Creating a Referral Program in 4 Steps

After discussing the benefits of referral programs, we’ll give you four easy steps for creating and implementing these marketing programs.

The most effective form of persuasion often comes not from the glitziest campaign, but from casual conversation with a trusted friend. Your current customers can be your most convincing advocates, though while they are dedicated to your brand, they may not always think to mention their recommendation. That’s where customer referral programs come in. After discussing the benefits of referral programs, we’ll give you four easy steps for creating a referral program.

Benefits of a Referral Program

Encouraging clients to pass along their passion and loyalty to your brand is an easy, relatively cheap form of marketing that leads to more sales, organically grows your reputation, and creates an ongoing source of lead generation. 

Ease & Affordability

Customer referral programs are not only simple to understand, they’re also simple to set-up. All it takes is a relatively inexpensive prize and some basic promotion to get started, and program costs should be quickly recouped from the profits generated by the new business.

Greater Sales Potential

According to referral marketing company Extole,1 word-of-mouth is the primary factor behind 20-50% of purchasing decisions. In fact, when specifically referred by a friend, people are 4X more likely to make a purchase, and business-to-business companies with referrals have a 70% higher conversion rate than those without referrals. At the end of the day, humans are social creatures who don’t want to be left out of popular trends and who often mirror the actions of friends they trust.

Reputation Management

Customer referral programs are also a great way to strategically develop your dealership’s reputation. Because people typically trust their friends, a friend’s recommendation can transfer that perception of trustworthiness to your dealership. Data from consumer research company Nielson indicates that referrals are the most trusted form of marketing (better than ads, editorial content, or sponsorships).2

Retention & Referral Loops

After generating individual sales, a referral program continues to benefit your dealership by increasing the chances that current customers return. Clients acquired through referrals have a 37% higher retention rate than those who were not referred.1 Referral programs not only keep current customers loyal, but they also create a referral loop, in which referral clients themselves recommend your dealership to their own contacts. In fact, referral customers are 5X more likely to refer new clients, compared to customers who were not acquired via referral.3 With a customer referral program, your dealership has the potential to create a network of recommendations that can dramatically extend your reach and influence across the market.

4 Steps for Creating and Implementing a Referral Program

The steps for setting up a customer referral program can be simple, but it should be noted that all of your implementation efforts will be for nothing if your dealership programs and employees do not provide a pleasant and productive experience for your customers. Over 80% of customers will agree to make a referral after a positive buying experience,1 but very few — if any — will make a referral after a negative experience. Be sure you have the kind of dealership that is worth a referral, and then you can engage in the four steps for creating and implementing a referral program:

Step 1: Decide What Counts as a Referral

Is a current customer rewarded if they help you obtain a sales appointment? Or, does your program require that a sale be successfully closed before a current customer is rewarded? As your program launches, it may be best to start with referral appointments, in order to convince current customers that the reward is obtainable and that they should participate. However, depending on available resources and your ability to offer rewards, you may need to limit your program to completed referral sales. You should also consider how long a current customer has from the time of their own purchase to make a referral before they’re no longer eligible.

Step 2: Select the Reward You Want to Offer

Prizes for providing referrals can be anything from gift cards or branded souvenirs to minor products or a free month of service. You know your business best, so you’ll have to decide what rewards are most practical and affordable, and which would most effectively incentivize your customers to participate.

Step 3: Promote the Program

You’ll want to promote your referral program in-person, inside your dealership, and on relevant collateral. It’s also important to remember that today’s buyers complete most of their research — and come as close as possible to making a purchase — online, before they ever reach out to a dealer or visit a dealership. Customers on your website may already be deeply engaged with your brand, and are likely ideal candidates to participate in a referral program. In fact, customers are 4X more likely to share about your business when a referral call-to-action (CTA) is integrated into their online purchase path,3 and 16X more likely to share when a referral CTA directly appears on a post-purchase page.1 Again, you know your dealership best, so you’ll have to decide how to best reach your customers and promote the program.

Step 4: Track Your Referrals

Once your program begins, you’ll want to have a way of tracking both the customers who made the referrals and who they referred. Additionally, you should keep track of when they were referred, if the referral led to a sale, and any other communication. Utilize a customer relationship manager
(CRM) to keep track of these connections and correspondences. Once you receive a referral from a customer, follow up as soon as possible. The sooner you can make an impression on a referred customer, the more likely you’ll be able to keep them from going with a competitor. This individualized communication will make a customer, or potential customer, feel valued and loyal to your brand.

Conclusion: Your dealership’s referral program should be unique and set your company apart from the competition. By following these tips, your referral program can retain customers, boost word-of-mouth marketing, and generate more leads.