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5 Types of Referrals for Your Business (With Examples)

Referral programs are powerful partnerships benefiting everyone when done right. They are smart business tools using happy customers to bring in new ones by talking about the good stuff. Lots of businesses use referral programs as ...

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types of referrals

Referral programs are powerful partnerships benefiting everyone when done right. They are smart business tools using happy customers to bring in new ones by talking about the good stuff.

Lots of businesses use referral programs as a big part of their marketing plans because new customers from referrals are more likely to buy. When done right, referral programs create a win-win situation, ensuring everyone is happy.

In this post, we’ve compiled all the important info about referrals, different types of referral programs, tips for success, and real examples from successful referral programs. Whether you’re just starting or want to make your referral program better, this guide has helpful tips for a successful referral marketing program.

What is Referral Marketing?

Referral marketing is a strategy where businesses encourage their existing customers to recommend their products or services to others. It relies on the power of word-of-mouth and recommendations from satisfied customers.

In this approach, happy customers become advocates for a brand, sharing their positive experiences with friends, family, or colleagues. The goal is to leverage the trust and credibility existing customers have within their social circles to attract potential customers.

Referral marketing often involves rewarding customers for successful referrals, creating a win-win situation where both the existing and new customers benefit.

What is A Referral Program?

With the power of referral marketing, many brands run a referral program to reach more customers.

So what does a referral program mean?

A referral program, also known as a refer-a-friend program, is a marketing strategy in e-commerce that relies on people talking positively about a product or service. The goal is to make more people aware of the brand and increase sales by having existing customers recommend it. Referrals can happen in various ways, from customers suggesting the product to official partnerships with other e-commerce businesses.

In this program, current customers, influencers, or business advocates are encouraged to share their positive experiences with the product in their social circles.

If someone from their circle makes a purchase based on their recommendation, the original customer gets a reward from the company. These rewards usually include discounts, cash, or a free subscription month.

Special tools are used to keep track of this – like codes or links – so that when someone new makes a purchase because of a referral, the existing customer gets rewarded.

Getting started, or onboarding, can sometimes be tough for customers, but UpPromote made it better by simplifying the process for a situation where everyone wins.

Using UpPromote’s referral reward system, your brand can create one of the most successful marketing campaigns ever.

By creating a customer referral program, your customers can easily get an invite link and spread the word about your business.

Types of Referrals: 5 Common Types To Give A Shot

Let’s simplify and look at the five main types of referrals your business might come across as it grows:

Direct referral (Word-of-mouth)

For 85% of small businesses, the main way to get new customers is through word-of-mouth referrals. It makes sense because 92% of people trust recommendations from friends and family more than other types of advertising.

But how do you get these referrals? Do they just happen?

Well, first, you need to do great work and give excellent customer service. That’s how you build trust and keep customers happy. After that, you have to actually ask for a referral. It might seem simple, but asking your happy customers to tell others about your business can make a big difference.

Interestingly, a lot of businesses miss out on a big opportunity here. Even though 91% of customers are happy to give referrals, only 11% of business owners actually ask for them. That’s a significant missed chance!

It’s okay to remind your satisfied customers to spread the word gently. While old-fashioned word-of-mouth referrals can happen naturally, today, customer referrals often happen online and can spread much faster thanks to the internet.

So, don’t be shy about asking your happy customers for a little help in sharing the good word about your business.

Direct referrals (Word-of-mouth) Example

types of referrals 1

Zappos really knows how to make customers happy – they even call themselves a “service company that sells shoes.” Instead of spending their success on new ads like most companies, Zappos invests in making customers even happier.

This approach shows that great customer service leads to lots of people recommending them directly.

Here’s how Zappos keeps building on their good reputation:

  • No robots on the phone – you get quick help with real people.
  • You can easily find Zappos’ contact info on their website, so you don’t have to search for it.
  • They don’t rush you on the phone – their longest call was almost 11 hours!
  • No scripts – their staff can really connect with customers.
  • Employees can make decisions on their own to help customers without asking someone else first.

