Referral programs are one of the most effective means of increasing both brand awareness and your customer base, with the added benefit of little to no cash expenditure.
There is no more powerful way of motivating purchase behavior than word-of-mouth. Statistics vary, but one study by social media software firm Lithium found that 92% of consumers trust recommendations from friends and family more than any other form of advertising and just 10% trust brands today. Clearly, you need people talking to others about your brand! You can passively hope that happens, or you can stimulate word-of-mouth recommendations by instituting one or more referral programs.
The most commonly used program rewards your current customers for referrals with a free or discounted product or service you provide. You may also want to target a group of people who may not be your target market, but have access to and influence over your targeted customer, rewarding them for new business they refer with cash or gift cards.
Referral program variations are limitless, but regardless of the type of programs you initiate, a tracking system is imperative. Tracking referrals will allow you to reward the source of the referral in a timely manner, which is key to stimulating additional referrals. Conversely, NOT tracking and rewarding promptly will quickly turn a positive source of advertising into a negative one!