Implementing the best referral program ideas can give your business up to 293% returns on investment and maybe even higher.
Sounds incredible, right? Well-designed and expertly executed referral programs can bring more customers to the business by leveraging existing customers’ social networks. It boosts brand awareness, fosters brand loyalty, and improves customer retention without incurring substantial marketing costs.
Still not convinced? How about you relax and read about our 12 bright customer referral program ideas to get your business’s bottom line soaring? We’ll give you tips to make your program successful, too. Ready? Let’s begin.
What is a Referral Program?
A referral program is a strategy leveraging existing customers’ social connections.
It’s nearly identical to the age-old word-of-mouth marketing, where we ask people we know for other people who might be interested in our products or services. These “other people” are the customer’s family, colleagues, friends, acquaintances, and business contacts.
It’s like affiliate marketing, except the marketers are current customers. Their experiences with your brand make them excellent ambassadors or advocates. Of course, you will reward them for referring potential customers to your business.
Benefits of Using Referral Programs
Thoughtfully designed customer referral programs can bring many benefits to businesses.
First, a referral marketing program boosts brand awareness by tapping into existing customers’ social networks. Customers have families, friends, acquaintances, colleagues, and social contacts who might not be familiar with your brand. These individuals can become your customers, too.
Second, acquiring new customers is easy and more practical with a referral system. After all, 24 out of 25 consumers trust the endorsements of individuals they know personally. For example, who would you rather trust about a product: your family or a stranger?
You don’t have to worry about customer acquisition costs (CACs). Although CACs vary across industries, they are higher than what you will reward to existing customers for referring clients.
For example, e-commerce businesses spend about $70 for every customer they acquire. The CAC is higher in the software-as-a-service (SaaS) industry (about $702) and business-to-business (B2B) market (about $536).
While you can give cash rewards to referrers, other incentives are available. Gifts, discounts, exclusive offerings, and intangible rewards can motivate customers to refer your business to their contacts. And these don’t cost a fortune.
Third, referral programs also improve customer retention. Increasing your customer retention by 5% boosts ROI by 75%. Rewarding loyal customers for referring new clients is a sure-fire way to keep them in your fold.
Their referrals will also enjoy referral-related perks (i.e., discounts). Everyone’s happy. So, they’ll stay with you (hopefully forever).
Lastly, generating more revenue is a cinch with well-executed referral programs. Think about it. Your new referrals (those referred by existing customers) have social contacts they can refer to your business. They join the program and bring more traffic to your company. More traffic, more money-making chances.
It’s a ripple effect.
12 Customer Referral Program Ideas to Attract Your Customers
Offer exclusive deals and discounts.
Customers love bang for the buck! Over nine in ten shoppers want an exceptional deal, whether a discount coupon or a limited time promo code.
This observation extends to customer acquisition or invite-a-friend strategies. Businesses can give exclusive deals and discounts to existing customers for every friend, business contact, acquaintance, family member, relative, or colleague they refer.
The referral reward (discounts and deals) vary across businesses. For example, a 10% discount for succeeding purchases might seem inviting for some, while others expect a higher rate (i.e., 30% off).
You can also offer a bonus pack. It allows customers to believe they get an exceptional deal. Did you know this tactic can increase sales by up to 73% rather than reducing the product’s price? People buy a value pack (one with a bonus product) more readily than a version with a reduced price.
Unfortunately, discounts and deals can hurt your business if you’re not careful. Determine how much money you’ll make from each new customer. Next, ensure the referral deal or discount doesn’t reduce your profit-per-new customer too low.
This strategy is perfect for repeat customers. The discounts and deals will keep them in your fold.
Give free/seasonal gifts.
Did you know over four in five people remember brands after receiving gifts? That’s not all. Nearly three in four consumers buy from brands that give gifts. And that’s why gifting can be an excellent way to encourage customers to refer a friend or acquaintance.
While giving a mystery gift ensures brand recall, this strategy doesn’t work for all customers. It’s more appropriate for one-time customers or people who buy only once. Gift incentives also work for customers who buy only a few times annually. You can consider the gift as a thank you gesture for buying.
