How to Start a Referral Program
If you want to start a referral program you better make sure you have happy clients.
If you want to start a referral program you better make sure you have happy clients. If they’re not, they will NOT refer you.
If you aren’t sure, focus on customer satisfaction first, then we’ll talk. When your clients are happy, you’re ready to get started.
First, do the research and understand these three things about your business:
The average number of visits per client per year.
The average dollars spent per visit.
The average time a client stays with you.
Now you can calculate the lifetime value of an average customer.
On average, your customers spend $50 a visit, they visit 6 times a year, and they stay with you for 4 years. This means, the average client’s lifetime value is $1200
50 X 6 X 4 = 1200
Next, give your clients an incentive that is valuable enough to convince them to refer friends. But, not too valuable or your program will become unprofitable.
Based on our example, 15% off a service for each referral is (on average) only a $7.50 reward for each new client. If you know the lifetime value of a client is about $1200, you might be willing to offer a bigger reward than that.
Each business is different and you should experiment with incentives. See what percentages encourage the most valuable referrals. Valuable referrals = referrals that become loyal clients.
Here are a few types of incentives:
X% off one service per referral
Free Service after X referrals
Free salon products for each referral
X% off one service for the client and the friend they referred
The easiest (and cheapest) way to track referrals is to use referral cards. You can design and print your own here.
Each card should clearly explain how your referral program works and it should include a space for the new client to write who they were referred by. Include a limit on their discount, especially if you offer high value services.
On the front:
Refer a friend and you’ll receive 25% OFF
on your next salon service up to a total savings of $75
On the back:
Referred by: ______________
GET THE WORD OUT
Email - Send an email campaign out to clients. Let them know the benefits and tell them to ask for referral cards during their next visit.
Social Media - Post the details of your program to Instagram, Facebook, and Pinterest.
In Person - Keep a stack of cards at your salon/suit to hand to clients when they checkout. Make sure you have the details displayed somewhere in your shop for clients to see while they’re waiting.
VIP Clients - Print a separate set of cards for your best clients and offer them a higher reward. You want to attract more clients like these.
After their appointment, tell them how much you appreciate them and ask if they know other clients just like them. Hand them the cards during checkout and tell them you are inviting a few of your best clients to participate in a VIP referral program.
Use tools like StyleSeat’s “Client Notes” to keep track of how many referrals each client sends and if those referrals become loyal clients.
If a few of your clients are killing it, offer them a higher percentage reward.
Keep detailed notes about how much money you lose in discounts and how much you make from new clients.
Every few months, take a look at the progress of your program and see what adjustments you need to make.
Looking for tools to help you run your business? Try StyleSeat here.
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