Customer Referral Program - A Cheap, Easy Way To Generate Qualified Leads and Grow Your Bottom Line

February 23, 2018
by Pieter Moens

Customer referrals sell.

Plain and simple.

If you have a good customer referral program in place, you work less for your leads, those leads are better qualified, and they are more easily converted into successful sales.

I even have the statistics to back that up, and I’ll get to those in a minute.

Before I started writing this piece, I sat down and rummaged around my brain, trying to piece together as many of my recent purchases as possible.


customer referral program

Of course, I couldn’t remember them all, but some did stick out - buying new software for the office computers, a recent hotel booking, that baby stroller I’ve been pushing constantly for the last few months...things like that.

There are many more I could list here, but the one thing that ties them all together is the fact that these weren’t random purchases. Each and every one of them came recommended, in one form or another.

In fact, I find it difficult to remember the last time I spent a significant amount of money on a company (and a product/service) that I’ve just stumbled on haphazardly on the Internet or in the street.

Hence my lead-in - customer referrals work, and you’d be smart to ensure that you have a lot of them coming your way.

However, if you’re still skeptical, here are the referral statistics that I’ve promised:


Customer referral stats:
  • A person is 4X more likely to buy from you if you were referred by a friend or an acquaintance, according to Nielsen.

  • A referred customer has a 16% higher lifetime value (CLV) than a non-referred customer.

  • Companies that manage their referral programs are more than 3X more likely to achieve their revenue goals.

  • 84% of B2B purchasing decisions start with a referral.

  • Companies that use dedicated tools to manage their referral programs can scale their programs 3X faster and collect more qualified leads.


While referrals happen spontaneously (and that means you’re really doing something right), most customers need a nudge. Often times, a friendly reminder is more than enough, but an incentive will sweeten the pot and make your current customers work for you even harder.

However, it’s difficult to manage something if you can’t measure it, and that’s where advocacy platforms, such as Ambassify, come in handy.

The built-in mechanics that allow you to schedule email blasts, encourage active participation, and help with community-building and referral code generation will be of tremendous help here.


Types of Referrals (And Three B2B SaaS Industry Examples)

Referral marketing is all about turning your customers into a sales force to be reckoned with. A happy customer will refer 2.68 people to you. Let’s round that up to three. By investing just a little into your existing customers, you get this massive boost in qualified leads, and you don’t even have to work really hard to close the deal with them.

There are several different types and subtypes of referrals, but I’ll condense this for the sake of clarity. The first classification relies on where people refer you:

  • One-way referrals- a type of referral in which only the referrer is rewarded.

    A great example in the SaaS industry would be Yesware - software that helps salespeople by tracking opened emails. I think you’ll agree with me when I say that this isn’t the type of software that you talk about with your friends. However, their referral program is pretty successful, despite the fact that they’re only rewarding the referrer, and there are two reasons for that.

referral program yesware
a) Yesware gives 100 free tracking events for every person that signs up. This is a valuable benefit for the referrer, who can rake up a significant number of free tracking events.

b) They make it easy by providing referrers with an email template that has a strong copy, which is an option you can use to boost your own referral rates.

  • Two-way referrals - a type of referral in which both sides - the referrer and the customer-to-be - get rewarded.

    A a popular example of this would be both Paypal and Dropbox. However, there are plenty more from which you can draw your inspiration. One such referral program is instituted by Video Block, a stock video company.

    Although their regular subscription is pretty pricey, referred customers get a 90% discount and pay only $ 99 per year. On the other hand, the referrer walks away with $ 20 in their pocket every time someone they’ve referred signs up for the service.

videoblocks referral program

  • Third-party referrals - these referrals are also called partnership referrals. Essentially, you can partner up with a company and give a discount to all of their customers who can prove a purchase.

    While there are many subtypes of partnership referrals (one being partnering with a charity and giving them a cut of the profit from the customers they refer), I rather like what Evernote did with Moleskin, a manufacturer of notebooks and journals.

    In fact, Moleskin still carries a whole range of products that have an Evernote brand stamped on them. Every purchase comes with a unique Evernote code that can be used to get one month of free premium service. If the customer is already an Evernote Premium user, they will get points that they can use to pay their subscription next month.

    Although Evernote has a pretty good two-way referral system, I’m sure that this has netted them a solid user base they would otherwise be unable to tap into.

evernote referral program


7 Benefits of Customer Referral Programs


Although the overall benefit of referral programs is pretty much clear now, I still want to point out exactly how they boost your bottom line. Here are six reasons why this type of marketing will always outperform your other channels.

  • Referrals cost next to nothing - I’m pretty sure you’re calculating your cost per lead almost religiously. If you do, you’ve probably noticed that standard advertising and cold calling bring just a handful of clients, but at an extremely high price. Compared to them, referral programs cost peanuts - sometimes, no incentive is needed and even a thank you is enough.

