Who could use an effective way to get more clients?

Well, that probably describes most businesses, but many are also looking for a way to do so cost-effectively. Advertising can bring in clients, but it costs money and the flow of clients tends to stop if you stop advertising.

There is an often under-utilized method to build a pipeline of future clients, without having to spend large amounts of money - referral programs. 

Read here: These referral programs work with Squarespace

Why set up a referral program?

You might think that if you provide excellent service to your clients, then naturally they will refer more customers to you. This works sometimes. While you should always aim to deliver an exceptional customer experience, the reality is that people often don’t make referrals unless you ask. It’s not that they don’t want to, it’s more likely that they simply don’t think of it.

That’s just one good reason to set up a referral program - when you set one up the right way, it prompts people to make referrals. It even incentivizes them along the way. 

Referrals are a big deal in the overall scheme of what gets customers to buy. Here are just a few statistics that highlight why referral marketing is important:

• 80% of all B2B and B2C purchases involve some sort of word-of-mouth recommendation during the purchase cycle. (Source)

• 49% of US consumers say their friends or family are their top sources for brand awareness. (Source)

• People are four times more likely to buy when a product or service is recommended by a friend. (Source)

• (On the flipside) just 33% of people trust online ads. (Source).

Starting to gain the trust of new customers before you’ve met is a great reason to operate a referral program, as is the fact that referral programs give you a lower average cost per lead than paid advertising. 

If you need another reason, studies have found that customers obtained via referrals tend to be more loyal and stay around longer than other customers. A Harvard Business Review study followed 10,000 accounts at a large German bank over a period of three years. The bank offered a simple referral program where those who referred new customers would receive €25. The researchers found that the referred customers were 18% more likely to stay with the bank and 16% more profitable. For the €25 investment, they made a 60% return.

What is a referral program?

Most business owners understand the value of asking customers to refer business: a referral program formalizes that and gives the referrer something in return. Most of us have experienced this - you make a purchase (often online) and get invited to refer friends, usually in return for something such as store credit.

It helps to have an official referral program in place because it puts a system around referral requests. Instead of them being an “oh, by the way,” tacked on when you remember to ask, a referral program usually has a set process.

Tracking is an important aspect of a referral program. As a business, it’s important to know who your key referrers are, but it’s also really important that you deliver on whatever has been promised in return for the referral. For this reason, referral software (which we’ll get into) is something that we highly recommend.

What does an effective referral program look like?

The answer to building an effective referral program is that it will look different for each business. Your referral program as a Squarespace website designer will probably look completely different to your client’s program for an ecommerce business. 

In any case, you should always offer an excellent product or service first - something that people will want to refer others to. One thing to remember about referrals is that people want to refer something trustworthy to their friends: in a sense, it’s about their own reputation, too.

The place to start is with your goals - following a process something like this:

#1. Create goals for your referral program

You need to know exactly what it is that you’re hoping to get from a referral program and this does look different from business to business. For example, as a Squarespace designer, a lot of your clients are probably project-based, so you need a reliable way to keep a pipeline of projects.

Businesses that sell a longer term product or service may have goals around retention or repeat business. The clothing store wants people to come back and buy more clothes while the software subscription business wants people to retain their subscriptions.

What do you need to get out of a referral program?

At this step, it’s also important to define who you want to attract via a referral program - what sort of customers are you looking for? Being specific is a good idea when you create the verbiage for your referral program too, for example: “Refer a restaurant that needs a new Squarespace website!”

#2. Know your referral sources

Who are you going to be asking to join your referral program? Will it always be direct customers, or will you include others as well? As an example here, it’s still quite common for bloggers to advertise affiliate links to products or services on their websites.

This is where you can consider some of the “how.” So for example, if customers who buy from you are a target of your referral program, you might invite them to refer by sending them a unique link they can use. As for any bloggers or other affiliate sites, you might set up an affiliate center on your website.

(Note: The key difference between referrals and affiliates is that referrals tend to be based on making a personal recommendation to someone the person knows, whereas affiliates publish a link that anyone can find and click on. Affiliates are usually a third-party brand advocate and affiliate programs usually operate separately to referral programs).

#3. Know when and how to reach out

Any time you ask for a referral, the secret is in the timing. Identify when the appropriate time/s will be to reach out and ask for referrals.

For example, ecommerce businesses might request a customer join their referral program as soon as they have ordered something, or, they might wait until the product has been delivered. When would it make sense to ask a Squarespace client? At the completion of their website? It’s up to you.

#4. Understand what will work as an incentive

Given what you know about your target audience, what will be a good incentive for them? A few ideas include:

• Credit toward a product or service

• A free product or service

• A percentage of the package the referred customer bought

• A stepped incentive, where the prize gets bigger for more referrals made

• A set amount of cold, hard cash

The best referral programs often offer something to both the referring customer and the customer being referred. For example, maybe the referred customer gets a discount or a store credit to get them started.

#5. Make referring easy

The best way to encourage more referrals (besides providing an excellent product or service) is to make the referral process easy. People don’t like to have to jump through hoops to get something done.

Some examples of “easy” referral mechanisms include:

• Enter your friend’s email address into a box (this is probably less popular - there’s still some work involved!).

• Send an email requesting that the person share their unique link with referral code.

• Make the actual sharing part super-easy, for example, allow people to share with one-click to their social media.

As we mentioned earlier, the easiest way to set up a referral program that will be convenient for your customers and simple for you to track is to use referral software. There are a few programs that have been built and are ready for you to customize with your own details. ReferralCandy is just one that works with Squarespace websites. 

Importantly, when you’re choosing your referral software, check out the analytics and tracking that come with the package. This is how you know if people are engaging with your referral program, as well as which customers came from whom.

Read here: Referral programs that work with Squarespace

Final thoughts

A referral program is a great solution to bringing in more customers without a large investment in marketing spend. Referrals are effective and tend to net more profitable clients.

There are some key points to making a referral program effective: you must design it around the target customer, especially by understanding what will incentivize them to refer. You also need to make it as easy as possible, removing unnecessary friction from the referral process.

At SQSP Themes, we have an affiliate program, which as noted, is slightly different to a referral program but operates along similar lines. You can see how we’ve set that up here.