Do you ever wish there was an effective and efficient marketing strategy out there that could bring you new customers while at the same time building loyalty with your current ones? Poof — wish granted.

Referral marketing is a seriously underutilized method of driving traffic and revenue by small businesses, likely because of their limited time, budgets, and tech resources. But the good news is that referral marketing doesn’t have to be costly or complicated. Your program can be as simple or robust as you’d like — the important thing is that you have one.

But first, let’s back up and make sure we’re all on the same page. A referral marketing program is a strategy in which a business mobilizes its current customer base to increase exposure and bring in new business by offering incentives for referring friends. A customer is asked to tell their network about the company, and in exchange the company offers a reward for each referred friend who takes whatever the desired action might be — a signup, a request for more information, or a purchase. This can be something that you track by hand if your business is more mom-and-pop, or it can be managed digitally through a provider.

If you’re having flashbacks to the chain emails of the 90s that plagued your inbox threatening you with great bodily harm if you did not pass it along to 10 friends immediately, take heart. Technology has come a long way, and there are plenty of service providers out there who can help you quickly and easily put together a smart and attractive promotion if you want to take the next step beyond individually managing referrals.

To get your creative juices flowing, let’s talk about two simple and effective referral marketing program examples.

Dropbox, the cloud storage and sharing provider, has been very successful at increasing their user base by word-of-mouth marketing through current users. Their program works like this: Free users of the software get 2GB of storage to begin with. In order to get more space, users suggest that their friends try Dropbox, and for every person who signs up from their referral, the original user gets another 500MB of storage (up to 18 GB).

LivingSocial, unsurprisingly, harnesses the power of social networks in their program. When a user purchases a daily deal, they are given a URL that is specific to their account. They are encouraged to share that through email, Twitter, and Facebook, and when three of that user’s friend purchase the deal, it is free for the original user. This “Me + 3” program seems a particularly smart use of current technology to me.

When you are brainstorming about your referral program, get as creative as you like. But there are a few best practices to keep in mind to ensure your success. As with any new marketing strategy, you’ll want to make sure your referral marketing program is SMART:

Specific: Think through exactly what you want to accomplish, and how this helps you reach your goals. Have a written plan of exactly how the program will work, and what the rules and constraints will be.

Measurable: Set up your program in a way that allows you to collect data about how effective it is. How many people use it? How much did it cost you to set up vs the marginal revenue from new customers? Is your time well spent maintaining it?

Attainable: Be realistic. Creating a robust, creative, multi-faceted program does you no good if you don’t have time to manage it. Find a good balance between originality and self-awareness. Don’t start something you can’t finish well.

Relevant: Is referral marketing appropriate for your business model and your industry? Is the program you came up with in line with your business’ values and branding?

Timely: Promotional strategies are most effective when the required action and the reward are as close together as possible. So think about how you can fulfill the rewards your customers earn in a timely manner.

We’d love to hear what you come up with! Drop us a note in the comments and tell us your best referral marketing ideas or experiences.

About the Author: Sarah Matista is the Online Content Specialist and resident blogger at Webs. Loves branding, marketing, whales. Get more from Sarah on Webs’ Blog and Google+.

2 Responses

  1. Reply
    Vincent
    Sep 09, 2013 - 09:50 AM

    Great tips. I have written a post on referral marketing which in essence takes the tips you mentioned and propose a method that any business can implement. http://blog.keeping.com/referral-marketing/

  2. Reply
    Mike Noble
    Sep 18, 2013 - 10:16 AM

    Great ideas to utilize. As a marketing manager for Web Hosting company AIT http://www.ait.com/, this is helpful to get moving in the right direction and use Referral Marketing as another tool to generate business. Thanks.

Leave a Comment

STYLE SWITCHER

Layout Style

Header Style

Accent Color