(Getty Images)
As a small business owner, building awareness targeting potential buyers is crucial for sales and a key objective for scaling.
One of the easiest ways to get the word out is by creating a referral program that can help foster growth initiatives. Therefore, a referral program will not only increase your customer base, but it will increase your cash flow as well.
As a small business, it can be tricky to build your initial audience, especially if you aren’t web-based. Having a referral program can help you get the word out about your business so you can grow. Studies show that 92% of consumers trust referrals from people they know. These consumers are then four times more likely to make a purchase.
Referrals are also powerful because they can help you build brand loyalty, with 69% of consumers stating that if they had a positive experience with a company, they would gladly recommend the brand to other people. Finally, it's worth noting that referred customers' overall lifetime value (LTV) is 16% higher than leads from other channels.
Referral programs are an easy way to increase your customer base quickly and boost your business strategy.
What are referral programs?
A referral program is a marketing tool that allows your clients to refer friends, family, and colleagues to your business in exchange for an incentive.
These programs are designed to not only boost interactions with your current customers, but also to leverage their positive experience to help you grow your business. Referral programs come in many forms and offer different incentives. Some of the most common referral programs include:
- Referral rewards/bonuses: The most common referral program is a discount or a free product/service offered when a customer refers a friend.
- Social media referral: Customers tag friends in a comment on a post or tag the company’s product in their post for a chance to win a prize.
- Referral partnerships: Businesses work together with other businesses to provide a mutually beneficial deal for both parties.
While these are the most popular programs, the options are endless. However, you will need to tailor your program to your specific audience.
Small businesses are always looking for ways to increase their cash flow, and a referral program is a great way to do so, although this strategy is often overlooked. Forgetting to implement a referral program can be dangerous since referrals are one of the strongest ways to attract new customers and grow business.
Let's take a look at some of the ways referral programs can increase your cash flow:
1. Increase revenue
The most obvious way in which a referral program can increase cash flow is by boosting your overall revenue. Studies show that companies with a referral program experience 86% more sales than those that don't.
2. Increase your net profit
In addition to increasing overall revenue, a referral program can also increase your net profit, as it incentivizes customers to refer their friends, family, and colleagues to your business. As a result, they're more likely to make a purchase.
3. Decrease your customer acquisition costs
Aside from boosting your overall revenue, a referral program can also help decrease your customer acquisition costs. This is primarily because you're not paying to advertise to new customers. Instead, you're giving your clients an incentive to promote your brand through word of mouth, which 28% of people say increases brand affinity.
4. Increase your brand awareness
A referral program can boost your brand awareness, which, in turn, can have a significant impact on your cash flow. This is because referral programs enable customers to share your brand with their friends and family, and also with strangers online. In fact, approximately 79% of consumers say they trust online reviews as much as a personal recommendation from friends and family. Therefore, having an effective referral program will put your brand in front of people who would have otherwise never encountered it.
5. Increased customer retention rate
Referral programs can go a long way in attracting new customers, but they are also an excellent way to retain your current customers. Research shows that customers who are referred to your brand by another customer have a 37% higher retention rate, which means that even if they don't buy from you today, they are much more likely to come back to you in the future.
An effective referral program will help your small business grow
If you've never given a referral program a try, then you're missing out on one of the most powerful ways to grow your business.
A referral program can help you increase your customer base, boost your brand awareness, and drive more sales. If you're looking for a new way to increase the cash flow for your small business, then a referral program may be just the solution.
You can find more tips on growing your small business at the BBB.