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Should you start a referral program for your restaurant? The benefits of a referral program for your restaurant include greater customer loyalty and an increase in customers. As loyal customers refer their friends and family, your customer base grows.

Many restaurants and businesses don’t bother with referral programs. They view it as too expensive and complicated to start a referral program. This article will review the economics of starting a referral program for your restaurant and the benefits of a referral program for your restaurant.

“One customer, well taken care of, could be more valuable than $10,000 worth of advertising.”  – Jim Rohn, Motivational Speaker

The Cost of Acquiring a New Customer vs. The Cost of Bringing Back a Customer

Marketing to a new customer can be quite costly. There is not as much trust or brand recognition when it comes to new customer acquisition. Therefore, they need to see your advertisements multiple times before deciding to make a purchase. Another reason that the cost of acquiring a new customer is more expensive is that of ad creation and testing. You don’t automatically know what will resonate with new customers because you don’t have any feedback from them or relationship with them yet.

Consider the following statistics on referral marketing:

  • Referral marketing generates customers who have higher lifetime values, are more loyal, and contribute higher margins per year than other customers – AMA
  • The average small business gets 60% of its business from referral campaigns – Kissmetrics
  • Eighty-two percent of small business owners have said their main source of new business is referrals. – Joel Hughes SVP, Constant Contact

Focusing in on your loyal customers and encouraging them to refer their friends will build a more solid business in the long run. Loyal customers don’t have to continually be convinced that you have a good product. They will convince their friends that you have an excellent product.

Rewarding your loyal customers is a great way to ensure repeat business. When a customer already loves your product, offering a reward of a dessert or cup of coffee for each referral, will not only increase their loyalty but also expand your business.

friends eating at a restaurant grand opening

Lifetime Value of a Referred Customer

Referred customers are highly valuable customers. They are four times as likely to make a purchase from you. Not only that, they act as brand ambassadors, convert more, and have a higher customer lifetime value than other customers. According to the Wharton School of Business:

The Lifetime Value for new referral customer is 16% higher than non-referrals.

For this reason, having an effective referral marketing program in place can improve your profit. Referral marketing works best when there is a formal, referral program that is solidly in place. This ensures that the customers are reminded of the program and rewarded for referring their friends and family.

Loyal customers, they don’t just come back, they don’t simply recommend you, they insist that their friends do business with you. – Chip Bell

Loyal customers are your best advocates. Rewarding them for referring their friends and family is a small price to pay when compared to the business that loyal customers bring in.

What if I Get Too Many Customers?

Implementing a referral program will increase the number of customers that you have. Therefore, you’ll have to figure out how to accommodate them. Luckily, unlike a one-day promotion, referred customers tend to trickle in on their own schedule instead of all at once.

However, if you do end up with a huge influx of customers, technology has come up with useful tools to manage them. You can start taking reservations, to ensure that there will be enough staff to serve the guests.

Upserve can help you manage an increase of customers with features such as online ordering, guest books, menu management and a daily digest, which gives you raw data in understandable insights. This data can help you adjust to an increase in the number of customers.

If too many customers show up at one time, you are going to have to turn some customers away. Before you do, you can give them a small discount coupon for an earlier time of day when it is less crowded. Inform the customers when it won’t be as busy.

Allow the customers to come back later in the evening if there are openings. Another strategy would be to have the customers make a reservation in the future to ensure that the customers will be able to enjoy your cuisine at a later date.

couple on their phone at dinner

Social Media Referral Programs

Customers are looking to social media more and more for reviews and information about restaurants before trying them out. One of the great things about social media is people have started sharing mouth-watering pictures of their meals on Instagram and Facebook. It is a great place to get the word out about your restaurant.

Integrating a formal referral marketing program for your restaurant with Facebook is an excellent marketing strategy. It conveniently allows you to connect your friends and family to your favorite restaurants with the click of a mouse.

CandyBar now has a fully automated referral program for restaurants. When customers give your restaurant a positive review online, Facebook messenger asks if they want to join your referral program. You select the reward that you will offer to them.

Customers can then refer their friends and family by hitting share on their phone. Referrals are automatically tracked. Rewards can be redeemed by simply showing the cashier the message from the CandyBar Assistant.

Referrals don’t happen automatically. Many people’s lives are so busy that they forget to refer people to restaurants that they love. For this reason, it is important to incentivize them and remind them to refer their friends and family. Offering rewards for referrals is a great strategy for increasing referrals and improving customer loyalty.

As time passes, many people will forget about the referral program that they joined. Remind your customers periodically about your referral marketing program. This can be done through holiday promotions, emails, and social media. Be creative. Referral programs can get stale. Spice it up by introducing new menu items for referring friends and family or get creative and offer a VIP reward experience.  

Loyal regulars spend 67% more at restaurants than new guests do. With effective guest communication, you can make every guest a loyal regular.

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Written by   |  
Melinda Curle is a marketing professional from the United States, currently working for CandyBar, a digital punch card loyalty program which allows restaurant owners to retain their best customers and keep them coming back for more food.
Restaurant Insider