Referred customers were found to contribute 25% more margins in sales compared to all other customers.
If your customers are happy with your product, they are likely to talk about it with others who might find it useful. When you close such customers who’ve been introduced by existing customers, you have effectively got a referral sale. In theory- your client has done the selling for you, without you spending a penny.
So you might be wondering, how to get referrals from clients?
You need to create a process to scale referral sales for your product. Referral sales reduce the dependence on lead generation while generating new sales without much effort and investments. It is the perfect channel to further augment your sales growth.
Throughout this article, we will explore why referrals lead to more conversions, how to ask for referrals in sales along with various proven strategies and examples.
Why should you care about referral sales
Referral sales don’t only make for easier closes, they bring in better customers too. According to research, referred customers were worth at least 16% more than other customers. They stay with you longer, contribute to better margins, and are more valuable both in the short and long term.
Compared with other sales channels, you’ll realize your referred leads don’t spend any time in your pipeline before closing. They’re nurtured by your customers, who are considered more trustworthy and candid than a salesperson.
Some of the most popular and successful internet companies like Ahrefs, Zapier completely rely on word of mouth referrals for their sales, and don’t have a sales team. The reason being, at 11%, referrals are the best converting sales channel.
How to set up referral programs
1. Go out and ask
The phrase “If you don’t ask, you won’t get” is true in our day to day lives and referral sales as well. The first step will be to decide that you’re going to reach out to your customers to refer to your product. You might feel uncomfortable going ahead — doubting if the program might not work. If you are skeptical, ask a few of your close clients to provide you feedback on the decision. If you receive positive feedback, go back and build up a larger audience of customers you will reach out to, as part of the next step.
2. Segment the target user audience
Now that you have decided to set up a referral program, it is important to identify who your target audience will be. These are your existing customers you’ll reach out to regarding your referral program. Forced referral programs don’t tend to do that well, as customers wouldn’t have the motivation to talk to other people about you. The ideal referring customer primarily has the following characteristics:
- Is satisfied with your product and has provided positive feedback
- Has the influence to make referrals
- Knows your product extremely well
This data can be mined from customer support systems, CRMs, etc. Once you have this data, you can create a segment or cohort of these customers in your CRM to later reach out to.
3. Setting up specifics for the program
As we discussed, your referrers are really happy with your product and have some influence(or have a popular brand). How would these users be motivated to talk about your products? Your rewards and benefits need to gently push your referrers to talk about your product when they get the chance.
These rewards can be anything you can offer them, given it further augments their product experience. It could be exclusive for them and the referral process itself should involve negligible efforts compared to the rewards. Few examples of these rewards:
- Free early access to unreleased product features
- Discounted access to the next subscription tier
- Goodies (Electronics, Merchandise, Cash vouchers, etc)
You also need to write down policies to avoid abuse of your referral program. Rewards you’re offering to your referrers need to be weighed out against the value of the customers they refer to you. The focus here should be on making it a win-win situation for everyone involved.
4. Setting up analytics and tracking for the program
Once your referral program is live, you need to be able to track its performance. You can make use of the tools listed towards the end of the article, or tweak existing tools like CRMs. A simple way to execute it would be to add a referrer tag to every customer that converts, so you know who referred them.
Being able to track how each referrer and referred customer performs over time will help you in a lot of ways. You’ll be able to improve your process to attract better customers through these programs, who eventually could refer more customers. Apart from this, you’ll be able to report the value generated through your programs.
5. Conducting program outreach
Once you have set up the specifics of the program, you can start reaching out to the cohort of customers you chose for the program. Like mentioned before, referral programs work the best when they aren’t forced on your customers. Some of your customers might be strictly against the idea of promoting your products, which you should respect. The customers that deserve your time and attention are the ones who have expressed interest in referring customers to you on your outreach.
You should then re-work on the qualifying criteria for your cohort of referring customers based on the results from your outreach. For eg., if you received an >80% positive response, you can relax your qualification criteria and find more such customers, or vice versa. Similar to Lead Qualification, this will help you focus on high-value customers and generate better results over time.
You can use sales engagement platforms like SalesHandy to conduct your referral program outreach at scale. It will help you both personalize your email content, send them out with best delivery rates, and track the engagement from your customers.
Now that we have seen that the basic process would look like, we will proceed to explore referral tips and strategies to make the most of your referral sales program
Strategies and best practices for referral sales program
1. Approach your clients as partners
Oftentimes, referral programs are aggressively pushed, and referring clients feel like being taken advantage of. You shouldn’t see an influential customer as a sales channel, they deserve to be treated along the lines of a partner. How you choose to conduct your outreach will define how your referring clients perceive the relationship.
Highly personalize your outreach, and maybe personalize the rewards on successful referrals. This will lend your clients the exclusivity of their relationship with you and push them to invest in referring more customers.
2. Make your referring clients look good
Make your referring clients look really good in front of the leads that they referred. At the very least, don’t make them look bad. Appreciation and affirmation from new clients to referrers acts as a reward and pushes them to refer more clients. Clients who convert from referrals need to have a great product experience and realize the referring client helped them make a good decision.
Keeping these things in mind, make sure your newly referred clients have the best possible experience with your product. Also, credit the referring client when the new client sees good outcomes with your product.
3. Create a flywheel shaped incentive structure
A flywheel shaped incentive structure is one where the incentive redemption itself results in more product usage and client referrals. This system is based on the Marketing flywheel – it focuses on customer delight which helps spread goodwill and word of mouth. Having this will ensure that you’re able to generate the most value possible for everyone involved, with lesser time and efforts invested.
