Recommendations are an essential part of engaging in anything today. And with an increased demand, it’s become challenging to find the services or products that fit our needs. Whether you’re looking for a new coffee shop, a restaurant, or looking to buy a book, the first thing we look at are reviews, making the referral strategy crucial for many businesses.
But did you know that around 86% companies with structured referral programs have reported an increased revenue within just a two-year period. To back this up, over 92% of consumers trust reviews from friends and family. This opens an incredible earning opportunity.
So, how do you create a successful referral program for your business and cut back on customer acquisition costs? Let’s review everything there is to know about customer referral programs, what are some referral program examples, and share tips to set up your own referral marketing strategy.
What Is a Customer Referral Program?
A customer referral program is a marketing strategy that encourages current customers to refer new customers to a business. They usually offer referral incentives or rewards to customers who successfully refer new customers.
The rewards can come in many forms, such as discounts, cash rewards, free products or services, or loyalty points. A referral program aims to increase customer retention, where satisfied customers spread the word about a business to their friends, family, and colleagues.
A referral marketing strategy can be a highly effective way for businesses to acquire new customers because potential customers are more likely to trust recommendations from people they know and respect when compared to traditional advertising.
Moreover, they are cost-effective because businesses only need to pay rewards when a new customer is acquired through a referral rather than paying for advertising that may or may not result in new customers.
Do Customer Referral Programs Work?
Today, if you need or want to buy anything, all you have to do is pop to a local shop or get what you need online. But with so many choices available to us, merchants and businesses create intricate marketing strategies to help attract potential customers. But that’s just one side of the same coin.
The other side is customer referral. Colorful and eye-catching marketing ads have become a standard, requiring less and less experience to create. That’s why, when we find an interesting ad, most of us immediately open up Google and look for reviews.
With an effective customer referral program and marketing strategy, businesses can drive growth, build customer loyalty, and improve customer acquisition costs. But how do referral programs compare to marketing strategies, and what makes a referral program successful?
Referral Programs In Numbers
Research shows that referred customers have around 25% higher customer lifetime values than non-referred customers. The reason is simple – people prefer to buy from brands recommended by friends and family.
Another metric that a lot of businesses favor is the cost per acquisition (CPA) which is typically lower for referral-based customers. The main reason for this is that companies only pay for successful referrals.
Marketing Strategies vs Referral Programs
The key difference between a customer referral program and a marketing strategy is that the former method is way more cost-effective and organic than traditional marketing. Paid ads may be what makes marketing spin, but they come with significant upfront costs with an undetermined percent of success.
In contrast, a customer referral program pays per referred customer and often results in an immediate sale, making referral programs especially effective for small companies and startups with limited budget and low brand awareness.
Moreover, both customer acquisition methods leverage different attraction hooks. Referral programs are all about real-life customer experiences, while content marketing or social media marketing emphasize the potential benefits and key product or service features.
Factors for a Successful Customer Referral Program
- Attractive rewards: Offering referral incentives like freebies, discounts, bonus points, gift cards or other can attract all customers to your business.
- Simplicity and usability: A customer referral program should be easy to understand and quick to engage with. A hassle-free user experience can encourage participation in referral marketing strategies.
- Targeting the right customers: Identifying and targeting highly satisfied or engaged customers can result in a more effective referral program.
- Timely reminders and follow-ups: Setting up automated emails or push notifications can remind your customers about your referral program and its potential rewards.
- Transparency and trust: To make sure your customer referral program is successful, be transparent about your reward system structures and timeframes.
Benefits of Customer Referral Programs
Having an effective customer referral program can be beneficial in many ways. For starters, letting your customers do the marketing for you allows you to focus on growing your business. Here are the key benefits of referral programs:
Efficient Customer Acquisition
Referral programs can help businesses attract new customers through word-of-mouth marketing. Potential customers are more likely to trust recommendations from people they know and respect, making a referral marketing strategy more effective.
