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Here’s a great story from CMO magazine, about a company “Bike Friday” who has a great fold away bike, which certainly generates a lot of discussion. To capture this discussion and use it to expand it’s business they have set up a refereal program.

Margaret Day who is 70-something and lives in my home country of Australia has referred over $300K of sales .. and in return has earned credits to buy herself a new $2000 bike.

The company also uses a referral awards program. Customers receive a set of 12 prepaid postage cards with their name and that of the Bike Friday expert who sold them their bike. Whenever a customer meets someone whose interest is piqued by his bike, he’ll fill out a card and drop it in the mail. Bike Friday then mails information to the contact. It also captures this interaction in its database so that riders who make a referral receive a bonus if their prospect purchases a bike. Customers can choose either a $50 check or $75 credit toward future products. Day accumulated enough referral credits to purchase a $2,000 bike last year.

The referral program has helped the company acquire more than a third of its 10,000 customers; it also helps drive sales. Over the last three and a half years, the program has generated $1.3 million in sales. In 2004, 29 percent of its sales came from referrals.

“We did a lot more press releases and advertisements early on, but we realized our customers were our best advertisers—if we made them happy,” explains Hanna Scholz, Bike Friday’s marketing manager.

Consumers love to talk about products that they are passionate about. But providing them with the right tools and incentives is what word of mouth marketing is all about.