The business rule is that 80% of our income comes from 20% of our customers. AND we also know that it is cheaper and easier to sell our services to an existing customer or their friends than it is to cold call a new customer. Therefore, a formal referral program makes sense if you want to grow your customer list.

A formal referral program maximizes the power of word-of-mouth advertising by creating a formal system for having customers help you make sales through referrals.

Here’s a simple five-step process to build a referral program that works for you:

Step One: Define what you want to achieve

To start with you will want to consider what is it that you want your referral program to help you achieve. Do you want an ongoing stream of new families accessing your preschool program? Or are you looking to connect with young families who will use your services 3 years down the road? Know what you are asking them to help you do.

Step Two: Create a plan for customer referrals

Examine how existing customers can help you build your customer list. What can they do to help your existing marketing? Do you want them to refer one friend who would be interested in your services? or would you like them to bring a friend to an outreach event you are hosting in your business? Know how you want them to help you.

Step Three: Structure the “ask” for a referral

Formalize the referral process so that you and your customer realize the benefits. Structuring the ASK might be as simple as, can you please share my posts with your community on Facebook? Here are 10 business cards, I’d appreciate it if you could pass these on to families that you meet who might need my services.

Step Four: Offer an incentive to engage customer help

Figure out and offer incentives that motivate customers to make referrals. Sometimes a simple thank-you card will suffice; other times the customer might be satisfied knowing that they connected a friend with an appropriate service. Or maybe the benefit is bigger: a $10 coffee card, a discount on services for every successful referral, entry into a bi-annual draw for a family getaway. What you offer is based on what you know your customers value most and what you can afford as a business.

Step Five: Evaluate if the referral program is working

Always measure the results of the Referral Program to evaluate success. Considering how you will track the referral: who made it? did it lead to new business? which incentives resulted in more referrals? Tracking these administrative details helps evaluate $ spent on new customers (Return on Investment (ROI)) and provides feedback to fine-tune the program.

Want some additional information? Check out these tips, courtesy of HIP Strategic Consulting to help you jump-start the design of your referral system.

Questions about setting up a referral program or want to learn more leave me a comment below. I'm happy to brainstorm and share ideas...