Chapter 8 – Referrals


Click to go to the introduction
One simple option to increase the number of paying customers you have that many businesses don’t try is that of asking for, and encouraging referrals from their current clients.

Now, there are a variety of ways to get your clients to refer their friends, family and colleagues to your business, but a particularly effective way of achieving results is to offer some sort of reward for referring.

If the profit in your average sale is high enough, you could offer a monetary reward in return for a referral that turns into a sale.

For example, offer your customer 5% of the sale amount for any referrals that buy from you. Or, offer a fixed amount (say $10, $50 or whatever works for your business) if that’s easier for you. Or, offer credit at your business if that is likely to be popular.

The  key, no matter what incentive you offer, is to make it reasonable and fair. Offering $5 for referring someone who makes a $5,000 or $50,000 purchase is just being mean, tight and stingy, and isn’t going to win you any friends!

It has to be in proportion to the profit you will make from the sale, so if your average sale nets $150 profit (for example), then paying a referral of $15 (10%) to $50 (33%) is reasonable.

Keep in mind that if your average client becomes a regular shopper with your business (ie they go on to make more than 1 purchase on average), then a higher referral payment is justifiable because you not only got a new client but they are likely to keep buying from you, which makes them even more valuable to your business.

The best way to encourage referrals is to design a simple voucher or special offer letter to give your client to pass onto their friend/s that offers something of value to their contact, and requires them to bring the voucher or letter in to redeem the offer. You have the referrer’s details (as simple as their name is fine) on the voucher or letter so you know who gave it to them, and who you have to pay once a purchase is made.

Just let your client know that referrals are vital to your business, and you’d like to make it worth their while referring their contacts to you (assuming they are happy with your service) in return for paying them a bonus for each referral that turns into a sale.

If your product margins are low, you might find it easier to produce something like a loyalty system, whereby they earn points from each referral that buys, and once they have enough points earned, they can cash them in for products or services of your choice (gift vouchers at your favourite winery, Myer vouchers, meals at a restaurant, etc).

Here’s 4 simple ideas to help kick start your referral marketing program today:

  • Train your clients to provide referrals by talking about them early and often. Build in the expectation that they will give you referrals if they are happy with your product/service. Don’t wait for them to offer, educate them and expect it.
  • Follow up by phone, email or letter to ask for referrals.
  • Create a system for your business to encourage referrals. It could be as simple as offering $20 for every referral.
  • Give each client 5 of your business cards & ask them to hand them out to anyone they feel is likely to need what you sell. Have new business cards printed with your offer to new clients on one side and get your client to write their name on the other side, and ask them to hand them out to people they know.
  • A free fifth idea is: send THEM referrals – that’s a great way to build trust and trigger the desire to return the favour we all have within us…


Chapter 9 is next, and it discusses how to increase the value of every sale you make.

About the author 

Eran Malloch

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