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15 Reasons Why Every Business Needs a Referral Program

Every business should have a referral program. Referral marketing is an automatic way to get new leads and sales, and it doesn’t require any effort from your part. If you have tried other forms of marketing, you’ll find that you will stop earning the moment you stop promoting. But that’s not the case with referral marketing. While referral marketing is not precisely ‘build-and-go,’ you can still reap lasting benefits from setting it up one-time. In this article, you’ll learn several reasons why having a referral program is worth your time. 

Here are the reasons why every business needs a referral program. 

You Can Set It Up in a Few Clicks

Setting up a referral program is not that hard. You can set it up in a few clicks. You no longer need to code a referral system from the ground up. You can set it up with referral software. When you use this, you only need to know your reward and the details of your program. From here, you can input the details on your software and have it create the system for you.

NOTE: You need to ensure that your chosen software is compatible with your website platform. For example, a WordPress eCommerce website requires a WooCommerce affiliate plugin. A Shopify store needs a Shopify app. It doesn’t need to be a referral app. You can also explore refer-a-friend or affiliate apps to see if it serves your purpose. 

You Can Leverage Networks

Referral marketing is the only form of marketing that leverages networks. Consumers claim that they are far more likely to buy a product or service if it is recommended by someone that they know. Since people promote brands to people who are close to them, the response is often more favorable. This stems from the trust that people have with each other. In intimate relationships, they know that the person who is recommending a product or service has their best interest at heart. They will not support a product or service just to make money. They are recommending it because of they authentically like the product or service. True enough, referral marketing is the reason behind the most successful purchase decisions. 

You Can Promote it Anywhere

Another reason why referral marketing is excellent for your business is it allows for secure promotion. You can easily promote it anywhere – from social sharing in social media channels to word-of-mouth marketing in your inner circles, it works. The best part is that promotions are done authentically. This is because promotions are not done to make money. It is done to share their reviews for a product or service authentically. With more people depending on the reviews of their family and friends when they try a product or service, social media promotion has become more effective in promoting brands, products, and services. According to Nielsen, more than 60% of users got to know a brand from a social media recommendation

It Promotes a Sense of Belonging

Referral marketing is excellent because it allows people to review their products and services continually. By doing this, your social proof is often boosted. This will remind your buyers that it is the right decision that they chose you. This will drive their satisfaction up, and they will feel a sense of belonging in your community. This is important. This is because customers no longer buy a product for its benefits. They usually do it for the community as well. When they buy from a group, they feel that they belong. This encourages them to buy from you again in the future. Thus, it can also positively affect your customer lifetime value. 

You Attract People Through Incentives

Referral marketing is useful because it encourages people to buy from you through incentives. The incentive acts as a bribe. This helps the target market to take action. When it comes to choosing the right motive, it all depends on your target market. There are cash and non-cash incentives. Some say that non-cash incentives are more effective in driving sales. But you may also want to use cash-based incentives. This will all depend on market testing. You can test to find out which is the most effective type of motivation for your campaign.

You Build a Mutual Relationship with Customers

When you run a referral program, marketing is now integrated into your customer’s lives. It is no longer just your responsibility. The responsibility is also shared with your customers. This helps you to create a mutually beneficial relationship with them. By offering them an incentive, you invite them to be a part of your promotions. If you thank them for their efforts by giving them a payment, the relationship can go for a long time. This is the reason why affiliate marketing is so effective. It is because you give a portion of your profits to the people who help you promote your products and services. 

Referrals Help You Build your Brand

When your business is just starting, you’ll find that it is harder to get someone to buy your products. You may have already tried convincing people to try your products and services, but you’ll find that most people will ignore you if you have no proof to show that your products and services work in solving your market’s problems. Referrals give you this proof. When they promote your business, they will usually talk about it positively to other people. This then encourages other people to trust you and take action.

PRO TIP: Your best referrals are your current customers. If you want to get new customers fast, you may want to consider asking your current customers to find other customers for you. You can just give them a portion of your profits in return. This can be considered as a form of affiliate marketing, but it is highly effective in driving new customers to your sales page. This can also be a fast way to grow your business. It is easy. All it takes is you ask your customers to promote you to the people that they know. You don’t even need a formal referral program or referral page. You can just ask people to recommend you to other people, and this will help you get more customers to your business.

