Home \Blog \
Customer Referral Program - A Cost-Effective Method To Acquire New Leads

Customer Referral Program - A Cost-Effective Method To Acquire New Leads

If you own a business, you know how important it is to constantly come up with new marketing ideas to attract new customers. But attracting new customers is never cheap. It can be expensive. 

We’re sure you’d agree. 

A much more cost-effective approach would be to market to your already existing pool of customers.

How is that going to bring you more business? 

Well, this is where customer referral marketing programs play an important role. 

What is a customer referral program? 

In the simplest term, a referral program incentivizes already existing customers to recommend your products to their family and friends.

Sounds cool right? 

Believe it or not, customers are 50 times more likely to buy a certain product if a friend or family member recommends it.

That’s the power of customer referral programs. Retaining an existing customer is roughly seven times cheaper than acquiring a new customer.

A cavalry of loyal customers can do a lot of legwork for you when it comes to spreading the word about your products.

If you can implement an effective customer referral program, you’ll be able to acquire new customers without much effort or breaking your bank.

With that being said, implementing a successful customer referral program is not easy as it sounds. However, if implemented properly, it can derive phenomenal results. 

In this guide, we’ll tell you how to effectively use a referral program to boost sales numbers. We’ll break down referral marketing for you and cover all the basics of referral marketing. After you’re done with our guide, you’ll be confident enough to run your own referral program in no time.


How To Create Your Own Customer Referral Marketing Program


To help you create your very own customer referral program, we have listed down a list of strategies you should follow to get maximum results:

1. Establish your referral goals.

2. Analyze to see how referrals are making their way to your business.

3. Find out what an ideal customer is for your business.

4. Find and jot down all your referral sources.

5. Find out potential channels and sources where you can host your referral program.

6. Prepare an outreach plan.

7. Think about the incentives that you can offer.

8. Figure out how you can inform your customers about your referral campaign.

9. Set up tracking for your referral program.

10. Don’t forget to Thank your referrals to establish a bond on a personal level.

11. Maintain a strong follow-up with your referrals.

12. Continuously find new ways to improve your referral program.


What Even Is A Referral Program? 


A referral program is basically word-of-mouth marketing. The goal behind this program is to encourage existing customers to endorse your brand. 

Referral programs let customers share their experience regarding your brand with their colleagues, family, and friends.

Referral programs are designed to attract new leads. But, ever wondered why these programs are so effective? Well, with referral programs, you won’t be attracting irrelevant leads. You’ll be gaining new customers who are a perfect fit for your brand.

Referral programs build customer support and brand loyalty. If new leads hear about your product from trustworthy sources, they would want to get it too. 


Why Are Referral Programs So Valuable?


Customer referral marketing programs are super cost-effective and highly valuable. After all, from a marketing perspective, it doesn’t cost too much money.

Speaking of cost, there isn’t a fixed budget for running referral programs. It varies across different businesses. But one thing that is constant is the results it drives.

As per data and statistics, customers gained through referral programs are 18% more loyal compared to non-referred customers.

To prove a point, if we talk about the effects of B2B referral programs on sales and marketing in North America, data suggests that companies running referral programs performed 87% better than companies that didn’t take advantage of referrals. 



Even when the Covid pandemic took over the world, referral marketing proved to be extremely beneficial when companies struggled to find new customers. Based on data, around 86% of companies globally who relied on referrals, have actually witnessed their revenue increase marginally.

With that being said, running customer referral programs takes a lot of patience and consistency. After all, you’ll essentially be relying on your customers to run your marketing and which in return will derive sales.


Why Should You Run Referral Programs?


It is simple - to save money on marketing and still be able to gain new customers.

Ever wondered how referral programs work? 

We’re sure you must have seen countless examples online.

Let’s jog your memory real quick.

You visit a clothing website and on the checkout screen, you see a referral code. If you share the referral code with your friends, you’ll get 15% off on your next purchase. 

This is essentially what a referral program is.

There are also two-tier referral programs in which not only the customer who refers someone gets a discount but also the person who got referred gets a certain discount on their first purchase. 

Running successful referral programs will bring in new leads, more referrals, and more incentives for customers who endorse your brand. It’s a win-win for all.


What Makes Word of Mouth So Effective?


If you wanna know the importance of word-of-mouth, you don’t have to look far. Just reflecting upon our day-to-day lives will give you an idea of its worth in imparting the sales of any particular product. 

For example, you visit a random burger joint, you purchase a burger and find it to be affordable and worth every penny. You’ll naturally talk about it among your peers who have similar interests as you. This will entice your peers to also try out the burger joint that you recommended.

