Positive word-of-mouth marketing is a powerful tool. It helps enhance brand visibility and drive revenue as existing customers refer their friends to purchase from your business.
One of the most effective strategies to encourage this is to run gift card referral programs and offer referral gift cards.
When your buyer receives an incentive for recommending a friend, it becomes a win-win situation. After the friend’s purchase, this advocate gets their favorite reward while your store gains sales.
Who else can resist the “free money” and discount coupons when shopping online? Thus, this is your chance to boost customer engagement and sales revenue.
What Are Referral Gift Cards?
Referral gift cards are popular incentives used in referral marketing programs. This reward goes to successful referrals who refer a friend, that friend who becomes a new buyer, or both.
The digital gift cards work effectively to encourage word-of-mouth marketing. Your existing customers or employees can share the deal with others, motivating newly referred people to purchase from your brand.
Cash-equivalent gift cards are better alternatives to actual cash rewards. They work best when:
- Customers do not expect any near future purchase
- Rewarding someone who is not directly paying for your goods (e.g., their company pays)
- Giving customers flexible gift card options
When Should You Use Gift Cards As A Referral Reward?
There are 2 popular types of referral gift cards to incentivize your program participants: your brand’s gift card rewards and third-party options.
When used, your own cards store credits to your company, meaning they are coupon codes dedicated to later purchases. This reward benefits your business and encourages people to buy more from you.
While external gift cards (third-party) are issued by other non-competing merchants that your customers enjoy. This enables a personalized experience as referrers can choose their own reward.
For example, a skincare brand can collaborate with a wet brush retailer to reward referrals during the Black Friday season.
Each choice of gift cards has its advantages. Should you use your own or third-party gift cards as a reward?
Use your own gift cards when:
- You expect advocates to purchase regularly
- You want to inspire customer loyalty by tying the reward to your business
- You want to incentivize the referred buyers to make the first purchase
Tip: If you are in the beauty or apparel industry, run another eCommerce store that drives frequent purchases.
For instance, Sephora can offer discount coupons as referral rewards for its partners like Fenty Beauty or Kiehl’s. Future purchases still benefit Sephora the most with revenue shares to such partners.
Use third-party gift cards when:
- The advocate may not buy from you again in the near future since you sell something people will not repurchase for a few years
- You want to reward the referrer in your B2B referral program, but they do not directly pay for your product
- You want to offer a diverse selection of gift cards that are easy to maintain
- You plan to incentivize your employees for referrals in an employee referral program
Here are some industries where you can effectively use third-party gift cards: car dealerships, insurance, travel, home services, education, solar, etc. They work well for businesses where people spend large sums and not often.
In general, you can use both types of referral gift cards to reward existing customers or employees. It depends largely on your business purposes.
Benefits of Using Referral Gift Cards
You will discover many benefits of gift cards when used as a referral reward. Overall, this incentive allows merchants to encourage customers to refer more buyers and increase loyalty.
To be specific:
- Instant send and receive
You can give away gift cards immediately since they are digital rewards. Customers will receive your coupons as soon as they complete the required action.
- Easy application
Despite being in the digital form, these cards are highly secure.
They are also easier to send than cash. Cash will not benefit your online business when people want to purchase again, anyway.
- Feels like free money
Gift cards are basically free money. Who does not love free money, though?
However, this money ties back to your store to boost revenue with repeated purchases from different buyers.
- Rewards based on customer choice
In some cases, merchants would provide external gift cards from third-party partners. As a result, customers are free to choose their favorite rewards.
Referral gift cards are simple to reward and manage, especially when you have a ready provider. UpPromote, an optimal platform for running referral programs, would be your ideal solution for online customer rewards.
The software allows buyers to refer their friends within UpPromote and enables effective word-of-mouth marketing. All without the need to join any affiliate programs!
As the product owner, you get to create a customer referral widget on your Shopify online store. It is called “Refer & Earn,” prompting them to click on it for further incentives.
Next, it shows a pop-up introducing them to your referral program for a discount. After filling out their emails and clicking on Get invite link, the software instantly provides them with a referral link for promotion.
Not only does their friend get a discount when entering the link, but the buyer themselves also receive the same reward. Obviously, this is a fantastic win-win situation.
All in all, merchants can benefit a lot from rewarding customers with these gift cards or coupons. What are you waiting for?
Useful Tips for Using Referral Gift Cards
Now you know when to use referral gift cards and their advantages. Get some extra tips to gain more insights on this incentive.
Tip 1:
Assuming you run a referral program where the referred friend earns a reward for buying. You should give them a digital gift card to your own store to encourage that first purchase.
Tying that referral reward to your business is optimal to encourage more sales from the referred friends. Moreover, most brands that reward the referred friend will give money for that first purchase.
Tip 2:
If you use third-party coupons to incentivize customers, consider running a program with tiered gift cards. This kind of program enables existing buyers to gain gift cards of increasing value when hitting different referral milestones.
For example, your customer receives a $10 Amazon gift card for 1 referral. Then, a $25 gift card for 3 referrals and referring 10 friends results in a $50 gift card.
Tip 3:
Third-party gift cards are most suitable for rewarding the referring customer (the advocate). Those who earn these external cards tend to use them for advocate incentives.
Tip 4:
One more tip. Besides the standard gift card referral program, you can also try this:
Let the advocates earn different coupon values based on the value of their referred friend’s purchase. For instance, $100 for an inground pool system installation or $200 for that, plus an HVAC system installation.
FAQs:
- Should I offer a collection of gift cards to choose from?
According to a small analysis of gift card rewards, it is common not to offer diverse card options to customers.
However, even when you provide only one type of gift card, vendors like Amazon or Visa are still appealing. They are simple rewards with a high degree of choice.
- What are the best referral gift cards?
The following gift card options are highly compelling for referral rewards:
- Discount and deals: Benefit both the referrer and the referred friend
- Product giveaways: Best for brands with tangible goods
- Tiered rewards: Motivate advocates to refer more friends
- Charity donations: Align your brand with social responsibility
Conclusion
What is your opinion on using referral gift cards as an incentive for existing customers and their friends? We believe that once you fully understand how these rewards can motivate new sales, you will wish you had tried them sooner!
Both internal gift cards and third-party options are beneficial for your business. Experiment with both approaches to find out which one your buyers prefer.
As you use gift cards wisely in referral programs, you will likely see an increase in sales revenue and customer trust. Obviously, customers need to trust your brand and product before referring them to their friends.
