I’m Telling You, Referrals Are Your New Customer Source

Eugene Suslo
Sep 28, 2015



Have you asked your customer for a referral yet?

If you haven’t, then you need to start. Referrals are powerful. So powerful are referrals, that marketers and companies spend immense amounts of money determining what the most effective way to harness a referral customer is.

Referrals are essentially recommendations. This has taken the form of being called referral marketing, or word of mouth marketing, and it can be seen in a number of ways.

A great example of word of mouth or referral marketing is Fireball Whiskey in the United States. Fireball, as it is called for short, is a hot cinnamon flavoured whiskey (not good in my opinion, but college kids love it). The product has been around since the 1980s in Canada and was relatively unknown in the United States. This was until the word of mouth campaign was started. One individual went around to United States colleges introducing the whiskey and it began to take off . The result is, now the product is a huge success and has even been mentioned in songs.

This style of referral marketing is the ultimate goal of any company, and there are now ways to harness and incentivise this style of business growth. This is done through a referral program.

What is a Referral Program?

To understand what a referral program is, we need to take a step back and understand what referral marketing is. Referral marketing is one of the most powerful ways to build business. This is the building of business through word of mouth, and it tends to be the result of an excellent product. Products that generate a lot of word of mouth, tend to be such great solutions that it compels the users to share it with their network of friends, family and colleagues.

The Referral Program is a program that monetises this natural situation, as well as incentivises people to engage in it further. The Referral Program is essentially a little nudge to get people to share your product or service. The nudge comes in the form of discounts and coupons that the current user of your product or service will receive if they share with a friend. Some companies have gone so far as to give incentives for the existing customer, and the new customer. In the case of Dropbox, it worked tremendously well.

How Does It Work?

Armed with the understanding of what a referral program is, we can now discuss how exactly the referral program works. The referral program allows the user of a particular product to incentivise their friend to use your product. Specifically, this means that the individual who loves your service, and has been a loyal customer, will receive a discount or coupon for referring one person to your business. This is great for the individual as they get a nice perk for just talking about the service they love.

There is a second part to how this program works as well. You as the service provide need to assist your customer who is going to refer your service. You want your loyal customer to receive this discount, so in some situations, this is why just the recommendation from a friend is not enough to motivate someone to act. This is where you provide the person who just got recommended to use your service a coupon or discount as well. This provides incentive for both of your potential referral parties to gain something from your service.

Is It Right For Me?

The real question here is; is business growth right for me? I would say it sure as heck is. So why not harness that with the customers that already use and love your service. This is what you will accomplish with a referral marketing program, one that TaxiStartup just so happens to be launching. But enough with our own advertisement, what is important is figuring out if your business model is right for this style of business growth.

A service based business is perfect for a referral marketing program, because great service is usually conveyed most effectively in the form of a review. Reviews on an online review board are nice, but what is better, is a review from a trusted friend or colleague. This review is the type of review that will cause someone to act.

If you have at least a few customers you can rely on to begin your referral marketing program, then this is a great program for you. The New York Times states that 65% of new business comes from word of mouth, which is a referral. This is a powerful number, and if you have the tools to begin harnessing this avenue of new business, then it is necessary to utilise this platform.

Where Do I Begin?

As we discussed different tips for beginning to grow your business, the first step is always to begin with actionable steps. The first step is to put in place a referral marketing program, such as the one TaxiStartup is rolling out.

The first step is to take what you learned in starting an email list (and social media followers), and alerting all your email subscribers of your new program. Alert these loyal customers you have a new opportunity to receive a discount, as well as ask them to share their experience with your service with family, friends, and colleagues. The first step is asking for the business.

The next step is making it a point to ask all your customers, politely, that if they enjoyed your service could they please recommend it. I say this with caution, because you do not want to be pushy. Ask as casual conversation and mention they will receive a discount or coupon the next time they use your service. This is not uncommon and customers are used to referrals, so you want them to be aware that you offer this service as well.

At this point, you will want to continue these efforts consistently for a long stretch of time. As you get more of this program information out, the more the new business will come in. The biggest thing to remember at this point is patience, because referral marketing growth is organic and will take some time. We ask you to please stick with it.

Now that you are armed with a referral marketing program; what is going to be your first course of action to grow your business?