TLMM #056: Why Customer Referrals Are So Incredibly Powerful For Local Small Businesses

Read time: 4 mins

In this week’s issue, I want to talk about how customer referrals are so incredibly powerful for local small businesses as a Local Small Business Consultant or Digital Marketing Agency Owner…

Customer referrals is an often overlooked lead generation strategy.

In fact, it’s a great way to exponentially grow a customer base.

So with that in mind…

Let’s dive in!

 

Why Customer Referrals Are So Powerful

Like I previously mentioned…

Customer referrals are a great way to exponentially grow a customer base.

Here’s some numbers that might shock you…

• Referral leads convert 30% better than leads generated from other marketing channels.
• Referred customers have a 16% higher lifetime value.
• Referrals are 4 times more likely to buy when referred by a friend or family member.
• 83% of consumers are willing to refer after a positive customer experience.
• Offering a reward increases referral likelihood, but typically the size of the reward itself does not matter.
• Businesses with formalized referral programs experience 86% more revenue growth over the past two years when compared to the rest.
• Currently, only 30% of businesses surveyed have a formalized referral program.
• When referral tools are implemented, businesses are 3 times more likely to accelerate referral generation and conversion.
• Yet only 22% have a tool in place to effectively scale their programs.
• Every referring customer averages to 2-3 new referrals!

So as you can see, there’s a lot of opportunity to help local small businesses implement a referral program.

 

What Types Of Strategies Work Best For Customer Referrals?

Did you know that there are five (5) types of referral strategies to gain new customers?

1. WOM marketing (or Word-of-Mouth)
2. Email referrals
3. Referrals from reviews
4. Social media referrals
5. Incentive-based referrals

While all of them work…

The one I think works the best is incentive-based referrals.

You know, when a company will give the referrer a reward for their referrals?!

As the saying goes…

“Money talks, Bullsh!t walks!”

From my own personal experiences…

Anytime there’s been some sort of monetary reward, I’ve acted on it…

And I bet you have too!

Especially in this over inflated market where every dollar counts.

So the more you can save the current customer on their next purchase simply by referring a friend or family member, the better!

 

How To Get Customer Referrals?

As I previously mentioned in the last section…

You can implement one or all five of the referral strategies outlined above.

Of course the first one listed…

WOM marketing (Word-of-Mouth) you really can’t control.

This one happens more or less organically and by chance.

Email referrals, referrals from reviews, social media referrals, and incentive-based referrals all are valuable and have their pros and cons…

But I believe incentive-based referrals are way more predictable…

Thus making them more lucrative to both the customers doing the referring and the local small business owner.

In fact, the customer is more likely to refer someone if they know they will be rewarded.

And if the local small business can get a steady stream of referrals…

It all but guarantees that they will end up with consistently more new customers.

Making it a win-win scenario.

Does that mean you shouldn’t implement the other three referral strategies?

Not at all…

They all have merit and can do no harm.

So it would be silly not to utilize them as well.

But the primary focus should be the incentive-based approach.

 

How To Implement An Incentive-Based Referral Program

First you (and your local small business client) need to decide on what they’re willing to give in order to get customers to take action.

Typically this will be something like a percentage or dollar amount off of the current or past customers’ next purchase…

But only AFTER they have successfully referred at least one other person to the local small business.

And if you want to kick it up a notch…

You should also suggest to your local small business client that they give the referral a purchase incentive too.

Perhaps the same exact deal.

That way it’s a win-win for both parties, the current or previous customer and the person they referred to the business.

Now this can get quite cumbersome to manage if it’s done manually, pen to paper so to speak…

So that’s why I suggest using a software as a service (SaaS) solution that handles this entire process automatically.

I’m sure you can do a quick Google search and find some *canned* solutions dedicated to solving this very problem…

However, you’ll probably have to pay a pretty hefty fee to use such a service…

Not to mention that it may or may not work seamlessly with your local small business client’s other digital marketing solutions.

Which is why I took the liberty of developing my own solution inside of HighLevel (SaaS)…

It’s the software solution that I prefer to use for all of my client’s needs.

And thus ensures that everything works seamlessly…

And the best part is that it’s all housed in one spot, one login…

I don’t have to deal with things like:

• Multiple software
• Multiple logins
• Multiple fees 

HighLevel just keeps things…

SIMPLE.

I love it…

And more importantly, my clients love it!

So if you’re not using HighLevel yet…

I encourage you to do so.

I must warn you though…

Once you go HighLevel, you won’t go back! 😉 

Give it a shot, I promise you’ll love it too…

And your clients will thank you for it.

See you next Monday!