral program, you can use business cards as an easy conversation starter. Simply hand the customer three business cards at the point of sale and say, "I'd really appreciate it if you could let a few friends know about the great service you received today."
Of course, your active referrers are most likely sending new customers your way just because they love your business. It's very possible that they don't expect or even want incentives for referring. So before you spend the time designing a referral program based on monetary reward, test out how willing your customers are to simply help spread the word.
Annie Tsai is chief marketing officer at Demandforce, an Internet marketing and communication company that advises small- to medium-sized businesses