Although the customer might not buy from you soon, the gift will make them remember your brand. That should be enough stories to share with their friends and acquaintances.
So, what gifts should you give?
You could present a gift card, a coffee set, a ticket to a sporting event, or anything that speaks of your appreciation for the customer. Be mindful of their interests and pick a gift that reflects their passions.
Alternatively, you can gift daily-use items, like refrigerator magnets, water bottles, coffee mugs, stationery, and notebooks. You could also gift prepaid debit cards.
We must point out that the gift’s value must be appropriate to the referral’s worth. For example, if the referral buys a high-ticket item, the referrer’s incentive must be high-value.
Send upgraded product.
Most businesses give monetary rewards for qualified referrals. You must know some people prefer something else. Sending existing customers an upgraded product can be more valuable to them than cash incentives.
For example, suppose your customers currently enjoy limited Cloud storage space. A worthy refer-a-friend idea would be to upgrade referrers’ storage capacities from 10 GB to 20 GB. The 100% bump is like giving successful referrers a cash reward equivalent to the price difference between the storage capacities.
Of course, you can combine the upgrade with a discount to make the referral incentive more appealing. Alternatively, you can give it free.
So, analyze your product offerings and work with the R&D department (if you have one). Try to develop a better version of your products and be ready to send the best to top-referring clients.
VIP early access to new products.
Only 1,500 of 30,000 new products launched annually succeed. With a staggering 95% failure rate, it’s surprising why businesses would want to give new product access to customers who refer new clients. You might be better off giving away referral cards and cash.
However, customers love the thought of you prioritizing them over others. They like the idea of being the first. After all, Haas School of Business researchers say “first is best.”
That’s why giving customers early access to new product offerings is one of the most effective referral program strategies you can implement. You convey the message that your business values them. They are your priority.
They will be more motivated to increase their word-of-mouth referral activities because customers know they will be the first to know and use a future product. That’s an incentive many folks cannot resist.
And if your customers are like them, you can achieve your customer acquisition objectives more effortlessly.
Offer double-sided incentives.
Some invite-a-friend strategies only reward referrers or people who refer new customers. That’s not a double-sided incentive.
As the name suggests, a double-sided program rewards the customer (referrer) and the new client (referral or referee). The incentives could be identical or slightly different.
For example, the referrer can enjoy store credits (cash) while the referee gets a discount (in percent). Or, it could be the opposite.
This strategy is perfect for enticing customers to target their friends. For instance, suppose a fitness company offers a $20 discount on a Pilates class. An existing customer can invite a friend to sign up for the fitness program. They can enjoy the next Pilates session with 20% off.
The advantage of this approach is friends or referees are more likely to avail of the offering than highlighting the intrinsic benefits alone. They feel valued. And this makes them want to buy.
On the other hand, double-sided invite-a-friend programs can be costly without careful planning. You have two marketing expenses (the referrer and the referee). That could undermine profit.
Run giveaways/contests.
Bonus drawings and contests are some of the best referral program ideas around. It taps into customers’ natural competitiveness, urging them to invite as many friends as possible to win a prize.
A referral contest is a race. It requires customers to be creative in their persuasion skills. The goal is to recruit or refer as many new clients as possible within a predetermined time frame. The business tallies qualified referrals and gives a big-ticket reward to the referrer with the most qualified referrals.
You will want to reward every qualified referral to avoid demotivating non-winning customers. For example, if you only reward the referrer with the most referrals, others might not exert their best efforts if they believe their winning chances are slim.
Running giveaways should address such concerns. It’s like the lottery, where everyone has an equal chance of winning the plum. Every qualified referral is a raffle draw entry. Hence, the more qualified referrals a customer has, the higher the chances of winning the prize.
For example, you could give a brand new Apple MacBook Pro for the jackpot, three iPhone 14s for the second prize, five Samsung S22s for the third, and ten consolation prizes.