For example, if your product has essential features that rise in costs, help your clients offset them by referral rewards. This will make sure your referring customer stays with you longer, and brings another customer with them, effectively boosting sales revenues. You can find examples of popular companies like Dropbox that have used this method to grow their user base.
4. Make it easy for the clients to refer
An easy referral process makes it more compelling for clients to refer your product to other potential clients. If a client needs to make a detailed email pitch to introduce the product to a lead, conversions will be tough. The opposite will be true if they bump into a lead who likes the idea of your product and can get discounts if introduced through them.
Your clients wouldn’t know how to pitch your product to a lead, you will have to help them out with it. Choose a non-aggressive, natural approach for this, so both the referring client and leads feel comfortable.
5. Educate clients about your products
It is true that your existing customers are the best people to sell your product to referral leads, but you might need to assist them get better. There might be certain aspects of the product your existing customers aren’t aware of, which you need to educate them about.
The best way to do this is through publishing case studies for different use cases. This will help your customers share relevant information with potential new clients. It’ll also enable them to explore new features and uses of your product that they might buy into themselves, later.
6. Keep all your newly referred customers engaged
Once you have converted customers from referral programs, don’t leave them unattended. Make sure you engage with these newly referred customers using specially tailored engagement campaigns. This will allow you to keep in touch with these customers long after the sale has closed. Also, stay engaged with your referring customers, figure out how to get more referrals from them, and help them stay with you longer.
7. Ask at the right time
Timing can be a deciding factor in your referral program’s success. So when should you start engaging with your customers to ask them for referrals? As per Eric Wilson, Account Director at Kaplan, the best time is now. “Why wait to ask for referrals when something can go wrong in a customer’s experience?” If you’ve really worked hard and made sure to keep your customer happy while closing, go right ahead and pitch the referral program. There will be a small opening after the deal closes while the customer still has your attention, so use it to your advantage.
Now that we have explored the best strategies to make the most of your referral programs, lets see how some of the biggest companies have implemented them to grow their user base
Examples from the best referral programs
Dropbox has implemented what we consider the best example of the flywheel incentive structure. They provided additional storage to a customer every time someone signed up using their code. The referred customer also received more storage than the standard free tier provides when they sign up using a referral code. Here, both the referring and the referred customers are delighted with extra storage limits. This later pushes them to refer more people into the program.
Dropbox referral program single handedly took Dropbox’s Ad spend of >$300 to $0 per customer acquired, while growing their user base by over 3900%.
Airbnb tested their referral program on a small scale to see great results, which led them to build this new program that drove about 300% growth in per day bookings . They built a system for users to send invite codes to everyone in their email contacts where the referrers would get discounts based on their referrals. It’s a well known, and it worked out for Airbnb by adding Millions of dollars in revenue thanks to this program.
Uber allowed users to invite their friends to sign up and take their first ride by rewarding them with free rides for themselves. The more users you invite, more free rides you can redeem on Uber. This program worked well to help build out Uber’s now massive user base. Uber also has a similar program for inviting new drivers to the platform in cities where they needed more drivers. Referring drivers earned more commissions and as a result, Uber was able to attract a blue collar workforce even in smaller cities.
Trello gave away a month of Trello Gold for every new customer you referred to the platform. It is another example of the flywheel reward structure, and here it gets you hooked to the product and gets you to bring more users. Trello’s Gold benefits would extend to your whole team, so essentially everyone from your team can refer new users and the entire team gets to use Trello Gold. This further intensifies the habit forming nature of this program, while reaching out to more potential users at the same time.
Freshbooks’ referral program gives out gift cards to referrers every time they refer a paying customer. The program focuses on simple and quick rewards for its referrers. Freshbooks realized that adding more usage to an accounting software wouldn’t be as lucrative, hence the gift card incentive. Apart from this, FreshBooks also personally engages with their customers both online(email, social media) and offline(conferences, meetings). FreshBooks recorded a 99% referral rate in its customer survey thanks to its referral sales strategies
Inspired and ready to build your referral program? We’ve curated a list of tools to get you started.
Best tools for your sales referral program
SalesHandy is a sales engagement platform that can be used for both referral outreach and engagement. You can conduct outreach at scale using SalesHandy’s mail merge feature, which lets you personalize your emails. It also enables sending multi-stage followups, which lets you schedule follow up emails based on how the recipient interacted with the first one.
All the emails sent out using SalesHandy are tracked using a Chrome plug in. It notifies you every time someone opens your emails along with the timestamps. All this data is available on SalesHandy’s analytics dashboard, where you can see campaign-level performance of all your emails. You can also export this data via CSV and sync it with your CRMs.
ReferralCandy is a referral program automation software for businesses. You can set it up to create and track referral links and referrers. It also allows you to automatically disburse rewards in forms of payments to referral sources based on the tracked performance. ReferralCandy has native integrations with popular platforms such as Shopify, Magento, WooCommerce, Mailchimp and Google Analytics.
Ambassador is an all-in-one referral platform that also supports affiliate, influencer and Partner programs for businesses. It has pre-built work flows for popular referral systems like refer-a-friend to make it simpler setting up. Ambassador has native integrations with popular ecommerce platforms, billing and CRM softwares like Salesforce, Stripe, Sendgrid, Hubspot, Zapier, etc.
As we just witnessed, referral sales can be a great channel for sales growth and help you boost your user base and revenues in a huge way, if done right. However, it isn’t a fit for new products and services that haven’t generated much demand yet. If you already have a great product with a bunch of happy customers – know that referral sales are a great way to add to your sales growth without much risk.
Have you tried setting up a referral program for your product? What kind of results did you generate?
If you have any questions regarding your referral program, do let us know in the comments section.