Referral marketing is an incredibly effective way to generate leads and new customers, but most small businesses lack a formal process to get referrals predictably and consistently.

What exactly is referral marketing? How do you create a referral marketing strategy? What are referral marketing best practices you should apply? And are there tools you can use to help make it easier? I will answer all these questions now...

Referral Marketing: What is it?

Referral marketing is a strategy that uses a current pool of customers to pull in new ones. It's a segment of word of mouth marketing that occurs when a person tells someone else about a business, product, or service. Referrals are very personal and direct.

Some businesses will incentivize or reward customers who successfully refer other people. They use this tactic to push the referral program even further.

Some types of businesses that employ referral marketing include retail stores, specialty stores, restaurants, automotive service companies, airports, hotels, travel agencies, and MANY MORE!

The first step in implementing a referral marketing program is creating a plan...

How to Create a Referral Marketing Strategy or Plan

Creating a referral marketing plan can be tedious work. However, today is your lucky day because in this section you will learn a simplified referral marketing strategy that actually works.

Let's start with...

Setting goals is a very important step in building an effective referral marketing plan. You should know what you want to achieve from the get-go. Without a clear set of goals in mind or in writing, you will be starting with a shaky foundation.

Here are a few common goals your referral marketing plan might have:

• Customer Acquisition 
  Know that acquiring new customers is the lifeblood of any company and it must top your referral marketing goals list. Your goal is to use your existing customers as an asset in generating more sales.
• Database Building
  You can use referral marketing to build a customer database. Many marketers use referrals to build an email list that their company can depend on when launching a new product or service.
• Loyalty
  Since most consumers trust referrals from people they know, you can use referral marketing to build loyalty within your community. You can later capitalize on this loyalty to bring in more referrals in the future.

Step 2: Decide on a Referral Program

Some companies choose to reward people for referrals and others do not. I don't necessarily think there is a right or wrong answer here.

But you need to decide if you'd like to reward people for making referrals, and if so, how you're going to do it.

Rewarding people can be a great way to get people excited and increase their incentive to refer you business.

There are all kinds of examples out there of incentive-based referral programs. Here are a few articles to get your creative juices flowing:

• 10 Rewards and Incentives to Offer Customers in Exchange for Referrals
• Examples of Referral Programs

Step 3: Outline or Map Out Your Referral Program

Now that you know what type of referral program you are going to offer you need to map it out. Your outline should include at least some of the following items.

• When will you ask for referrals?
• How will you ask for referrals?
• Where and how will you promote your referral program?

Quick Tip: Think about all the different customer touchpoints you have in your business because any of them can be a great place to promote your referral program or ask for referrals.

4. Measure Your Results

To measure the effectiveness of your referral marketing program you must keep track of the referrals you receive, the source of each referral, and how many ended up doing business with you.

Without keeping track of these important numbers you'll have no way of knowing if your referral program is effective.

Referral Marketing Best Practices

Aside from creating a referral marketing plan that works, you also need to keep in mind some industry best practices to get the most referrals.

Here are some to consider...

1. Set Expectations With Potential Customers Early

Before a customer even buys your product, start setting expectations that a referral program is waiting at the end of the transaction.

On the sales pages and other pages about your products, explain that your mission is to make customers so satisfied that they will want to spread the word about your company.

It's exactly like hitting two birds with one stone:

1. Customer satisfaction, and
2. Asking for referrals.

2. Create a New Client Onboarding Process

To get referrals you need to wow your new clients. Having a new client onboarding process or system to ensure every new client has a positive experience is critical.

This will help ensure every new client has a top-notch experience.

3. Make it Easy for Customers to Refer More

Learn the crucial points in your business process where you should be asking for referrals, and how to do it in a way that your customers feel safe and want to refer you to their personal connections.

An awesome way to do it is to ask for referrals during your customer onboarding process or after a support or assistance request. If you've done your job correctly these are times when your customers will be extremely happy.

Here are 25 Ways to Ask for a Referral Without Looking Desperate.

4. Say Thank You

Don't be shy to say "THANK YOU" by sending a thank you note to your new referral, and especially to the client who sent them your way.

Acknowledge referrals from a business associate, networking group member, or referral partner to build better and healthier relationships.

Step 5: Spread the Word

So how do you get more people to know about your referral program? Use some of the ways below:

• Invite former customers to join your referral program.
• Highlight your referral program CALL-TO-ACTION prominently on your website
• Invite digital influencers to join your referral program.
• Post about your referral program on social media by going live, using hashtags, geo-tagging posts, etc.
• Use post-purchase popups to get your customers connected even after making a purchase.
• Send smart email reminders to your fans and advocates.
• Use a referral widget to show your referral program to all your visitors.
• Teach your customers how to share your referral program.

Referral Marketing Tools

Now, let's talk about some of the referral marketing tools out there to make your life easier.

Let's begin with...

1. Woobox

Woobox offers tools to promote a business through the means of referrals and rewards. It lets you run sweepstakes, photo contests, video contests, and much more to really build engagement.

2. ReferralCandy

ReferralCandy is an easy way to add a refer-a-friend program to your store using their design, approach, and content. It integrates so seamlessly that anyone who becomes your client will refer people in a heartbeat.

3. Referral SaaSquatch

Referral SaasSquatch allows you to create, manage, and optimize your mobile and web-based refer-a-friend programs all in one platform.

4. Ambassador

Ambassador is a referral marketing tool for anyone who wants to track sales, customers, and performance.

5. Annex Cloud

Annex Cloud delivers fully integrated customer loyalty, referral marketing, and user-generated content solutions. Their best-of-breed suite of solutions and expert team of Customer Success Managers combine to help you tackle even the most complex acquisition, conversion, or retention challenges.

6. Extole

Extole is referral marketing software to help you drive brand advocacy and influence. 

7. InviteReferrals

InviteReferrals is a powerful and yet simple to integrate referral program software that helps to grow your business and acquire new customers through Referral Marketing.

That's it! You've got enough info to get started on your referral program today.

Keep in mind, your referral program won't be perfect! Just take action and make adjustments as you learn what works and what doesn't for your business.

What's working for your referral program? We'd love to hear from you in the comments below...we'd be honored if you feel this content is worth sharing.

Need more lead generation tips? Check out our entire Ultimate Guide to Lead Generation.

Header image courtesy of Pixabay.