Email referrals

Email referrals are about using emails to ask your current customers or contacts to recommend your business to others. It’s like tapping into the connections you already have through email to get more people interested in what you offer.

Email is great for this because it’s a direct way to reach your customers. Even though social media is popular, email is a powerful tool. It’s effective in making people aware of your business, getting them to try your products or services, making them regular customers, and keeping them with you.

The special thing about email is that it goes straight to your customers. If you create interesting email subjects and share valuable content, you grab your customers’ attention. Most people admit they regularly open emails from their favorite brands.

Email referrals work by encouraging your satisfied customers to tell their friends, family, or colleagues about your business. You can include easy-to-use buttons in your emails for forwarding and sharing on social media. Adding links to online review sites also helps your customers share their positive experiences.

Technology has changed how businesses operate, and email has become a crucial way to connect. Email marketing channels are not just about sending promotions; it’s a flexible tool for getting different types of referrals. Businesses can use it to encourage their customers to spread the word and contribute to their positive reputation.

Email referral Example

Customers love brands that show appreciation, with 91% more likely to buy from such brands.

California Baby gets this and doesn’t need a stat to know it. They add a personal touch in their referral emails, thanking their customers.

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If you want to thank your customers too, here’s how:

  • Talk about the impact of their referrals—share stats like revenue earned or people converted.
  • Appreciate both the referrer and the new customer—say thanks for referring or buying through the link, and give them the promised reward. Keep the good vibes going!

Incentive-based referrals

It’s often a smart move for brands to introduce incentive-based referrals to their customers and business partners. These programs encourage customers to stay loyal by offering them rewards.

Previously, companies typically provided coupons or gift cards as incentives for their referral programs. However, most companies prefer to give out digital referral incentives in today’s digital age.

To take things up a notch, consider implementing a program that rewards both the person giving the referral and the one receiving it.

For instance, a referral program incentive might involve giving an existing customer a 15% discount for referring someone to the business and extending the same discount to the person they referred.

It’s a win-win situation that keeps everyone happy and engaged.

Incentive-based referral Example

types of referrals 3

Now, let’s discuss Uber’s referral program. When new users or drivers join Uber, they receive a special code to share with friends. Uber also allows new users to add friends through the mobile app.

Once the referral code is shared, the recipient can continue referring others, like new customers, drivers, or couriers. In return, they receive a bonus when the referred person achieves specific targets, such as completing a set number of rides.

The person who made the referral can check their rewards directly in the Uber app. They can track their friends’ progress and choose to receive notifications when their bonus is ready.

What’s the lesson here? When designing your reward system, consider your goals. You don’t have to offer a bonus right away; instead, find the point where it makes the most sense and tie your bonus to that achievement. This way, your rewards align with your desired outcomes.

Review-based referrals

Reviews are vital in referral marketing, contributing to a business’s social proof. Positive reviews enhance credibility and attract new customers.

Encouraging customers to leave online reviews is another way to get referrals.

Start by creating pages on review websites. Instead of waiting for reviews to come in, ask customers to share their thoughts. Loyal customers often provide reviews willingly, but others might need a little push.

You can offer incentives like discounts, freebies, or customer loyalty program points that can motivate customers to leave reviews.

It’s crucial to avoid doing sneaky things like buying fake reviews or asking for only positive ones. Review websites can determine if something fishy is happening and may punish businesses by lowering their rankings or removing their accounts.

That’s why you need to handle your online reputation well, it’s important to control your profiles on business listing sites, review platforms, and social media. Keep an eye on what people are saying about your brand and respond to unhappy customers quickly.

Fixing problems not only improves the chances of keeping that customer but also looks good to others checking your brand’s online reviews.

Review-based referral Example

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Amazon takes ratings seriously. They only allow people who’ve bought something to leave a review, keeping things reliable.

How customers feel about shopping matters for what they choose to buy. So, retailers should ask for reviews that talk about a good customer direct experiences and how easy it is to find things.

