Building A Monster Customer Referral Program: My Simple 2-Part Strategy

Step 1. 

Get Referrals By Staying Engaged With Your Customers

Staying in touch may seem obvious, however, it consistently astounds me how many businesses don’t prioritize this, or even ignore this all together, instead just assuming the sale, is the goal.

In my experience, the completion of a sale and the delivery of a product or service, is only the beginning of the relationship. The majority of the value that I expect to receive from a customer comes after the first transaction.

If you believe your not communicating with your customers in your business as much as you should, here’s the silver lining: you’re in good company.

The majority of businesses I collaborate with, scarcely take any measures to remain a priority in their customers’ minds.

Want the good news?  Your competitors are likely not doing much to stay top of mind with their customers either. This creates a serious advantage for you, a way for you to exploit your rivals’ mistake, and distinguish yourself from the competition.

Understanding The Traditional Sales Funnel Vs. The Bowtie Funnel

For those unfamiliar, the conventional sales funnel is the path that the bulk of your targeted audience narrows down and progresses through during your sales process along with the emotional stages—from public outreach to leads, then to engaged leads, and finally to customers/sales.

The “Bowtie” model extends beyond this, maintaining relationships with customers post-sale to cultivate loyalty and of course, encourage referrals. 

This approach not only retains existing customers and provides upsell opportunities, but also converts them into brand ambassadors that will be quick to recommend your company, maximizing the scope of potential business revenue.

In the simplest form, there are only two ways for a company to increase its revenue and profit.

1. Get More Customers: This includes customers from any source and how much it costs you to get a new customer. 
2. Getting More Lifetime Value From Your Customers: This includes upsells, referrals (for new customers), product pricing, and churn rate (the percentage of customers that do not return to buy again, or stay subscribed).

Between these two methods, the data is clear, it’s much easier to increase your existing customer’s lifetime value than to try and get new customers. 

The chance of converting an existing customer is 60%-70% as opposed to the 5%-20% chance with new customers. 
~ Forbes

Pursuing an active customer referral strategy has the unique advantage of accomplishing both methods of increasing revenue at the same time.?

My real-world example of a missed opportunity

In a recent email I received, it was clear this business was missing out on a great opportunity and essentially wasting their time, money and efforts.

Two and a half years ago I spoke with a few different brokers while buying a home. I narrowed the search down to two. They both seemed qualified, I ended up choosing one, and they did an adequate job.

Today, I don’t remember the name of the broker I ended up going through for the loan. 

Fast forward over two years to a couple months ago, the broker I didn’t use reached out to me to see if I was in the market to sell my home.

As I thought about the logistics of this shot in the dark effort, I couldn’t help but feel bad for the broker. I know for this to be effective, he’d need to reach me exactly when I was starting to look at homes, before I talked to someone else. It will be extremely difficult for this type of campaign to work.

Additionally, if someone had asked me for a referral the day before that email, there would have been zero chance of me remembering this broker’s name. 

However, had he maintained contact all this time, he would have been my first recommendation.

Additionally, if I were in the market again, he would be at the top of my list of considerations by default.

Optimal Engagement Strategies

Creating Appropriate And Effective Engagement With Customers And Leads

It’s never a good idea to just send constant emails to your existing clients with information they don’t care about. It’s even more important to understand, what you care about, and what your customers care about, are usually very different.

I should emphasize, there is a giant difference between maintaining positive engagement by providing value to your customers vs. becoming a nuisance. 

Unfortunately, many business owners are guilty of just sending valueless emails, that will undoubtedly cause their customers to unsubscribe, and avoid the business all together, rather than engage with them, not good.

Consistently Providing The “Appearance” Of Value

What does the term “appearance of value” mean? Does it imply providing something that might not actually be valuable, but gives the impression of being valuable?

Absolutely not—it’s precisely the opposite.

Many business owners struggle to understand the difference between their perception of value and their customers idea of what value is.

 

The general gist of it is this, Business owners traditionally think money, customers think immediate value. This may seem like the same thing, but it’s actually a fundamental difference that plays a significant role in proper marketing strategies.

A business owner might extend offers, discounts, or services that they know have a lot of monetary value to the business, they expect that the customers will recognize how much money this offer will actually cost the business. It doesn’t not work that way. If these offers don’t resonate with customers, it’s a wasted effort.

I’ve seen countless owners get frustrated, thinking the customers just want bigger discounts, and then try to give even bigger discounts, in almost all cases, this never works, and quickly causes owners to throw in the towel.

This approach can potentially hurt the business, and still not resonate with the customers, and therefore, not deliver the referrals they are looking for.