Donate to charity.
Many companies find rewarding customers with money for referring new clients to the business not only acceptable but expected.
However, some customers appreciate brands that display social responsibility. It’s enough motivation for these clients to help the company win more customers. They know that increasing the customer base allows the business to do more for charity.
Studies show that seven in ten consumers value brands that show social and environmental responsibilities. Moreover, 23 in 50 consumers consider company efforts to address environmental and social issues in buying decisions.
The Harvard Business School says people prefer brands that sacrifice more of their revenues for social causes. They consider these companies “more generous,” with a stellar sense of goodwill.
For example, suppose you’re willing to donate $50 for every qualified referral to a charity while a competitor gives $25. There’s a good chance your potential client will choose your brand over the other one.
Market research is crucial. You don’t want to be “too generous” to hurt your bottom line. At the same time, you cannot afford to be stingy to avoid sending potential new clients to competitors with more generous donations.
Reward high lifetime value.
The best referral program ideas almost always consider customer lifetime value (CLV) because it measures the impact of a customer experience program.
Most folks measure CLVs by accumulating a customer’s purchases over time. For example, a client who spends $500 yearly on a brand can have a CLV of $5,000 over ten years.
However, CLV is more than a customer’s total purchases. It includes everything the business does to ensure a splendid customer experience.
Do they follow your social media channel and engage with you actively on each post? Do they share positive experiences or reviews with friends and third-party platforms?
If your answer to these questions is “yes,” you have a high-value customer. These are happy clients. They are your brand’s best ambassadors or advocates. You can rest easy knowing they will bring successful referrals every time.
So, be ready to reward them with a hefty bonus. The incentive should be more significant than what other referrers get. For example, if you give $20 for each qualified referral, a customer with a high lifetime value should receive at least $30.
That’s enough motivation for your customers to refer more clients.
Apply a tiered reward structure.
This strategy is perfect for drumming support for your program. As the name suggests, tiered incentives vary in reward values across several levels or tiers.
For example, you could offer a 20% discount for the first ten qualified referrals. The percentage can increase to 25% for 11 to 30 referrals and 30% for 31 or more referrals.
You can also offer cash-based tiered rewards to make referring new clients more encouraging. Alternatively, assigning points for each referral and categorizing prizes according to accumulated points can deliver results from your rewards program.
For instance, 100 points earn the referrer a $50 cash bonus or store credit, while 1,000 points can get the customer a $1,200 incentive.
The idea is to motivate customers to refer as many new clients as possible. However, the reward must be appealing enough.
Encourage loyal customers with higher discount.
How do you gauge customer loyalty? That’s a question many newbie business owners have. And it’s a valid riddle. After all, if you want to give loyal clients the highest possible discount without undermining the bottom line, you must ensure their loyalty.
You can run a Net Promoter Score (NPS) test to determine how your customers perceive your brand. Millions of businesses use this test to understand their standing from customers’ point-of-view.
NPS test scores classify customers into promoters, passives, and detractors. Loyal, happy, and enthusiastic customers will score your business 9 to 10. They are promoters.
On the other hand, customers who rate your brand 7 to 8 are passives. They might be happy with your business but insufficient to become promoters.
Detractors score your business 6 and below. They are unhappy and unlikely to buy. They might even discourage others from trying your offerings.
So, running the NPS survey should reveal who your loyal clients are. They deserve a higher discount, free access to a premium service, or a more attractive reward.
Promote referrals through customer service emails.
Email marketing is an effective strategy for growing your customer base. You could communicate with your customers, thanking them for their purchases. You can also inform customers about the latest offers, including the incentive for referring friends.
Ideally, your email must focus on thanking the customer. Adding a sentence or two asking for a referral should come naturally. Personalizing the message is always an excellent idea.
For example, if the customer recently bought a product, sending a referral request is timely because the customer is still “high” from the purchase. It’s a different message for a loyal client. You might want to focus on the quality of the ongoing relationship and how other people can also benefit from such interactions.