  • People trust you more - referred leads come through the door trusting you. After all, their friend trusts you, so why shouldn’t they? This means that you have to work less on convincing people that you’re the real deal.

  • You can charge more - pricing is always an issue with new customers, regardless of how you obtain them. That said, referred leads will have fewer objections to the price you’re charging because they already know someone who’s paying it and that someone is confident enough to recommend you.

  • Your sales processes moves ahead faster - since you’re not exactly strangers (remember, a referral is borrowed trust), the sales process between you and a referred lead tends to go smoother and faster. They have fewer objections and generally feel that things can be ironed out as you go along. Potential customers that have no idea who you are are more careful and can stall the sales process significantly.

  • You have a higher close ratio - generally, businesses ‘close’ anywhere between 10 to 30 % of open sales negotiations - this varies a lot from industry to industry. However, if we’re talking about referrals, that close ratio goes up to 50%, simply because of that extra layer of trustworthiness you get when someone recommends you.

  • Referrals bring in more referrals - simply put, a referred customer knows how they came to doing business with you. Because they are aware of that, next time they see someone who might benefit in the same way, they won’t hesitate to recommend you. In fact, a customer that has been referred is 4X more likely to refer someone else.

  • Brand recognition goes up - every company benefits from this, but it’s especially true for those that implement social media into their referral program. A lot of SaaS companies skyrocketed this way, including Moz, Ahrefs, Dropbox, and others.


7 Easy Ways To Get Your Customers to Recommend Your Business

how to get customers to recommend your business

Now that we have the benefits of referral marketing out of the way, I’m sure you’re wondering how to get referrals that will push your business ahead of your competition.

This is not difficult - it won’t tax your resources, and it won’t cost you too much in the grand scheme of things. However, it does require you to be consistent and persistent. Most of all, it requires you to know your existing customers and to nurture good relationships with them.

  1. Refer others yourself - asking for stuff is easy, but you want to lead by example, especially in this case. Take a close look at who your clients are and see if you can match them together. This works like a treat, especially in the service industry. Encourage your employees to do the same in their personal lives. What you end up with are interconnected networks that have a referral mindset switched on - people referrer people because they’re used to everyone doing it confidently.

  2. Don’t be afraid to ask for referrals - most of the time, you’re not going to get anything because you didn’t ask for it. Not a lot of customers will remember to refer you - it’s not their fault, it’s how people are wired. If things go well, they don’t complain, but they also don’t talk about it unless reminded. Don’t be afraid to let people know that you would appreciate it if they referred your business to others, but do it face to face whenever possible because it makes a better impression. One more tip - ask your customers to recommend you to people they like - there’s more mutual respect there and the likelihood of that the resulting lead will be at least ‘lukewarm’ will be substantially higher.

  3. Say please and say thank you - I’m pretty certain that this goes without saying, but I’ll repeat it anyway: when asking for something, say please, and when someone does you a favor, say thank you. You’d be surprised how many doors this opens. Most of the time, people don’t need tangible rewards, what they need is to feel appreciated. And a ‘Thank You’ card costs only a couple of cents, remember that.

  4. Use tools which will make your referral program easy to use - if you’re doing referrals on a scale, you need to have the right tools for it. Consider building an online advocacy platform where you can streamline the process. It will help you with everything from creating strong relationships with customers to keeping track of referrals coming in from each of them.

  5. Teach people how to refer others - one thing I’ve found is that people don’t mind referring companies, but they do mind if that takes up too much of their time. Once you ask for referrals (be that in person or through email), make sure to help those customers do it in the fastest possible way. If you’re using an advocacy platform, have email templates available there. If not, email the template yourself to everybody you’ve asked for a referral.

  6. Reward referrals - you take a little, you give a little. Everybody loves to feel like a winner, and if you can reward your advocates for their actions, they will be more likely to perform them. We did a dedicated post here on Ambassify about rewarding your advocates so if you need any pointers, make sure to check it out. Keep in mind that rewards don’t have to be tangible - whenever I talk about this, I love bringing up the Dropbox example - a reward with little to no monetary value, which doesn’t (strictly speaking) cost the company anything still managed to get hundreds of thousands of people to sign up for the service. Beat that if you can.


dropbox referral program


Ready To Give Your Advocates Some Work?

If you’re still unsure about referrals and you think they are too much hassle, let me propose a little challenge. Next time you’re meeting or interacting with a client, ask them to recommend your services or products to people they like and think might have a use for them. Remember - only to those people they like - tell them you want to work with cool customers and that the people they like already have their seal of approval, which counts for something. Say please and thank you, but don’t offer anything in the way of incentives.
There’s so many benefits to this, customer referral is just one of them. To discover more benefits, check out our dedicated resource page on Customer Advocacy.


Solicit referrals like this - up close and personal - for a full week and then come back here and let me know how it went. If you didn’t get a single referral in that period of time, I’ll eat my keyboard and never write again! 

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