Word-of-mouth referrals are more trustworthy than any sponsored ad that you may find online. Hearing reviews about a certain product from someone trustworthy will get new customers to trust your brand.

This is why brands build their communities of loyal customers. Authentic reviews, instead of sponsored reviews will help you build your brand reputation and authenticity.


How Does Referral Marketing Benefit Your Brand?


Referral marketing can benefit your brand in many ways. To keep things short, here are some of the most important benefits you can reap from referral marketing:

Gain customers who are loyal 

As we mentioned earlier, getting a new customer on board is costly. Whereas, getting a new customer through referral programs is considerably easy. An existing customer can easily get a new customer to try your product simply because they’ve previously purchased your product. 

To gain loyal customers, besides offering genuinely good products, you need to offer your existing customer incentives so they in return may bring you, new loyal customers. Offering discounts or cashback will get them to spread the word. 

Not only will your existing customers get incentives, but it also makes referred customers loyal to your brand.

Endorse your brand without hiring brand ambassadors 

Ever heard of brand ambassadors?

Brands hire celebrities and influencers to market their brand. For example, TAG Heuer has appointed Ryan Gosling as their brand ambassador.

Seeing a celebrity wearing a premium product will naturally create brand awareness and hype around it.

But hiring brand ambassadors is expensive. On the other hand, getting brand advocates to talk about your product is cheap. If your product is good and you’re offering incentives like discounts to your customers, they’ll happily talk about your brand, boosting your brand awareness.

Marketers emphasize the importance of quality content such as blog posts, social media updates, ebooks, and other marketing materials to boost brand awareness. But having a group of brand ambassadors willing to vouch for your business is equally important. 

Referral programs help retain loyal customers who will not only buy from you but also promote you at the same time simply because your product means something to them.

Helps improve your brand’s reputation 

As we’ve mentioned repeatedly, new customers are more likely to trust an existing customer rather than a sponsored ad. 

It’s all about trust.

Customers who spread the word about your product are trustworthy. Unlike brand ambassadors, brand advocates don’t get many incentives. However, they’ll still genuinely endorse your product because it appeals to them.


How To Run a Referral Program That Drives Results?


To run a referral program effectively, here is what you should do in a systematic fashion: 

1. Carefully focus the product and services you offer

2. Offer an incentive that entices your customers

3. Market your referral program

4. Track the progress of your efforts

1. Carefully focus the product and services you offer

First things first, assess the product or services you offer. Make sure your product has no apparent flaws. If you want people to talk about you, you want them to talk only good. Make sure your product is good enough so that other people may talk about it and which in return may bring more customers.

2. Offer an incentive that entices your customers

Next up, you need to decide what incentives to offer. Decide what will appeal to your customers. Ideally, you should decide between discounts, freebies, cash rewards, or branded merchandise.

Remember, you shouldn’t offer something that’ll make you lose profits. Nissan, which is a renowned automaker, made a huge mistake when it started offering dealerships extravagant cash bonuses on every sale they made. This proved to be crippling for Nissan and the company had to bear huge losses.

You can experiment with offering discounts for the person who refers and the referee. Both parties will get discounts on their purchases, satisfying them both.

3. Market your referral program

Once you’ve decided what incentive to offer, you need to market your referral program. Boast about your referral program to your existing customer base. You can take the help of email marketing, and social media marketing. You can even tweak your landing page to promote your referral program.

4. Track the progress of your efforts

Lastly, with all the hard work done, it’s time to look back and see if your efforts paid off or not?

You can take the help of analytical tools like Google Analytics for this. If you haven’t set up Google Analytics for your website, this guide should help you get started.

Monitoring your referral program will help you determine its effectiveness. You’ll be able to determine whether your marketing efforts are bringing in new customers or if your customers are successfully able to bring you new business through the referral strategy.

In case your referral campaign isn’t giving you your desired results, you’ll get a heads up to tweak your incentives and improve your retention and engagement strategies.

Wrapping Up!

Every business needs new customers. Sure, at the moment, you may be turning in a hefty profit without paying much attention to new customer acquisition, but the ground reality is, your business model isn’t a sustainable one.

Since the cost of acquiring new customers is quite high, businesses need to leverage their expenses with cost-effective marketing tactics. Customer referral strategy is an amazing marketing technique that is bound to yield amazing results.

Picky consumers rely on trustworthy referrals to make their purchasing decisions. It is exactly why kickstarting your own customer referral marketing program can marginally benefit your business and help grow your customer base.


Manno Notermans

Manno is a wanderer of the world looking to make an impact and change the world for the better. He has over 10 years of experience working in various marketing positions. Manno’s main focus the past few years has been accelerating the growth of businesses, increasing revenue, and profit with out-of-box creative ideas and implementations.