It’s a company that knows how to use customer reviews as a type of referral.

And that’s it – all done!

Social media referrals

Social media referrals involve people recommending your business to others through platforms like Facebook and LinkedIn. It’s like word-of-mouth but online. Customers discuss and share your brand, building relationships and trust.

To make it work, share helpful content regularly without a hard sell – this is called content marketing. It keeps your brand in people’s minds even when they’re not buying.

The great thing about social media referrals is that your content can spread widely. When your followers share with their followers, your reach grows. This creates a modern form of word of mouth.

Social media referrals are crucial in today’s business world, where many of your supporters are already active online. Unlike traditional referrals, social media ones happen instantly.

A single share by a loyal customer can reach a broad audience, showing the power of social media in referrals.

Social media referrals Example

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Pepsi did something smart with their emoji label campaign. They teamed up with social media influencers, used the #sayitwithPepsi hashtag, and got influencers to post about Pepsi. This got the referral campaign to new people.

Pepsi checked which posts worked the best and then had another set of influencers share those posts. The goal was to get more people to like Pepsi.

The campaign ended up with 46 million views and 50,000 likes and comments from social media users.

Why Should You Use Referral Marketing?

Referral marketing works really well at all stages of selling things. Why? Because when people hear about your brand from friends, they trust it more.

Think about it – when someone recommends something to you, you’re more likely to check it out. This is true for many types of products and industries.

Research shows that:

Discovery Source: About 18% of Gen X consumers find out about brands mainly from their friends.

Purchase Influence: People are four times more likely to buy something if a friend suggests it.

Lifetime Value: Customers who come in through referrals stick around longer, about 16% more.

Trust in Referrals: A huge 92% of people trust what their friends recommend.

Product Adoption: When friends or family recommend a new product, 77% of people are more likely to give it a try.

So how can referral marketing benefit your brand?

More People Know About You

Referral marketing helps your business get noticed more. It’s like when friends tell friends, and it spreads out to even more people. Almost everyone trusts recommendations from people they know.

Saving Money on Getting Customers

Referral marketing is cheaper than other ways of getting customers, like paying for ads. Getting referrals doesn’t cost a lot, and it can bring in a lot of money in the long run. By relying on referrals, you spend less on getting customers and don’t need to put in a lot of money upfront.

People Trust You More

Referral marketing makes your business look more trustworthy. When friends, family, or other trusted sources recommend your products or services, it makes people feel safer about choosing your business.

Even with influencer marketing growing, personal recommendations still matter the most to customers.

Getting Better Customers

Referral marketing does more than just bring in more customers – it brings in the right kind of customers. When people follow a recommendation, they’re often ready to make a purchase; they just need that little extra encouragement.

This makes referred customers more likely to choose your business when buying.

Customers Stick Around and Spend More

Referral programs help keep customers around for longer and make them spend more. Referred customers stay loyal and spend more money each time they buy.

All in all, referral programs make your business more visible, save you money, build trust, bring in good customers, and keep them around longer.

Wrapping up

Referral marketing is a budget-friendly approach to enhancing customer acquisition and increasing customer lifetime value.

Referral programs aren’t just for attracting new clients; they’re equally, if not more, effective for nurturing existing customers. You build a strong relationship by encouraging them to become long-term brand advocates through rewards or incentives.

If you haven’t started a referral marketing strategy in your business, it’s high time to do so!

The way customers refer to others has changed. Your online reputation is crucial for your business – it can make it or break it. If you use word-of-mouth, online reviews, social media sharing, and email referrals wisely, you will see positive outcomes.

Ellie Tran, a seasoned SEO content writer with three years of experience in the eCommerce world. Being a part of the UpPromote team, Ellie wants to assist Shopify merchants in achieving success through useful content & actionable insights. Ellie's commitment to learning never stops; she's always eager to gain more knowledge about SEO and content marketing to create valuable content for users. When she's not working on content, Ellie enjoys baking and exploring new places.