Cost-Effective Marketing
Referral programs are usually a more cost-effective customer acquisition method when compared to other digital marketing tactics. Businesses only need to pay rewards when a new customer is acquired through a referral rather than paying for advertising that may or may not result in customer acquisition.
Improved Customer Retention
Referral programs help improve customer loyalty by incentivizing current customers to continue doing business with the company and refer their friends and family. Your products and services will be seen as more credible, and will encourage continued use.
Increased Brand Awareness
With a good customer referral program, you can increase brand awareness by encouraging satisfied customers to share their positive experiences with others. While brand awareness might not immediately result in increased sales, it can lead to increased credibility and visibility for the business.
How Does a Referral Marketing Program Work?
A referral marketing program works by incentivizing existing customers to refer new customers to a business, with the goal of increasing their customer base and improving customer loyalty. This is a key difference from other marketing strategies like affiliate marketing.
Current customers are notified about the referral program through various marketing channels like email, social media, or the company’s website. Those who want to participate in the customer referral program share a unique referral link or code with their friends, family, and colleagues. The link or code identifies the customer as the referrer.
When a new customer uses the referral link or code to make a purchase or sign up for a service, the business tracks the referral and attributes the sale to the referrer. The referrer receives the reward specified in the referral program guidelines. Rewards may include discounts, cash rewards, free products or services, or loyalty points.
The new customer may also receive a reward, such as a discount on their first purchase or a free trial of the service. The business continues to provide high-quality products or services to both the referrer and the new customer to turn them into long-term, loyal customers.
How Do I Create a Referral Marketing Program?
By now, you’ve probably realized the importance of having a referral program for your business. Sure, different companies have their own unique customer referral programs, but in this section, let’s review the key steps you can follow to start planning your own referral program.
Step 1: Set Your Goals and Determine Your Rewards
Determine what you want to achieve with your referral program, whether it is to increase sales, grow your customer base, or boost brand awareness. Decide on the type of referral incentives you want to offer to customers who refer new customers like discounts, free products, or cash rewards.
Step 2: Create a Referral Program Landing Page
Create a dedicated landing page for your referral program that outlines the benefits and rewards of participating. Include instructions on how to refer friends and family and any terms and conditions that apply. And don’t forget to tell them that you only need people interested in your product, not just any friend or family member.
Step 3: Choose a Referral Tracking System
Choose reliable and easy-to-use referral program software like Referral Rock, Ambassador, Google Apps, and many others to track and monitor incoming referrals. referral tracking system that allows you to track and monitor referrals. This will make it easier to manage your program and reward customers.
Step 4: Promote Your Referral Program
Promote your referral program through your website, social media channels, email marketing campaigns, and other advertising channels to encourage customers to refer new customers. This is why referral programs work best with marketing strategies.
Step 5: Monitor and Measure Your Results
Monitor and measure the success of your referral program regularly. Analyze the number of referrals, the conversion rate, and the return on investment (ROI) to determine whether your program is working and make any necessary adjustments.
Step 6: Follow Up on Referrals
Don’t forget to thank your customers for bringing new customers to your business. Once you land a solid deal, try to make a great impression as soon as possible so you can close the deal and increase your customer retention.
Customer Referral Program Ideas
Now that you know the basics of building a referral program, there are numerous ways of setting up a customer referral system for your business. So, here are some of the most popular referral program examples you could look into.
A Surprise Gift
Surprise gifts can be a great referral idea to keep your customers excited and ensure they refer again and again. You can use your excess or under-purchased products to reward them or offer a service-based mystery box if you’re a service-based business.
Social Gifting
The reason why social gifting is so effective is that people like to give and get something in return. So, you can offer them a chance to share a gift coupon with their friends. If their friends redeem the coupons, they can get their own reward.
Giveaways or Contests
Host a giveaway or contest for customers who refer new customers. Customers who enter into a drawing can win a prize for each successful referral they make. This builds both engagement and anticipation, drawing interest from potential customers.
