Word-of-mouth marketing is the most influential form of marketing to date. If a friend or family member raves about a particular restaurant, bar, or eatery, you’re most likely to respond with “I’ll have to try it!”

That being said, sparking word of mouth marketing for your restaurant and reaping its benefits relies heavily on creating a referral program that passes the good word and gets new people in your door.

In this post, we’ll share the benefits of an effective referral program to help you capitalize on this powerful marketing tactic.

1. A Referral Program Gets New Business

Bringing in new business to expand awareness, grow revenue, and increase retention is a big driver for most restaurants out there. A referral program is your ticket to acquiring new customers and creating new business.

According to Nielsen, people are four times more likely to buy when referred by a friend and 92% of consumers trust referrals from people they know.

Additionally, McKinsey reported that word of mouth is the primary factor behind 20% to 50% of all purchasing decisions. Wharton School of Business reported that not only is the lifetime value of a new referral customer 16% higher than your average customer, but the lifetime value of a referred customer is 25% higher than that of other customers.

At the primary point of decision, an “I heard that place was awesome!” sentiment might be the tipping point in the direction of your restaurant for a new, valuable customer.

2. Referral Programs Create Customer Loyalty

Referral programs are a simple way for restaurants to capitalize on a customer’s positive experience. Referral programs create a win-win-win scenario between your brand, your loyal customers, and the people they refer to you. It’s a complete trinity of benefits for everyone involved.

If you incentivize your customers to come back, they most likely will. In the same way, you can incentivize them to refer a friend or family member- especially if you offer the new customer benefits as well. At which point, the existing customer becomes a loyal customer, as does the newly referred customer. In fact, referred customers are 18% more likely to stay a customer, according to a Wharton School of Business study.

3. A Referral Program is Super Effective Advertising

We’re talking significant potential for viral advertising.

Social media has a pretty heavy hand in the viral nature of referral programs, and since social media can be free, the potential ROI is substantial. Think about it- referrals via social media can be as easy as a like, share, or sign up. If you have an active referral program, imagine the places you’ll go.

Let’s explore a scenario and say you have a single customer who shares your referral program on one of their social media feeds. You have now just been exposed (for free) to everyone who follows that person on social media (at least the amount of followers that particular social media’s algorithms show it to). Let’s take it a step further and say a couple of those followers engaged with the post and later become customers.

At this point, you have the new customers sharing your referral program with their followers, exposing you to an entirely new network of people. This incredibly beneficial cycle of viral advertising all starts with that one, effective referral program and marrying it with the power of social media.

4. Referral Programs Are Cost-Effective

Perhaps one of the most significant benefits of referral programs, especially for restaurants, is that they’re cost-effective. Giving away a few well-targeted offers is a small price to pay for loyal customers choosing your restaurant, and advocating for it, too.

It’s also cost-effective in that the ROI is much higher for referral marketing than traditional marketing. Think about it- traditional marketing typically means educating new markets on who you are and the benefits of your restaurant versus your competition. In referral marketing, you’re essentially marketing to people who not only already know about you, but who only need one small nudge to get other people excited about you as well.

Wrap up

The bottom line is that a referral program helps to increase your restaurant’s bottom line. It’s a key method in taking advantage of the power of word-of-mouth marketing by creating a win-win-win scenario between you, your existing customers, and customers who have yet to come to your restaurant.

If you’re ready to create a referral program that capitalizes on the excellent experience you’ve created for your customers, Thanx is ready to help!