When offers and discounts don’t match what your customers find valuable, or, if the customer is not in a position to benefit from the value, (think discounts on things they don’t need ) they won’t be motivated to pay attention to you.

A much better strategy is to address common problems, or answer common questions that your customers routinely have, right now.

This presents much more perceived value than what you may have originally planned to offer, and at a significantly reduced cost to you as a bonus.

The three methods of providing value to maintain engagement 

To remain prominent in your customers’ minds, consider employing the following strategies:

1. Prioritize Exceptional Customer Service:
   Engage in clear and open communication with your customers to proactively address their questions and resolve any issues promptly and efficiently.
   
2. Create Regular VALUABLE Public Content:
   Regularly publishing articles, blog posts, and videos emphasizes your business’s expertise and authority in your field, but it is only meaningful to your customers if it talks about them and their problems, not your companies latest sale, new hire, or something cool about your product.
   
   Consistent valuable content generation serves as a platform for customer engagement. It allows you to share your knowledge and insights, thus establishing a stronger connection with your audience.
   
3. Distribute Valuable Private Content (via newsletter):
   Delivering regular, informative emails is crucial; however, many businesses struggle with maintaining the perception of value in this area.

Emails should be focused more on providing useful information and less on direct sales pitches (if at all) to maintain interest and engagement.

This method is particularly effective for maintaining relationships with existing clients because it gives you an excuse to go to them, regularly. 

With Customer Service and public posting, you’re relying on your customers coming to you.

Remember, the goal is to figure out what your customers will find valuable, and be sure the value you offer is both recognized and appreciated.

Reviewing Step 1: Keeping your customers engaged.

To sum up the first step, it’s critical to keep your customers actively engaged.

• You can’t get a referral if they don’t remember your name.
• They won’t remember your name if you’re not consistent
• You can’t consistently reach them unless you provide value every time
• The three methods of value deliver are; Service, Public Content and Newsletters.

By employing these strategies effectively, you cement your brand in your customers’ minds, making it more likely that they will think of you when a referral opportunity arises. 

The relentless value you deliver is crucial in keeping your name relevant and memorable.

Step 2:

Encouraging Referrals through Incentives

Successfully maintaining visibility among your customers via exceptional content and sustained value is a significant achievement, and it’s the toughest part conquered.

Let’s get down to our next goal, channeling our efforts into motivating our customers to champion our services to others.

As highlighted in the first step about maintaining visibility, customers can’t endorse you if they don’t remember you. 

Our challenges are:

The Incentive Strategy

A personal referral is widely recognized as the most valuable type of lead, with the highest conversion rate among all lead sources. 

When someone receives a recommendation from a trusted friend, it significantly influences companies they are considering doing business with.

Given the value of such leads and the fact that acquiring leads is a primary focus of our marketing efforts, it raises the question: 

Should securing personal recommendations be prioritized as much or more than our pursuit of other “less valuable” leads?

Indeed, they should, but only with the right data.

The baseline best practice for marketing investments is to prioritize avenues promising the highest returns. 

Gaining personal referrals from existing customers consistently proves to be an unparalleled strategy in terms of marketing profitability.

However, without a structured referral process, encouraging and tracking referrals to determine if your efforts are paying off is a difficult task that many businesses simply skip.

Figuring Out Your Incentive Structure

Like any marketing expenditure, it’s necessary to meticulously monitor the return on investment for referrals. 

This requires an in-depth understanding and tracking of the metrics we associate with our conventional marketing strategies: Average Customer Lifetime Value (LTV), Average Total Cost of Fulfillment, Average Customer Lifetime Gross Profit (LTGP), the quantity of leads/referrals received, and the conversion rate of these leads/referrals.

The mechanics of calculating your incentive pricing is outside of the scope of this article, but our detailed incentive creation plan will take you through it step by step. 

With these numbers, we can accurately determine the precise amount we can afford to spend on acquiring a new customer.

Additionally, we can determine the exact amount we can allocate to an enticing incentive for our referrals, greatly increasing our chances of getting them at the rate we want.

This strategy ensures that the referral incentive is as valuable and attractive as possible, motivating people to search for our name in their email if they don’t know it off the top of their head.

Most importantly, this strategy guarantees that your referral program will never lose money, and, with any additional new revenue beyond your customer acquisition cost, it’s pure, predictable, scalable profit.

Conclusion: It’s Time To Build a Monster Customer Referral Program!

By keeping in touch with your customers and giving them cool rewards for referrals, you can build a highly successful and repeatable referral program. 

This will enable your business and your customer base to continue to grow!

Final Recap – Building An Appealing Customer Referral Program:

• Giving valuable stuff will make your customers remember you.
• Cool rewards will make people want to refer you to their friends.
• Mixing these strategies will make your business shine!