Tiered Rewards
Offer tiered rewards for customers who refer multiple new customers. For example, customers can earn a small reward for their first referral, a larger reward for their second referral, and so on. With this strategy, you can both boost your referral system and long-term loyalty.
Points-based system
While similar to the tiered-reward strategy we just described, creating a points-based system where customers earn points for each successful referral can be another great alternative. Collecting points can keep customers interested as those points can later be redeemed for different rewards.
Best Customer Referral Program Examples
Having the right tools can make any job easier, and it’s especially true for choosing the right referral program for you. Let’s look at some of the best referral program examples:
1. Pawns.app
Pawns.app is a bandwidth-sharing and survey site and mobile app that gives people a chance to earn some side money in their spare time. The company has a great referral program that rewards both existing customers and new ones who join the app.
As a customer, your referrals get a $1 bonus as soon as they register on Pawns.app, which is a great way to attract them. You, on the other hand, get 10% of their payouts for life. So as long as your referrals keep using the app to share their unused bandwidth or take paid online surveys, you’ll get your share.
Recommending Pawns.app to your friends or family as an easy way to make some extra money is a nice way to ensure a lifetime passive income for you. Plus, the company has you covered when it comes to promotional assets so you can attract more referrals.
- Commission rate – 10% of the referrals’ payouts for life.
- Getting paid – you’re eligible for payouts 30 days after your referrals join and start using Pawns.app.
- Payment methods – PayPal, crypto, banks, and more.
2. MarketAgent
MarketAgent is a legit survey platform that allows you to take surveys for points that can then be redeemed for cash. It’s a nice way to make some passive income, so you can easily recommend it to your friends, family, or co-workers.
As part of the referral program, you can earn 50 points for each new referral that uses your unique link to sign up on the platform. To give you an idea of how much this is, 100 points equal around $1.20, so 150 points are probably worth around $.1.80.
MarketAgent’s free referral program allows anyone older than 13 to join it. It also provides promotional banners that will help you attract more referrals. But there’s a catch – your referral has to complete at least one survey so you can get your bonus, which is fair enough.
- Commission rate – around $1.20 per referral once they complete one survey.
- Getting paid – N/A
- Payment methods – Skrill and PayPal, after reaching the minimum payout limit of 200 points.
3. OnePoll
OnePoll is another survey site that lets people in the US and UK earn some money on the side by completing online surveys. It may not offer much, but it’s still a better way to use your free time than scrolling on your social media. If you decide to join its referral program, you can do it for free.
Whenever some of your friends or family members use your referral link to join OnePoll, you’ll get $0.50. There’s a chance to get a bonus if your referral reaches a specific earning milestone. Anyone that makes $20 will bring you a $1 bonus, and those who reach $40, which is not easy, will bring you a bonus worth $2.50.
Overall, the more active your referrals are, the more earnings for you. However, the program doesn’t allow you to invite more than 15 people per month, so it’s a bit limiting.
- Commission rate – $0.50 per sign-up, plus bonuses.
- Getting paid – you can redeem your earnings once you reach the minimum payout threshold of $40 or £40.
- Payment methods – PayPal for US and UK users, and check only for UK users.
4. Toluna
Toluna is one of the most popular survey platforms that gives you rewards for spending your time completing online surveys. Every time you complete a survey, the platform will give you points which can be exchanged for vouchers or cash.
Joining Toluna’s referral program is a good idea if people close to you want to make some side cash in their free time. Whenever someone uses your referral link to register on Toluna, you earn 500 points which isn’t a lot since 3,500 Toluna points are worth around $1.
Keep in mind that you can only refer up to ten new users on the survey platform per month. Toluna tends to check all referrals to ensure they are real people.
- Commission rate – 500 Toluna points.
- Getting paid – N/A.
- Payment methods – PayPal.
