One of the most important aspects of running a business is knowing where and how you make your sales. I’ve written about the importance of tracking leads and sales; and if you know that one of the best ways to get more leads is through referrals, then it’s time to create a formal Referral Program.
What is a Referral Program?
A Referral Program is a formalized process to encourage people to send others your way by offering them some kind of reward. If you think about it, you can get referrals from a variety of people: your clients, your colleagues, your employees and contractors, business prospects, and even friends and family.
The referral program lets people know that you’ve set up a formalized process to reward them in some way if they send business to you. If you think about credit card companies and others in the hospitality industry, they use rewards programs like this to encourage people to use their service more. The more you use their service, the more “rewards” you get – either in mileage (for airlines) or points (for hotels), etc.
The same can idea works with referral programs. They are set up so that – if someone sends business your way – they are rewarded.
How does it work?
The great news here is that it can work any way you like! If you’re setting up a rewards program for existing customers, you might reward them with discounts on their purchases. For example, if you’re a service company, it might be a percentage off one of your services.
Another way it can work is a bonus payment – or percentage – of the new sale that is generated by your referral. For example, if someone sends you a new client, you pay for that referral once the service is delivered and paid for. I’ve worked with a client that paid both when new business was signed and if the yearly contract renewed!
How do I create a Referral Program?
The first critical step is to know where your best sales come from; if word-of-mouth is key to your business, then it’s time to create a formalized Referral Program. Here are the steps you’ll need to consider setting this up:
- Think about the dollar value you typically receive from that first sale. If you offer a range of services, you’ll need to take that into consideration.
- Consider what you’re paying now to get new customers or clients. Do you know how much it takes to make a new sale? If you don’t – it’s time to start tracking it!
- What is it worth – to you – to get a new first sale, based on what you’re now paying for each new customer or client?
If you’re not sure how to create a formalized program but know that you get great business through word-of-mouth and referrals, contact me and let’s discuss how to get started.