Why It’s Essential to Build a Referral Program into a Small Business

You’ve scoffed at the idea of building a referral program. “That’s not how you get customers,” you think. “I get customers the old-fashioned way: high quality and word-of-mouth.”

Somewhere along the way, you’ve forgotten that the referral is the currency of word-of-mouth advertising.

Referrals are important. Referrals are what keep you in touch with your current customers and earn you highly-qualified new leads with customers you never knew existed. When a customer refers someone to your product or service, they’re doing half of the work of sales. A smart entrepreneur knows that they can tap into this enthusiasm, maintain a relationship with their most loyal customers, and slash their marketing costs—all in one fell swoop.

How do you pull it off? Simple: build a referral program into your small business.

Referrals are Already a Big Part of Your Marketing and You Just Don’t Know It


According to Referral Sasquatch, some 65% of new business is earned through referrals. Although it’s tempting to chalk up many of your new leads to SEO, advertising, social media, and the always-vague “word-of-mouth,” the truth is that more often than not, people are buying your products because they heard about them from a friend.

This is good news. Building a referral marketing program into your small business strategy is simply capturing the enthusiasm that already exists and making it more efficient. Not only does a referral program help you reach out to current customers and retain a relationship with them for a longer period of time, but it helps you discover new, highly qualified leads without doing the work yourself.

Every Business Needs to Find a Way to Reward Loyalty

Customers who don’t only buy from you, but buy for you by referring friends to your products/services, are essential. They’re loyal. They’re the ones that create buzz, talk about you on social media, and make your business more visible. If it’s true that you only ever need 1,000 true fans to be a business success, then loyalty is more valuable than money.

In order to have a successful referral program up and running in your small business, you should have already built up trust with your customers. If that’s where your business falls short, maybe your relationship with customers—not the referral program—is what needs work.

Acquiring Customers is Expensive

When your business is struggling, the advertising budget is often the first thing to go. Acquiring new customers is expensive, and most small businesses have a pretty high cost per acquisition (CPA) that they’d like to lower.

It’s no secret that acquiring customers is vastly more expensive than simply retaining customers. Building a referral program into your business is a sure way to find a happy medium: you’ll acquire new customers, and, if you offer a two-way referral program, you’ll be able to reward the loyal customers you already have.

Referral programs can help you reduce your CPAs, something any small business owner can get behind.


How to Build Referrals into Your Overall Marketing Strategy

Okay, you’re convinced. A referral program is the next step for your marketing efforts. Now what?

  • Get them at the point of sale. Your customer finally made the big decision—they’ve bought from you, and now they’re looking at the confirmation page, still riding high from that post-purchase buzz. What does your purchase confirmation page say? “Thank you”? That’s nice and all, but don’t squander the opportunity to build a stronger relationship with someone who just voluntarily gave you some of their money. Promote your referral program on your confirmation page, and tell them how to get started.
  • Emphasize your newsletter. Capturing emails is an essential part of doing business in the online world, and for good reason. You need to keep tabs on those ever-important customers who might be inclined to recommend your business to a friend. When you finally launch your referral program, you can announce your incentives on your newsletter and instantly create a private army of online marketers—at virtually no upfront cost to you.
  • Find the right tools. Referral Rock, Extole, Ambassador – you can’t go wrong. These programs take away all of the guesswork and allow you to create, maintain, analyze, and promote your referral programs from simple, intuitive dashboards.


Launching a referral program doesn’t have to be a chore. It doesn’t have to be cheesy. When you do it right and use the right tools, it’s an essential way of tapping into the core enthusiasm of your customer base.

Emma Siemasko is the Founder of Stories by Emma, a content marketing consultancy. She specializes in writing about startups, marketing, and customer engagement.



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