A client referral program is an essential tool for increasing a hair salon’s client base. This is especially true for new salons, which may not have a large existing client base. Referral programs are a great idea because they are very cost-effective. Unlike print or radio advertising which may cost hundreds of dollars, a referral program is an internal method of promotion which uses satisfied customers that already frequent the salon.
The most common type of referral program used by salons involves handing out business cards to customers. In theory, the satisfied client will distribute business cards to friends, family, and co-workers. When these new customers come to the salon, the stylist or receptionist will ask the new customer who referred them, and the name of the referring client is recorded. Once the referring client accumulates a certain number of new referrals, he or she is then given some type of reward. In most cases these rewards include a discount on future salon services or retail purchases.
While the idea behind a referral program is basic and inexpensive to implement, many salons with referral programs do not maximize the potential of this type pf promotion. The problem, quite simply, is that a current client will not be motivated to publicize or promote the salon unless a worthwhile reward is offered. For instance, many salons award a client with a 10% discount after 5 or 10 referrals. For an average haircut, this may mean a reward or four or five dollars at most (assuming that the haircut price is between 40 and 50 dollars). Clients who lead busy and active lives may not consider a savings of five dollars a worthwhile incentive. If this is the case, the referral program will not be very effective.
In order to get the most out of a referral program, the salon must be able to create an incentive that will motivate the client to distribute business cards and recruit new customers. A salon may want to consider giving the referring client a free service after three referrals, for instance. Many salon owners are hesitant to offer such a steep reward, feeling that it will be counter-productive. However, this is not the case.
If a salon charges 50.00 for a haircut, rewarding a client with a free cut after three referrals will still result in 150.00 in additional service sales. As long as the service sales generated by the referral program exceeds the value of services which are offered as rewards, the salon will be profitable and the program will work. Most importantly, however, the clients who participate in the program will continue to be motivated to refer new clients. The new clients may also be interested in the program (who would turn down a chance to get a free haircut for simply referring three new customers?), and they will also send new referrals. Before long, this will create a snowball effect, netting a salon 3 new customers for every 1 existing customer.
Once the program has been deemed successful and the salon’s client base has been increased to healthy levels, the salon owner can then decide to discontinue the program, or alter the program so that it will be more difficult for the client to earn free services. The most important thing for a new salon is to build a clientele, and the best way to do this is by offering substantial rewards.