How to Grow Referrals
The best referral program we’ve seen—generates 16-50 new clients a month.
Word of mouth is a tried-and-true method for gaining customers in any business. So it’s no surprise that the #1 most successful marketing practice for salons and spas is a program that drives word of mouth — the “25/20 Referral Program.” This is an easy, two-step process that generates an average of 16-50 new clients per month for 6-to-10-chair salons. The concept is simple:
STEP 1: An existing client invites a friend to try your salon, by extending to them a $20 credit toward any service they have not yet tried.
STEP 2: When the friend comes into the salon to use it, the referring guest then receives a $25 salon credit toward product purchases.
Existing guests like the program, because:
- It lets them extend a special deal to their friends.
- They are rewarded more than the new client. (This eliminates the common complaint, “Why do new customers always get the best deals, not loyal customers like me?”)
New guests like the program, because:
- They have less doubt about patronizing an unfamiliar business if a trusted person has recommended it.
- The $20 credit is significant enough to persuade them to use it.
Salon owners like the program because:
- It’s easy to implement.
- It drives itself.
- It’s easy to measure results.
- The $25 product voucher encourages upsells and crossover to new products.
- For Aveda salons, it’s eligible for Aveda Concept Benefits.
Salon staff like the program because:
- It’s easy to manage.
- It is successful even without staff involvement (dropped into retail bags).
- It helps fill their books — especially important for New Talent.
The Strategy Behind the Program
- The 20/25 ratio. Market research shows that of all the various figures tested for this program, the 25/20 ratio generated the most success for salons and spas. It’s a significant enough gift to entice both new and existing guests, but not enough to hurt your bottom line.
- Rewards your new guest with services and your existing guest with products. You want your referred clients to get a great service at your salon — this is more likely to bring them back. A discount on products alone might result in a loss to your salon without giving them an incentive to become a guest. Your existing guest is already getting services, so this isn’t a concern. The $25 is for products at retail price (not salon cost, therefore the loss to you is lower) and the retail ticket is often more than $25, plus it’s for products they may be new to trying. Guests are also more likely to book services again now that they’re back in to see you to redeem their product voucher.
Easily Implement with a 4-Channel Plan of Action
1. Service Provider to Guest— Arm them with this simple script: “I love doing your hair. I’m sure your friends are as great as you are. If you have any friends you think I can help, I’d love to be of service. In fact, I have a gift for you and your friend.” (Gives guest the 25/20 referral card.)
2. Front Desk to Guest (Reinforcement)— “Your hair looks great! Did (Service Provider) give you a referral card for you and your friends?”
3. Email the referral card to your client list.
4. Take it Online— Offer the referral card on your website and Facebook Page.
Need help implementing? Call Imaginal Marketing; they perfected the program and they’ll set you up with all the pieces above.
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Hi Cheryl.
Thanks for your question. Another salon owner asked a similar question, and the answer applies to this situation as well:
Salons handle it differently, depending on their culture and financial ability.
We would not recommend paying commission on the $25 thank you gift, however the salon should shoulder the cost of the product.
Most guests will spend more when they have a $25 gift voucher and the stylists can guide their guests to new products that they will hopefully buy in the future.
Thanks for your question. We hope this helps.
Does the salon absorb the cost for the retail? Or would you take it off the commission of the service cost?
We find that it’s best to send one-on-one emails thanking your loyal guests for sending in their friends. The personal touch makes a huge difference. Usually, we recommend sending the emails once a week – but whatever works for you & helps you manage time is great!
Hey Guys,
We love the referral program, but is there a way to do a mass email instead of one by one?
We have been doing them on Fridays. Are you finding it easier to do it day by day?
Excellent, Peggy! This program is tried and true.
Sometimes something as simple as a tweak to your referral program can make all the difference to your business.
I have a referral program and it really doesn’t work well. I love this idea and I can see it working. I will implement it ASAP!
we limited the voucher for only skincare which the stylists don’t normally sell anyway.
Hi Andria,
Salons handle it differently, depending on their culture and financial ability.
We would not recommend paying commission on the $25 thank you gift.
However, the salon should shoulder the cost of the product.
Most guests will spend more when they have a $25 gift voucher and the stylists can guide their guests to new products that they will hopefully buy in the future.
Thanks for your question. We hope this helps.
My question is about the referral card. Do you pay the employee commission on the retail even if they are getting the $25 off of the retail? I’m having push back on that part from my employees.
Thank you for your help!!
Andria
Thanks Tami!
We have seen amazing success with the referral program in salons; it’s a great way to build your business.
Great ideas
Love this idea! We are a new salon/spa and all are building our clientele from nothing. So for we are doing well, but defiantly need a push for more referrals! Would love to implement this and learn more about it and any other advice you may have!
I really like the referral ideas.