November 24, 2020 is a daily online magazine covering small business news. We help entrepreneurs transform ideas and innovations into greatness.

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Testimonial Marketing


Incentivizing Client Referrals

Written by Chris Martin for Gaebler Ventures

The most sought-after type of marketing is word-of-mouth referrals. And there are ways to encourage these referrals for your business. Here are some suggestions on how to incentivize client referrals

Every entrepreneur is constantly looking for ways to pull in new customers or clients.

Targeted marketing, networking, and new customer incentive programs are some of the options you can try. But some entrepreneurs tend to focus on complex measurements like site page views, conversion rates, and even media ratings – but forget about the simplest form of new lead generation.

Word-of-mouth referrals.

When someone tells their friends, family, or business associates about your fantastic product or service, that free publicity is more cost-effective than the rest of your advertising channels combined. And if you can somehow spur this process to repeat itself again and again, you will see your customer base grow impressively and organically.

But how can you help the referral process along? By incentivizing them.

It's not a new concept. But it's one that has fallen by the wayside in recent years given the increased accuracy of measuring responses to marketing programs and ad campaigns. An effective referral incentive system can fill your customer database without draining your bank account. Here are some suggestions:

Discounts and credits. This is the most basic form of referral incentives. Offer your existing customers a credit or discount on their next bill or invoice if they refer a new client to you (say, a 10% discount or a $250 credit). Or you can compute the account credit based on the new customer's revenue (meaning if a new customer places an initial order of $500, you will deduct all or a portion of the amount from the referring company).

Grandfathered rates. If your business offers a service, it's likely that you'll have to raise your rates for new clients from time to time. But one way to increase referrals is to promise your current clients that any new business they refer will get the same low rate that the referring business has been getting. So if you have a client that has signed a three-year deal for your services at $100 an hour but the current market rate is $125, promise the lower rate for any business that your existing customer refers to you.

Gifts. If you have access to attractive enticements, you may want to consider this option. A client might be more willing to refer new business to you if they know that they will get sports tickets, spa packages, restaurant gift cards, or some other inducement. Or you could offer one of the products you sell (flowers or chocolates, for example) or the services you provide (if you're in the maid service or lawn care business) for free to someone who refers new customers to you.

Thank you notes. If your budget or business type doesn't permit you to offer monetized incentives, then a simple thank you note can go a long way in fostering good will. Because how often do people get personal thank-yous in business nowadays? Make sure your thank-you note is handwritten and hand-signed and that your sentiments are heartfelt instead of generic.

The more you can generate new business through referrals, the less you'll have to spend on traditional advertising and marketing. So if it takes a little incentive to get those referrals flowing in, don't be afraid to provide it!

Chris Martin has been a professional writer for the last seven years. He is interested in franchises and equity acquisition.

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