You can also add a catchy referral reminder below your email signature.
If you choose this strategy, ensure to get each customer’s email address right. You don’t want to send a referral request to the wrong recipient.
Build win-win partnerships with other businesses.
Thoughtfully crafted referral messages are not only effective for customers. They can also work with business partners, like suppliers, subcontractors, and business-related service providers.
For example, suppose you are a tour operator catering to retirees. You could partner with hotel owners and restaurant operators to grow each other’s customer base. You can refer some of your customers to these businesses, and they will do the same.
Of course, you can offer gifts or rewards for every customer they refer to your business. They might not reciprocate with incentives because you’re the initiator of the business-to-business relationship.
You can also partner with a competitor by identifying gaps in the program. For instance, suppose you focus on first-time car buyers while the competitor caters to people with problematic car ownership histories.
Some of your clients might be the competitor’s target audiences, and vice versa. You could ask if you can send these customers to them while requesting the competitor to refer non-targeted audiences to you.
Tips to Create a Successful Referral Program
Ensuring a successful program for existing customers to refer new ones is easy with the 12 ideas we shared. However, attracting customers is only part of the equation. You will need more. The following tips will help you create a more successful referral program.
Offer exceptionally high-quality products or services.
A well-crafted referral strategy means nothing if you have mediocre-quality services or product offerings. Think about it. Why would your customers recommend your business and products to their friends if they don’t find them valuable?
Of course not! Your customers don’t want their friends and social contacts to think negatively of them for recommending a poor-quality product.
Ideally, you will want to evaluate your offerings and compare them against the competition.
Do they have unique attributes that make them stand out? Are they easy to use, affordable, and deliver exceptional value? What customer pain points do your products address? Are your component manufacturer partners reputable with verifiable quality control programs?
You might want to run various tests on your products before moving the prototype to full production. Execute a soft launch and gather initial user feedback. Return to the drawing board if there are more negative than positive experiences or reviews about the product.
Please don’t settle for a mediocre or a “good enough” product. Your product must stand out from the rest for the right reasons. It’s the only way to turn your target audience into customers and ambassadors or advocates.
Set clear objectives for the referral program.
All businesses have their eyes on the bottom line. While the ultimate goal of referral campaigns is to acquire as many new customers as possible, companies can still vary in their objectives.
For example, some brands focus on customer acquisition, even at the expense of paying more for rewards or incentives. Others might want a more balanced approach, pegging customer acquisition to a predetermined budget.
You might also want to focus on customer retention. Such objectives might require a different referral marketing strategy.
Clarifying your objectives will help you ensure program success. It sets measurable parameters to evaluate your progress.
Deliver splendid customer experience.
High-quality products and an attractive referral incentive scheme are useless if you neglect your customers and would-be clients. Modern consumers expect exceptional customer experiences from brands and businesses.
Don’t believe me? PricewaterhouseCoopers (PwC) revealed that 43 out of 50 consumers don’t mind price as long as they get exceptional customer experience (CX). Unsurprisingly, nearly 46% of businesses prioritize CX over product quality and pricing strategies.
A splendid customer experience leads to happy customers. And that makes them more willing to refer families, business contacts, friends, colleagues, and acquaintances to your business.
So, engage them on social media. Get their opinions, comments, ideas, and other feedback to understand how your business stands in their brand choices. Learn their interests and customize your messaging.
Choose a trustworthy referral marketing platform as your partner.
Although you can create a business-specific referral marketing platform, a more cost-effective solution is to partner with an established referral marketing software.
These businesses offer software-as-a-service solutions, allowing you to create, organize, mount, and track referral programs without significant investment.
You can create referral links, codes, referral submission forms, and invitations. These platforms also track referral conversions and provide other referral marketing tools. Many facilitate seamless integrations with e-commerce programs, like Shopify.
So, pick a reputable partner to mount and manage your referral strategies and programs.
Examples of Successful Referral Programs You Can Follow
You might be curious about how referral business models work in real life. Let’s look at the following examples to appreciate how the referral process works.
