Using referral marketing to attain more customersIncrease word-of-mouth to improve your restaurant business

Challenges in acquiring new customers

• advertising is costly and ROI is uncertain

• high upfront marketing costs results in negative cashflow

• low advertising budget results in small and unnoticeable ads

• time spent on marketing distracts owners from day-to-day operation

Referral marketing is the future• 84% of consumers trust recommendation

from their friends

• less than 70% of consumers trust advertising

• 77% of consumers are more likely to patronise your business after hearing from their friends or family

• WOM has been shown to increase marketing effectiveness by 54%

• referred customers are 13% more loyal

Consumers’ trust in advertising is falling, making advertising increasingly ineffective

But…

Out of the 83% of satisfied customers who are willing to refer their friends,

only 29% actually do.

Provide incentives to increase referrals• Incentives increase referrals by 15%

• More than 50% of respondents are more likely to give a referral if offered a direct incentive, social recognition or access to an exclusive loyalty program.

• 39% of respondents say monetary or material incentives such as discounts, free swag or gift cards greatly increase their chances of referring a brand.

• A University of Chicago study found that non-cash incentives are 24% more effective at boosting performance than cash incentives.

If 85% of your customers comes from referrals, increasing referrals by 15% results in…

12.75% increase in customersAdditionally, referred customers have a 16% higher life time value, leading to…

14.79% increase in revenue

In the immediate future

In the longer term, as a result of compounding…

Assume initial number of customers = 250, average dollar spending = $15, profit margin = 50% and monthly fixed costs = $10,000

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Some referral marketing ideas

• Free drinks for checking in to Foursquare while at the restaurant

• Receive 10% off your next bill with a HungryGoWhere Review

• Dessert thrown in with any entrée order with a location update in Facebook

• Free drinks for posting image to Instagram

• 1 for 1 deal when you bring along a friend

To set up referral program like Uber and Dropbox, try using RefvyThank you