July 28, 2014

Small Business Advice

Offered incentives, customers will likely promote your business

"There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else." ~ Sam Walton

Jerry Osteryoung | 11/11/2013

FBMC Benefits Management There is an erroneous assumption among business owners that existing customers will promote your business if you provide great customer service. This is not entirely correct.

Customer service is important and necessary, of course, but you also must provide a strong incentive to encourage your existing customers to promote your company on a regular basis.

Dish Network is a great example of a company that uses its existing customers in the marketing plan. It offers a $50 incentive to both the referrer and the new customer so both have a compelling reason to act.

Recently, I recommended Dish to a friend who ultimately took advantage of the offer. As a “thank you” for my referral, Dish unexpectedly sent me a large stuffed Joey (their trademark) and some free movie rentals in addition to the cash.

Clearly, Dish understands how to maximize referrals to help grow its customer base. The company also provided outstanding service. This paired with a good referral incentive encourages customers to pass the company name along to friends and family.

Any business can introduce a customer referral program by following these guidelines:

  1. Understand that customer referrals are not automatic. You need to develop a plan to encourage them. Most of your customers really want to recommend you, but you must offer an incentive to make it happen.
  2. If you ask customers to refer you, equip them with your selling points in an easy-to-use format they can use in their “pitch.” Good options for this include a brochure or a website.
  3. The incentive you offer must be something your customers value, otherwise, they are not likely to go out of their way to recommend you. Cash is a great one — everybody likes cash — but there are other options that may work well, too. Depending on the type of business you are in, you could offer a complimentary product or service. If I have a heating and air conditioning business, for example, I might offer a free maintenance check-up, a service I would normally charge for.
  4. Avoid putting so many limitations on how the incentive is earned that it turns off the customer.
  5. Make the incentive the same for both the referrer and the new customer.
  6. Try experimenting with a variety of incentive offers to different groups of customers and see what works best.
  7. Communicate the details of the referral incentive frequently to make sure your customers know about it and do not forget.

A customer referral program is one of those things every business should consider. Now go out and see how you might use your existing customers to help grow your client base.

You can do this!


Other small business advice columns from Dr. Osteryoung are here.

Jerry Osteryoung is a consultant to businesses - he has directly assisted over 3,000 firms. He is the Jim Moran Professor of Entrepreneurship (Emeritus) and Professor of Finance (Emeritus) at Florida State University. He was the founding Executive Director of The Jim Moran Institute and served in that position from 1995 through 2008. His newest book co-authored with Tim O'Brien, "If You Have Employees, You Really Need This Book," is an Amazon.com bestseller. He can be reached by e-mail at jerry.osteryoung@gmail.com.

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