T-Mobile
According to the 2023 5G Global Mobile Network Experience Awards, T-Mobile beats competitors in 5G availability in the US. Although this telecommunications giant is only the country’s third-largest, its 5G coverage delivers lightning-quick data speeds.
And that’s worth conveying in blog posts to entice friends, colleagues, business contacts, and acquaintances to sign up with the telecom.
T-Mobile pays advocates up to $500 (Virtual Express Prepaid MasterCard) in customer referrals annually. Although referrals or referees won’t enjoy identical perks, they will get T-Mobile’s impressive customer benefits.
For example, they will receive a free 1-year AAA membership, access to leading streaming services, exclusive entertainment perks, and more.
T-Mobile’s referral marketing ideas saved millions of dollars from customer acquisition marketing. That’s the power of leveraging referral sources and connections.
- Referrer Incentives: Up to $500 annually, maximum 10 referrals per year
- Referee Incentives: T-Mobile subscriber benefits
IG
IG is a renowned trading platform offering forex, indices, commodities, shares, cryptocurrencies, and other tradable solutions. Its market range is impressive (over 17,000), and its training and support program is perfect for beginner traders.
Unsurprisingly, it’s one of the easiest trading platforms to refer to a friend. Clients can generate a referral code and share it with social contacts. In turn, IG rewards customers for bringing in a friend to the platform.
IG’s type of referral program follows a tiered scheme. Referrers get $150 for every qualified referee with five qualifying trades. If the referee trades at least $250 but not over $1,000, the referrer gets $300. Tier 5 guarantees a $5,100 reward.
Meanwhile, the referee enjoys a 10% rebate on trading costs (for trades below $1,000). The trading discount maxes at 40% for trading at least $10,000.
IG observes a time period (three months) before paying the commissions.
- Referrer Incentives: Up to $51,000
- Referee Incentives: Up to 40% trading rebates
Dermstore
Craig Krafferts established Demstore in 1999 to empower people to care for their skin and hair. The e-commerce store specializes in skin care, beauty, hair care, and makeup products, while partnering with leading brands.
Customers can write beauty-related social media posts to encourage their friends and social contacts to try Dermstore’s products. They can click a unique referral link to enjoy a 15% discount on their first order.
The discount might seem insignificant. However, it remains valuable, especially when referees subscribe to Dermstore’s Beauty FIX monthly subscription service. They can also buy high-end beauty products from Obagi, Oribe, SkinCeuticals, and Sunday Riley.
One can check these brand’s online reviews, and they will know their products aren’t the usual run-of-the-mill type.
Meanwhile, the referrer gets a $15 store credit they can use for their next purchase.
- Referrer incentives: $15 store credit
- Referee incentives: 15% discount
Koodo
Koodo’s referral system is not as lucrative as T-Mobile’s. However, this Canadian telecom is a magnet for young customers. It makes its referral slogan, “Friends that stick together, save together,” sound more meaningful.
Referrers can use blogs, social media channels, emails, and other platforms to spread the word about Koodo.
This brand’s refer-a-friend program gives $25 to customers and the friends they refer to and subscribe to a phone plan. It’s a parallel double-sided system where both parties (referrer and referee) enjoy identical benefits.
Koodo created the refer-a-friend system to reduce customer acquisition costs by 167% and generate a more robust return on investment. The company focused on improving the customer experience by delivering bright, fun, and consistent branding.
Signing up with Koodo’s phone plans is easy, making it an easy sell for existing customers referring friends and other social contacts.
- Referrer incentives: $25 credit
- Referee incentives: $25 credit
Conclusion
Implementing the best referral program ideas into your customer acquisition and retention program can help secure your business’s bottom line. However, merchants, advertisers, and brands might want to evaluate their programs to decide the most appropriate strategy for acquiring new customers.
Although strategies vary, they all point to one inescapable aim. Customer happiness! A happy customer will use their convincing powers to attract people in their social circles and drive them to your business. Hence, prioritizing your customers above profits makes sense.
