It's almost a guaranteed sale once your product or service is referred to an interested party by a satisfied customer. According to Nielsen, people are four times more likely to purchase when referred to you by a friend.

That said, building customer loyalty and encouraging your customers to refer you to others should be your top priority this coming year.

Why Do Customer Referrals Matter?

1. People trust recommendations

According to a 2015 Nielsen report, recommendations from friends and family are the most credible forms of advertising. 83% of the respondents in their worldwide study say they trust recommendations from their friends and family.

2. People like to experience things that their friends have experienced

When people show off a great product or service to their friends, they are likely to purchase the product either due to fear of missing out or just to experience the same thing.

3. It brings in more valuable customers

People who become your customers after being referred approach you with a very positive impression of your company. Compared to other clients, they are 18% more loyal, have a 16% higher lifetime value, and spend 13% more than their non-referred counterparts.

4. It improves brand reputation

This goes without saying. The more your customers talk about you positively, the more the awareness of your brand and the better its reputation. People are more likely to trust each other than a paid ad.

By encouraging your most loyal customers to talk about your brand, word will spread around, placing you on a well-deserved pedestal.

5. It increases customer retention

It is more costly to acquire a new customer than to keep your current ones. Referral marketing is quite effective at retaining customers as it is hard to change the first positive impression that the referred customers approached you with.

Why You Should Make Customer Referrals a Priority For 2022

1. It Will Lower Your Costs

The only cost associated with word-of-mouth marketing is the incentives you offer - if any. This is significantly low compared to costs associated with the other marketing tactics.

2. It Has a High ROI

As mentioned above, the only cost associated of word of mouth marketing is the cost of rewards and incentives. Since the customer is quite likely to stick with you for a lifetime, this investment pays itself many times over, resulting in a very high return on investment.

How To Increase Customer Referrals

It doesn't matter whether you are actively working on customer referrals or not. As long as you are offering great services and products, your loyal customers will talk about you and recommend you to others.

But for you to enjoy all the benefits of customer referrals, you shouldn't rely only on these accidental referrals. You should actively work towards increasing targeted customer referrals. There are five ways to do that.

Create a Formal Customer Referral Program

Instead of asking your customers to send in a friend, you should have a detailed plan that explains how your referrals work. This makes it easy for your customers to understand it, making it easy for them to refer others. It also removes the awkward silence before a "no" when you ask a first-time customer to send you more business.

It can include several details such as the type of incentives if any, that you offer and who it goes to between the referrer and referee. 

To your benefit, a formal program makes it easy for you to track and manage referrals so you can know what works and what doesn't.

Promote Your Referral Program to the Right People at the Right Time

Like most things in life, the success of your referral program depends on timing. A common practice in lots of businesses is to ask all their customers for referrals at the cash register during checkout. If you are doing this, please stop. This could be the reason why your referral program may not be working.

You shouldn't ask for referrals from just anyone. There are two types of clients or customers you should focus on: the most loyal, and the most influential. The most loyal because they are more likely to recommend you, and the most influential because their opinion will reach more people and carry the most weight.

The best time to ask for referrals depends on your type of business. For the highest rate of response, you should ask for referrals once your customers can see the value of doing business with you. If they were satisfied, they will happily tell and recommend others.

Encourage Your Customers Using Incentives

What's in it for them?

Some customers just can talk about your products unless there is something in it for them, no matter how pleasant their experience with you was. They simply can't go out of their way. To encourage them, you should offer a thank-you gift for bringing you customers.

There are a number of incentives, you can offer depending on your business. They include:

1. Free cash
2. Mystery gifts
3. Discounts on subsequent orders
4. Charity donations
5. Subscription credit
6. Discounted or upgraded services
7. Free goods and services

But encouraging them doesn't have to be all about giving incentives; you can simply acknowledge their efforts with a simple thank you to show appreciation.

Make It Easy For Them

If your referral program is too complicated or involves too many steps, it discourages both parties from participating.

As you design your referral plan you should ensure it is easy for the referrer to refer and claim their incentives, and your staff can easily monitor the process and reward effectively.

Give and Ask for Referrals

Research from Texas Tech proved that all you need to do to get more referrals is ask. It found that 83% of satisfied customers are willing to give referrals, but only 29% actually do. Although we cannot definitively say why this is the case, the one thing we can agree on is that asking them, coupled with a proper referral program will bridge this gap.

Offering incentives not only increases the number of repeat purchases; it also increases the probability of your customers talking about you and referring you to their friends and family.

Nonetheless, customer referrals should not be considered a quick growth hack. It is a long-term strategy that should find a place within your other marketing strategies.

If you would like to create and run a customer referral program to turn one-time purchases into life-long customers on Shopify, you need a convenient tool that will automate most of the tasks.  Glow is exactly what you need.

Glow is an easy-to-use setup wizard that makes it extremely easy for Shopify merchants to run a personalized loyalty, rewards, and referral program without breaking a sweat (or the bank). It has all the tools merchants need to gain and retain customers through referrals. 

Glow also conveniently awards points to customers when they take various actions, such as purchasing from you or sharing your website or products. It also presents data in convenient ways, such as charts and graphs, allowing you to measure the performance of your program at a glance.

Install and setup the Glow app in minutes.