It Produces More Repeat Customers

When a customer joins your referral program, they do more than promote your business. They also become invested in helping you succeed. On the surface, it may seem that all that they are after is the reward. But when they have successfully promoted you to their family and friends, they instantly become your brand ambassadors. When this happens, they become regular promoters of your products and services, plus they become regular buyers as well.

It all works in an infinite loop. When your customers promote your business to their network, you get more people to talk about your business. When this happens, your social proof rises, and more people will trust your brand. As more people trust your brand, your buyers also trust you more. This may mean that buying from you becomes second nature to them. They now remember your brand when they need a product or service from you. 

More than brand recognition, you get more repeat customers. The customer lifetime value of customers tends to go up when you implement a referral program. They grow to trust your brand more as more people recommend you to their family and friends. 

It Helps You Reach More People

Have you wondered how the conversion rate is computed? It is calculated by multiplying the percentage with your traffic and getting your potential sales. From here, the actual sales are estimated. This is the percentage of sales from your overall traffic. From here, you will see that there is one factor that plays a vital role in your conversion rate. That is traffic. Without it, you will not be able to compute how well your website will perform.

With this, business owners are always looking for ways to improve their reach. This is because the more people they reach, the more buyers they will get. While not all will convert, the number still plays a vital role. The more people you get into your website, the more chances you’ll have in transforming them into buyers.

Referral marketing helps you reach more people. Your brand spreads through word of mouth. The best part is that it is continuous. When one customer refers to you, his family, and friends, his family and friends can also promote you. This means that the wave of promotions doesn’t stop with one person. He can also empower another to develop your brand to others. 

It Can Increase Your Profits

Since referral marketing plays a vital role in your website’s conversion rate, it can also increase your profits. As more people get to know your brand, it also gives you more chances of closing sales. This can have a positive impact on your overall profits.

So if you want to improve your sales, you may want to start by having a referral program. This will help you to boost your traffic and eventually, your sales. 

It Can Encourage Engagement

You’ll also like referral marketing because of its ability to encourage engagement. You see, referral marketing helps conversations around your brand. As more people talk about you, other people are encouraged to do the same. You may be surprised that some people will recommend you with no reward. When they do this, you can just contact them to lead them to your referral program. This way, they can get access to your bonus. Engagement is essential not only in driving social media attention but also in getting better brand recognition. 

It Can Automate Your Growth

When it comes to promotions, automation is everything. You don’t want to spend all of your hours promoting your brand. You also want to focus on other high-value tasks that will bring more profits to your business. Referral marketing can automate your growth. This is because promotions are done through other people. This means that you no longer perform marketing tasks. You have other people to do it for you.

It Can Decrease Cart Abandonment

Cart abandonment is a problem for most eCommerce sellers. Fortunately, referral marketing can help in stopping shopping cart abandonment. Even new eCommerce websites like Best Drums Set labs have used to lower their abandonment percentage significantly. This is essential because you don’t want your customers to leave their carts continually. You need them to proceed and buy. 

It Gives You Tons of HIgh Converting Leads

One of the things that you’ll love in referral marketing is you’ll get tons of high converting leads. Unlike other forms of marketing that usually bring you cold to warm leads, the points in referral marketing are often considered hot. This is because of their close relationship with the referrer. 

Also, another thing that you have to consider is the fact that referrers will only promote your business to people who will likely buy from you. Most referral systems only release a reward when the lead has successfully converted into a sale. This is the reason why you may get tons of high converting leads as a result of your online promotions. 

It is a Powerful Asset for Other Forms of Marketing

Referral marketing can turn your website or brand into an asset. When someone promotes your brand to other people, it acts as social proof that your products and services work in solving your market’s problems. Because of this, additional prospects and brands will also trust you. By simply implementing a referral program, you also turn your website into a powerful asset that is worth promoting even to influencers and other partner brands.

With so many reasons to promote your brand through referral marketing, you will miss all of its benefits if you choose not to implement it in your business. Referral marketing is the secret behind the growth of the biggest brands on the Internet today. You can also use it to grow yours.

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I'm the Director of Digital Services and Partner at Ballantine, a family-owned and operated direct mail & digital marketing company based in New Jersey. and started in 1966 by my great uncle!