Referral programs are an effective marketing tactic for many businesses. These help reach more people, generate new leads, and .
One of the best programs of this type comes from TheSkimm. This news company now reaches , and 10% of subscriptions come from their referral program. Dropbox also has such a program that increased by 15 months.
With the right steps, this word-of-mouth strategy can help businesses of all sizes and industries.
This tutorial will cover everything you need to know about referral programs, from definition to benefits and examples. We’ll also walk you through the process of creating a program step-by-step, including tips, ideas, and recommended software.
What is a referral program?
A referral program is a word-of-mouth marketing strategy that encourages existing customers to recommend a brand’s products to their network. Through it, customers receive incentives with rewards for each recommendation, such as discounts and free products.
How does a referral marketing program work?
A referral program is about asking satisfied customers to become brand advocates. These join a referral campaign and get a unique link or code to share with their network.
Existing customers typically receive incentives once their referred customers purchase an item using the link or code.
For example, Casper’s Refer a Friend program offers an Amazon gift card for 10 Dollars when a customer’s friend buys their mattress for the first time through the referral link.
The referral process can be tricky to track as each member has a unique code or link. Therefore, many companies use referral software to automate the flow, from generating links to sending rewards.
What are the benefits of a referral program?
Although this word-of-mouth marketing strategy requires a large investment, such as buying software and offering rewards to incentivize customers, it is worth the effort. The benefits of a referral program include:
- boost sales. they trust recommendations from family and friends and spend 200% more than regular shoppers. Referral marketing is effective because it replicates the feeling of a referral from a trusted friend.
- Create brand recognition. Many active members of the referral program indicate that more people will talk about your brand.
- Increase customer retention. A brand can reward loyal customers for generating new leads through a referral program, resulting in a better relationship with them. In addition, the referred leads also have to be people from other marketing channels.
- Reduce customer acquisition costs. agree that referral programs have a lower cost per lead than other platforms. Incentives prepared by a company help encourage existing customers to invite as many people as they can.
5 Great Examples of Referral Programs with Conclusions and Tips
Before you learn how to create your own programs, let’s look at the five best examples of referral programs so you can get inspired.
1.Marriott Hotel
The Marriott hotel does not provide a great example of a referral program. This service-based business awards points to existing customers for bringing in new customers. They can then redeem the points for rewards such as airline tickets and plane rentals.
key takeaway– Instead of cash discounts, use points-based referral bonuses to encourage customers to return to your brand.
Marriott hotel customers can earn at least 2,000 bonus points for each referral, but those points can only be redeemed for certain bonuses after reaching a specific number. For example, the company offers car and flight rentals for .
2. Girlfriend Collective
Girlfriend Collective is a sustainable sportswear brand. Their Refer a Friend program offers the successful referral a $10 discount, while the referring customer gets a free pair of leggings.
key takeaway– Encourage people to join your referral program with a free product. This is a powerful marketing tactic as this is when a business involves free items. Labeling a free product as a bonus also improves the perceived value of a product.
In this referral program, Girlfriend Collective not only uses free products, but also takes advantage of . This strategy helps ensure that the quality of the free product pays off and generates more referrals from friends.
3.
is a web hosting company that offers many services, from virtual private servers (VPS).
‘s referral program allows existing users to offer a 20% discount on products to referred customers. For each purchase made by a referred customer, the referrer will receive up to a 20% reward. Users can register and manage their referrals through ‘s web hosting control panel.
key takeaway– Make your referral program page easy to use and rich in features. Seamless integration into your product and the addition of useful features will improve the overall experience for senders.
Since ‘s referral program page is easily accessible through hPanel, the signup process is quick and easy. Managing references is also easy with built-in features like the tracking progress of referrals and the option of connect to multiple PayPal accounts.
4.Tesla
Over the years, the Tesla referral program has changed its bonus system. The company now gives out free supercharge miles for referred leads and offers various rewards for referrers, from a free car to a tour of the company.
key takeaway– Consider experimenting with different rewards or bonuses. This will help find the right incentive and surprise the audience.
Keep in mind that it is essential to inform your customers to avoid confusion and generate enthusiasm. For this reason, the Tesla referral program page displays past and ongoing campaigns. Their referral bonuses are also unique, such as watching a rocket launch and joining their test track.
5.Get-around
Getaround is a car rental marketplace. Referring customers will earn driving credits if their friends take their first rides and earn cash when new customers lend a car.
key takeaway– Provides a social login method for current and new customers. Social logins don’t require users to create and keep track of more credentials, reducing login failures and . In fact, creating new accounts on websites annoys .
Getaround makes it easy to participate in the referral program by providing three popular social login options: Facebook, Google, and Apple.
How to create a referral program
Now that we’ve explained the concept, benefits, and examples of referral programs, follow these six steps below to set up your own.
1. Define your ideal client
A referral program works when a business gets referral customers who buy their products. However, it can be challenging for your current customers to understand what makes a good recommendation.
Therefore, identify your ideal buyer before asking your current customers to look for referrals. Once you decide, share the information with them. That way, they’ll know who to refer instead of just listing friends’ names to collect bonuses.
The perfect description of the referred client does not have to be long. For example, copy like “Do your friends love to run? Give them $30 off their first order.” This is appropriate for a sports shoe company, as it indicates that they are targeting running enthusiasts.
Defining a perfect customer also helps find the right advocates because not all customers want to join the referral program.
We recommend applying the Net Promoter Score (NPS) approach to deciding which clients to ask for referrals. This method rates customer satisfaction with your business from 1 to 10 and divides them into:
- Promoter. People with a score of 9-10 are likely to recommend your products.
- Passive. Customers who probably won’t recommend but won’t give bad reviews either.
- Detractor. People who share negative reviews.
When promoting your referral program, interact with the Promoter, as these are the best customers for generating referrals.
expert tip
The most common type of customer that participates in referral programs is an early adopter. This means that they tend to be ahead of the curve when it comes to new technologies and trends.
They are also often referred to as influencers as they tend to be active on social media like Instagram and Snapchat and have large networks of friends and acquaintances. If you are trying to get people excited about your referral program, you should try to target these types of customers.
In addition, people who have tried a product and loved it, and those who have been delighted with a company’s customer service, are also likely to participate in such a program.
2. Create valuable rewards
they value brands that offer incentives. Giving them bonuses provides additional value and makes the brand experience memorable.
To develop a perfect reward system, decide who will get the reward first. There are three ways to do this:
- Unilateral incentives for existing customers. This option helps improve customer retention, but may not encourage new customers to join. It is better for companies that sell affordable products, since the referred friend may still be interested in buying them even without discounts.
- Unilateral incentives for referred customers. Helps motivate new customers to buy. However, the number of referrals may be lower as referrers may not be interested in joining.
- Two-sided incentives. This strategy rewards current and new customers, motivating them to join the referral program. However, not all companies can afford to offer incentives for both parties.
While referral benefits can attract customers…
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