5. PrizeRebel
PrizeRebel is a well-established survey platform that has provided people with an opportunity to earn passive income for over 15 years. The platform uses a point system, so whenever you complete a survey, you earn points that can later be redeemed for gift cards or cash.
Recommending it to your friends and family aged 18 and over can help you increase your earnings while you sleep. You can share your referral link on any platform you want and get anywhere between 15% and 30% of your referrals’ cash rewards as long as they are active.
If you’re a member of the Bronze level, you get 15%. The percentage will increase to 25% when you reach the Gold level, and 30% at Platinum. To reach higher referral rates, you need to obtain a specific number of points.
- Commission rate – 15% to 30% of your referrals’ payouts.
- Getting paid – N/A
- Payment methods – PayPal or gift cards.
6. Fiverr
As one of the largest online marketplaces for a wide range of freelance services, Fiverr is popular in the freelance and business communities. This means you can recommend it to anyone in web design, content writing, graphics, and similar sectors.
So if you have friends and family you think can benefit from Fiverr, you can join its referral program and get a unique referral link to share by email or social media. Every time someone registers on the platform using your link, you earn 10% of their first order amount, up to $100. Your referral also gets a 10% discount on their first purchase, so it’s a win-win for everyone.
- Commission rate – up to $100 per order.
- Getting paid – N/A.
- Payment methods – PayPal, bank account, or Payoneer.
Key Elements of a Successful Referral Program Template
It doesn’t matter whether you operate a big or small business, any company can benefit from having a referral program example to follow. A template that’s both visually appealing and has clear instructions can help your existing and future customers to better understand and follow the referral process.
Let’s review some of the key elements you should consider for your template to make it easy for anyone to refer to your business from the comfort of their own homes.
1. Clear Headline
A good headline is key to attracting attention. So when creating it, make sure it’s catchy, short, aligned with your brand, and immediately lets customers know what you offer. For example, “Refer a Friend, Earn Rewards!” or “Invite Friends & Save Together” grabs attention and communicates the main benefit upfront.
2. Simple Visuals
Catchy headlines are good, but visuals should be both catchy and minimalistic for clarity. Try to use clean and simple visuals that highlight the benefits without overwhelming your customers. This could be a simple few-step flowchart with a couple of words describing the process and rewards for participants.
3. Explanation of How the Program Works
Following a step-by-step flow is both a great visual explanation, and a referral program template. When defining the referral progress, be simple and don’t use too many words. A good example could look something like this:
- Invite friends: Share your unique referral link with friends.
- Friends sign up: Your friends join using your link.
- Earn rewards: Receive a reward for every successful referral!
4. Referral Code or Link for Tracking
Depending on your capacity and capabilities, referral codes could be a great way to track valuable referral data. If you want to include it in your referral template, make the referral code as visible as possible. Once you’re up and running, a referral code can help identify and link together customers with people who referred them.
5. Strong Call to Action (CTA)
Finally, a strong and clear call to action (CTA) is as crucial as the cherry on top. CTAs encourage participation and engagement, so if you want your CTA to stand out, use examples like “Invite Friends Now,” “Start Earning,” or “Share and Save!”. Plus, the CTA should also have a dedicated visual element to help it stand out.
Conclusion
Having a customer referral program is one of the best and most cost-effective ways to get more traffic, leads, and customers to your business. Plus, it’s an excellent way to reward your existing customers for recommending you to their friends and family.
As long as you follow our advice on building a referral program and implement some of our ideas to ensure its success, you can expect more sales and higher ROI.
FAQ
Why do businesses need a referral program?
Businesses of all sizes can benefit from referral programs because it’s an easy and cost-effective way to increase sales, build customer loyalty, and enhance brand awareness.
Why use referral program software?
Referral program software can help businesses streamline the process of managing a referral program. It can help businesses manage their referral program more effectively, increase the likelihood of referrals, and provide a better user experience for their customers.
