Answers

Should a small business have a referral program?

Often, yes, if happy customers already send friends your way. A referral program makes that habit easier to notice, track and thank. Keep it simple: one clear ask at the end of a job, one question to every new inquiry about who sent them, and one thank-you that is the same for everyone and stated in advance. If a referrer mentions a reward in a public post, they should usually say plainly that they get something for referrals.

When a referral program helps

  • You already get some work from word of mouth, and you would like more of the same.
  • Most customers finish the job happy enough that you would be glad to hear they told a friend.
  • Your service is one people ask friends about before hiring, as is common with home, care and repair work.
  • You have room for more work of the kind your customers would refer.

Keep it simple

  • Ask once, at the right moment, usually when the job is done and the customer is pleased: if you know someone who needs this, we would be glad to help them too.
  • Ask every new inquiry how they heard about you. When the answer is a person, record the source channel as referral and note who sent them.
  • Offer one thank-you, the same for everyone, and say what it is before anyone refers, so no one feels misled later.
  • Thank the referrer every time, whether or not their friend hires you. Share details about the friend only with the friend's okay.

Thank-yous that work

Often, a note or call means more than the reward. A handwritten note, a phone call or a small gift often lands better than anything elaborate.

If you offer a reward, keep it something you can afford to give every single time, and avoid rewards that depend on how much the friend spends. Those can make a friendly recommendation feel like a sales pitch.

If referrers mention the reward in public

The FAQ does not address referral programs directly; applied to referrals, it means the following.

The Federal Trade Commission's endorsement FAQ says that when someone recommending a product has been paid or given something of value to promote it, that connection usually should be disclosed clearly and conspicuously. It says even a small incentive may need disclosing if knowing about it would affect how much weight people give the recommendation.

The FAQ says a disclosure is more likely to be seen when it sits very close to, or is part of, the recommendation, and gives starting a post with "Ad:" as one example. It also says it is not okay to offer a discount only to people who say good things in reviews (and Google's review policy bans incentives for reviews at all; see the related answer on getting reviews the right way), and that a business should tell people in advance when they need to disclose what they received. On businesses, it is direct: "Your company is ultimately responsible for what others do on your behalf."

In practice, that means asking referrers who post about you to say plainly that they get a thank-you for referrals. This is a plain summary, not legal advice.

Sources

  1. Federal Trade Commission, "FTC's Endorsement Guides: What People Are Asking" (FAQ, no date shown; the Guides were revised in 2023)

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