4 Types of Referral Programs to Boost Your Business

referral programs

Eighty-five percent of small businesses say customers come to them through word-of-mouth referrals, according to a Verizon report. Search engine marketing was the next most popular method of marketing in the survey, named by 59 percent of small-business owners, while other means such as social media, email marketing, direct mail and Yellow Pages ads all came in at 33 percent or less. What about the referral programs?

Over 69 percent of business owners surveyed by Duct Tape Marketing felt they got over half of their business from referrals. But despite this, 79.9 percent said they had no formal system for referral generation. Here are four methods you can use to cultivate referral business systematically.

Direct Referral Programs

The most basic type of referral system is a direct referral program. Here you explicitly offer clients or prospects something in exchange for referrals. For example, online backup service provider Mozy currently provides customers with free MozyHome accounts an additional 256 MB of storage space in return for each referral who purchases and uses MozyHome. Mozy tracks referrals by delivering a customized link with a unique URL that customers can copy and share with friends through email.

Mozy’s program illustrates several ingredients of a successful direct referral program that can also apply to other types of referral programs.

First, referral partners should be offered something of value as an incentive in exchange for their referrals. In this case, Mozy offers free storage space to customers who are already known to be interested in free storage.

Second, it should be easy for referral partners to respond to the offer. Mozy achieves this by providing an easy-to-copy URL. Third, there should be a mechanism to track and verify referral sources. Mozy’s unique URL code also achieves this purpose.

Implied Referral Programs

Where a direct referral programs are over, implied referral programs speak by example. In an implied referral program, you take steps to let your target market know that you are doing work for clients similar to them, without directly asking for a referral.

For instance, when attorney Johnnie Cochran defended O.J. Simpson, the trial’s intense media coverage gave Cochran instant fame and publicity that attracted additional high-profile cases and wealthy clients, sending his net worth soaring from $1 million to $5 million within five years. Simpson didn’t have to directly refer clients to Cochran for Cochran’s work for Simpson to generate referrals.

Small businesses can also employ implied referral programs. For instance, a remodeling contractor might create a book showing pictures of completed projects and leave it in a real estate office lobby to serve as a brochure.

Tangible Referral Programs

The third type of referral program is a tangible referral program. Here you give referral partners a physical or digital object of value that they can provide to prospects.

For example, Kimberly-Clark generated over a million referrals with a “Softness Worth Sharing” campaign. The program allowed participants to send free tissue boxes to family and friends by signing up at one of more than 900 participating retailers in the United States and Canada. A social media counterpart to the campaign allowed participants to share free virtual samples with Facebook friends.

Community Referral Programs

The fourth type of referral program is a community referral programs. Here you partner with a nonprofit organization to support their mission, which in turn motivates your partner to promote your organization. For example, Sartori, a Wisconsin-based cheese company, donates $1,000 to the Make-A-Wish Foundation each time Green Bay Packers’ all-time leading scorer, Mason Crosby, kicks a field goal. This generates publicity for Sartori on Packers broadcasts each time a field goal is made, and their donation is announced.