Customer referral programmes: 7 steps to get yours cranking!

Referrals are the lifeblood of most small businesses, and they are indeed a wonderful thing. What better than to have your customers doing your marketing for you!

The problem is, that if this is left to chance, the process is very sporadic. Wouldn’t it be great if you could enjoy more referral business?

The good news is that it’s totally possible to be enjoying more referral business! I’ve worked with numerous clients over the years to systemise their referral systems, and the good news it’s easy to do.

However, there are definitely some ways of creating a referral system that work better than others. Here’s your 7-step guide to getting more referral business.

1. Give your customers a service so amazing that they say, “WOW”!

First things first: you need to be giving consistently excellent service. No-one is going to recommend a business that gives terrible or lack-lustre service. So your business needs a good story behind it.

To show what I mean, here are some stories that are so dull that no-one’s likely to repeat:

“I went to ABC Dentist and it didn’t hurt too much.”
“XYZ Plumbers installed my new bathroom OK. I paid my bill and never heard from them after that.”
“I bought an ABC Gadget and it works OK. I managed to understand the instructions after reading them a few times.”
“XYZ Mechanics put a new battery in my car and it’s OK now.”

And here are some stories that you wouldn’t want your business to be part of:

“I went to ABC Dentist and it was really painful – AND their instruments looked filthy!”
“I got XYZ Electricians to install a new power point, and they left a terrible mess behind – it took me ages to vacuum up all the dust!”
“I bought an ABC Gadget and it fell apart after just 5 minutes! It’s rubbish!”
“My car was repaired by XYZ Mechanics and they did all this extra work I didn’t ask for, or approve, and the bill was astronomical!”

Instead, these stories make great conversations – and will get your business talked about in a good way:

“When I left ABC Dentist, the friendly nurse gave me a bag of freshly-baked Dental Buns to take home!”
“XYZ Plumbers installed my new bathroom and did a great job – they even left a bottle of posh bubble bath for me!”
“When I picked up my car from XYZ Mechanics, it had even been valeted for me, I’ve never seen my car look so clean and shiny!”
“When my ABC Gadget broke, the company replaced it without question AND gave me a spare set of batteries by way of apology!”

2. Find a way of facilitating referrals

Make it easy for your customers to tell your story and pass on your details.

A common way to do this is with a referral card of some kind. (Or if your business is web-based, then an online system of some kind works well.)

But let’s assume you do business face-to-face, and will be giving printed referral cards. The key here is to encourage your customer to keep them in their wallet, and that means three things.

Firstly, the referral card has to fit in their wallet, so a business card-sized referral card is ideal. (Or at least something that folds down to business card size.) Don’t be tempted to do anything larger because it’s “prettier” – it’ll just get left on the desk… or in the bin. Trust me, the cards that work are business card-sized. End of story!

Secondly, make sure the referral cards look good. Let a graphic designer work their magic. Personally, I’ll happily put a well-designed card into my wallet, but if it’s ugly and looks cheap, I won’t want to carry it in my purse, let alone give it to my friends. It would be too embarrassing to give them something cheap and ugly looking! If your card looks bad, it makes your business look bad. Good design is well worth the investment.

Thirdly, there has to be an incentive for the referrer… and that’s what the next step is all about:

3. Think about rewards that will motivate your customer – and add value

Some businesses choose to offer a reward to incentivise referrals and speed up the word-of-mouth activity.

It can be a good idea to reward (a) the referrer, and (b) the referree.

Some schemes involve prize draws, so that only a select few win a reward. My feeling is that schemes that reward everyone will get a better uptake. People love instant gratification, rather than the possibility of a gift!

Any rewards offered must be fabulous in the eyes of the recipient: enough for them to shout your story from the rooftops! It’s probably better to offer nothing at all, than something really dull or lacklustre.

And remember, it’s all about perceived value, not the actual value of the item. Therefore value-added gifts of some kind work well; or contact your strategic partners for a relevant offer that’s beneficial for them, you, and your customers.

It’s best to avoid offering discounts: all that does is erode your bottom line. And to be honest, discounts aren’t really all that exciting. 10% off; 20% off… yawn.

But a free car valet? Or a bouquet of flowers? Yes please!!

4. Make the rewards practical to implement

The other thing to consider is that the reward has to be easy and practical to implement. I’ve seen some referral schemes offer bottles of champagne, which is great if you have a local wine shop that can pick, pack and send all the orders for you.

Otherwise you’ll have to be prepared to spend a lot of time buying the champagne; buying boxes for it; writing labels; organising couriers… you get the picture!

So yes, make sure it’s practical to implement – no matter how busy you get.

5. Offer a choice of two rewards

Here’s a sneaky tip: don’t offer one reward – offer two.

Why? If you offer just one thing (e.g. a bottle of champagne), people then starting umming and ahhing if they want that item or not. For example, they start thinking: “do I really want champagne? I don’t actually like it that much. Nope, I don’t think I’ll bother with this offer.”

But if you offer TWO rewards (e.g. champagne or a bouquet of flowers), the thought process is quite different. People don’t think “yes/no”, they think “which one”. For example: “hmmmm, I don’t really like champagne much, but I would like a nice bouquet of flowers to brighten up my desk. Yes, I’ll go for the flowers”.

Don’t be tempted to offer more than two rewards, that just makes the decision too hard!

Do send the rewards out promptly: a handwritten thank you card with it goes down a treat, too.

6. Promote the referral scheme

You ain’t gonna sell it if you don’t tell anyone about the referral scheme. It might sound obvious, but I’ve seen to many businesses carry out all the steps above… and then not implement the scheme, and then claim that “referral schemes don’t work”. You have to market the referral scheme, just like you market everything else, and you need to market it in as many ways as possible:

  • Face-to-face: you and your team need to tell your customers about it. To make sure this happens consistently, write it in your sales scripts.
  • Newsletters: this is a great way to publicise the scheme. Ideally, make it a regular slot in the newsletter, and announce how many goodies you’ve given away, or who the winner is. As well as reminding people that the scheme exists, it’s also proof that it’s “real” and that people out there are benefitting from it.
  • Website: your website is another great medium to promote the scheme. Best way to do it is to dedicate a page to the referral scheme, telling people how they can sign up; how it works, and announce how many goodies you’ve given away.

7. Test and measure!

As with all marketing, measure the response you get.

Try different offers and rewards too; if one thing doesn’t work, try something else.

Your referral programme should be flexible and measurable so that you get the best results out of it. Perhaps survey some customers as to what they think of it: chances are you’ll get some great feedback.


A referral scheme is a very effective way to welcome new customers to your business. It’s also very cost-effective: all it’ll cost you is the design, printing and rewards. And this is significantly cheaper than running advertising or direct mail campaigns.

I sometimes have clients saying to me: “oh, the referral scheme isn’t working very well. We only get or so new 5 clients a month through it”.

My response: Wow, 5 new new clients a month? That’s 60 new clients a year, and if they’re spending $200 each, that’s $12,000 of sales revenue… and the design and printing of the cards cost you less than $800! And if those clients come back year after year, that makes the whole exercise even more profitable!

In terms of client acquisition cost, a referral scheme is hard to beat for small businesses. Especially if you follow the 7 steps above.