The importance of using referral schemes to grow your franchise business

The first thing to remember is that referral schemes are reliant on good customer experiences

When starting a business or choosing a franchise to invest in, one of the most concerning aspects for people is often their lack of experience in sales and marketing and how they will grow their business. The great news is that any good franchisor will share tactics for effective marketing with their franchisees, so you will learn of all the ways others in the franchise network have successfully grown their business. One really effective part of the marketing mix is referral schemes. David Truby, MD of Greensleeves’ lawn care franchise, explains why, in his experience, referral schemes are one vitally important element of growing a franchise business.

Firstly, what is a referral scheme? Well, referral schemes are word-of-mouth initiatives designed by a company to incentivise existing customers to introduce their family, friends and other contacts to become new customers. The schemes help business owners to expand their customer base, often giving an impressive return on investment due to the low initial outlay. In fact, Greensleeves’ Recommend a Friend scheme was the highest single method of new customer acquisition in 2020. Tracking the scheme was simple and it gave us clear data proving it was the source for 30 per cent of the new customers we gained.

Referrals are so effective because 84 per cent of people trust recommendations from people they know, making them the most influential advertising form. They also offer a 37 per cent higher retention rate of customers than other marketing forms, which means if you’re a brand invested in cultivating loyal fans, like most businesses are, it’s perfect for you. So, here are some practical ways to ensure that your business is providing an exceptional referral scheme to its franchise network.

1. Provide great customer service

It’ll come as no surprise that providing excellent customer service is the basis of any good business, let alone a referral scheme. To deliver best-in-class customer service you should communicate regularly using positive language – think of it as a glass-half-full mentality as ideal in forming healthy relationships with your customers. Just remember that over-promising and under-delivering is a fast track to losing business and a client’s trust.

Referral schemes are reliant on good customer experiences. The fact of the matter is, customers will only refer businesses that they have enjoyed using.

2. Make referring easy

Have you ever heard the phrase ‘short and sweet’? That’s exactly how you should make the referral process for your customers. It’s important to make referring easy because no one will jump through hoop after hoop to refer a business to their friends, even for a reward. So, to maximise the number of people your franchisees can reach through a referral programme, ensure you’re providing short, simple and easy-to-use referral options.

You can make referring easy for your customers by giving various options to refer your business through your website, social media pages or via email. At Greensleeves, all a customer needs to do is share a friends’ contact details with us and we do the rest. Once the new customer signs up and receives their first treatment, we then apply our reward – simple! The easier you make it to refer your business, the more likely customers are to share.

3. Identify your incentives

The incentive is the reward you give to your customer for successfully referring their friends. Customers have busy lives, so referring a friend is rarely a priority. However, the more attractive a reward is, the more likely it is to nudge someone into taking action.

The incentive you offer could be a discount on services or products, additional services or products or a money-back reward. At Greensleeves, we rely on repeat business, so we incentivise customers to refer us by rewarding them a five-pound discount off their next service to increase the likelihood they will use us again. This way we can optimise the chance of picking up new business and keeping our current clients happy.

Whilst this style of incentive may not be useful for a mattress company where people only buy every eight years, there are many sleep-linked rewards where you could partner with a mutually beneficial brand. 

4. Promote your referral programme

Just setting up a referral programme isn’t enough; you need to promote it. Reaching out to as many people as you can is probably the single most important factor that will determine the success of your referral programme. It would be a shame if your referral scheme didn’t get you the exposure you deserved because your customers and would-be advocates never realised you had one!

Advertise your referral scheme on your website, on the back of invoices and through word of mouth to optimise the scheme’s exposure. You can also promote your scheme by posting about it on your social media.

5. Set up a tracking system

Very simply, referral tracking is collecting data on each touchpoint throughout the referral journey so you can map out that journey and look to understand how to optimise it. No matter what system you use to track referrals, you need to trace back who is referring your company. You should be tracking:

• Who was referred and who referred them
• When they were referred
• How you’re going to nurture and follow up with them
• Whether or not they converted to a sale.

Whilst you can do this is manually or through a simple spreadsheet, it can be very time-consuming. Once you’ve tested and established a referral scheme, look at using automated platforms to increase the chances of being more effective and assertive in your approach.

So, when starting a new business or choosing to invest in a franchise, whether you’re well-versed in sales and marketing or feel like it’s the area you’ll need most support, ask your franchisor if they run a network-wide referral scheme.

About the author

David Truby is the MD of Greensleeves. Established in 1998, Greensleeves is a lawn care franchise with 96 territories in the UK. It delivers an all-year-round lawn care service through a network of franchisees across the UK and in 2020 had a record-breaking year.