5 Ways to Reward Referrals

Many businesses grow by word of mouth. If you want yours to be one of them, consider giving people incentives to get the word out about your company. Whether you're seeking referrals by friends, customers or competitors, here are five ways to motivate people to keep the kind words--and business--coming.

Offer a personal gift. Even if you expect friends, family members and colleagues to send clients your way, let them know that you appreciate their efforts by giving them a small token of gratitude, such as a gift certificate for a dinner out or a free service at a spa. The gesture need not be repeated every time they refer someone; if they make several referrals let them know that the gift is to thank them for their ongoing support. At the very least, send a thank-you card to acknowledge the gestures they've made.

Create a referral discount system. One way to get customers to spread the word about your business is to give them a discount on products or services in return. For example, you might offer a one-time five% off for each referral that is made. This type of promotion works best with customers who are buying a frequent service since those who buy a product or service one time won't see as much benefit from a discount on future purchases. One of the additional benefits of such a promotion is that customers can be particularly convincing since they already buy your product or service. To encourage referred customers to make a purchase, you may want to extend the one-time discount to them, as well.

Create a cross-promotion. It might seem counterintuitive that competitors would refer customers your way, but if you offer some services that competitors do not or if you're in a different regional area, consider coming up with a cross-promotional agreement. For example, if customers go to the competitor looking for a service that they don't provide, have them refer the customers to you. Likewise, you refer customers to them when they ask you to provide services you don't or can't provide. Don't fear that you'll lose potential customers in the process. You may, in fact, cement your relationship with customers because by making the referral, you're still helping them get what they want.

Exchange cash for clients. Consider offering an old-fashioned finder's fee. Let people know that you'll give them a monetary amount for any referrals that lead to business for your company. The amount you give for referrals should depend upon the average amount new customers spend. The more money customers tend to spend on your business, the more valuable each referral is and the more money you may consider offering as payment.

Give referrals. Sometimes, you have to give to get. By sending your customers to other local businesses (and letting those businesses know you did so), you're making a favorable impression on those businesses. They're likely to remember your generosity and do the same when they come across potential customers for you.