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What Is a Referral Code and How to Benefit from It? (2024 Guide)

The referral program is a smart approach for businesses looking to boost sales. If you’re considering this campaign, ensure you’re familiar with the “referral code.”. So, what is a referral code? How does it function in ...

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what is a referral code

The referral program is a smart approach for businesses looking to boost sales. If you’re considering this campaign, ensure you’re familiar with the “referral code.”.

So, what is a referral code? How does it function in your program?

In this guide, we’ll help you know the ins and outs of this term. As you scroll further, explore curated tactics to create a code that works.

Are you ready to dive into this power player of the referral marketing scheme? No worries about fancy jargon since we’ll make every definition and practice simple.

Let’s begin!

What is A Referral Code?

A referral code is a string of alphanumeric characters. When existing customers join your program, you’ll assign this code for referring and tracking.

So, the referral code acts as a fingerprint. It identifies who referred to whom. The tracking feature also enables precise rewards.

As new customers use their code during transactions (i.e., purchase something or subscribe to a service), both parties will earn certain benefits. It could be cash, discounts, free trials, etc. This reward is for their word-of-mouth promotion efforts.

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Let’s dig deeper into the code’s format.

Businesses can use diverse sets of letters, numbers, or both to form a referral code. Review some popular referral code examples:

– Numeric or alphabetic random codes: 240124 or GHIJKL

– Mixed code: MK890 or G54K8H.

– Custom phrases: FRIEND15 or REFER24

– Code with referral’s name/initials: MARK10 or JL20

How do we deploy the codes? There are two common ways.

First, we can embed codes in referral links. As someone clicks the link, the code is automatically applied.

Second, we send codes for manual entry. Referred customers can type the codes during checkout or account creation.

How Does a Referral Code Work?

You’ve explored what a referral code is. It’s time to know how it works. Here’s a breakdown of the process, which includes three detailed steps. Let’s start with the first one!

Step 1: Generate and distribute referral codes

When customers interact with your business (i.e., they make a purchase), their customer profile will be created within the business’s system.

The system will generate a unique referral code once they sign up for your referral program. It could be in any format listed above, depending on your choice.

So, there’s a direct association between the customer and their unique identifier. This connection allows you to track and credit successful referrals accurately.

Businesses should inform their customers about the codes assigned. They can send the information through an email notification or in-app message. Besides, clarify the details of the referral program, including the incentive structure and any terms and conditions.

Note: For offline referrals, you can send your customers printed cards that include the codes.

Step 2: Facilitate the code-sharing process

You’ve transferred the code to the potential referrals. But the success of the program requires more than that. It needs extra facilitation. Let’s see what you should do:

Make sharing options accessible

Your customers always desire to share their codes with a minimalist effort. Thus, consider implementing email links or social media sharing buttons within your website or app. This way, they can refer the codes to their friends within several clicks.

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Pre-written messages

Another way to facilitate sharing is by offering your customers pre-written messages. These pieces often include a reward explanation and a call-to-action, along with a link or code for the recipient to use. If possible, allow customers to personalize their messages for an authentic touch.

Create a dedicated landing page

Build an information hub to provide customers with everything they need to know about the referral program. It’s also essential to include simple-to-use sharing tools on these pages. It ensures that customers can quickly spread the word about your brand.

Re-engage your customers with your program

Sometimes, customers might forget about the lucrative referral codes. Consider sending automated newsletters to remind them of your program. Other ways? Push notifications, banners, or in-app messages can also draw their attention.

Note: Ensure sharing options and referral code access are navigable on smart devices. Customers will find it convenient to execute their tasks on the go.

Step 3: Track the codes and send rewards

If you want to know whether the customers are generating a good result, implement a robust code tracking system performed by referral program software. The system will record the information as soon as the new customers enter the referral code at sign-up or check-out.

Tracking also lets you know which customers are driving successful referrals, facilitating the reward process later.

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Regarding incentives, clearly communicate how rewards are calculated and any other conditions. Consider which bonuses to distribute to your customers and those they refer to. Some may prefer discounts, while others may appreciate cashback or free products. Monitor the performance of your referral program and refine incentive offerings to reach better results.

Additionally, ensure the reward distribution process is timely and effective. Whether you deliver incentives through automated systems or gift cards, a smooth experience will satisfy the customers and their referees.

What Types Of Businesses Should Use Referral Codes

Many businesses can benefit from referral codes to elevate their marketing journey. However, some of the business types might take more advantages than others. Let’s see who they are!

E-commerce and retail

These online businesses can use referral codes to encourage existing customers to share their positive shopping experiences with friends and family. This recommendation builds trust among potential new customers. As a result, it allows businesses to naturally attract more customers.

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For instance, Skin O2, a beauty e-commerce store, offers referral codes for their customers. For each successful referral, they’ll gain $30 off.

Subscription-based services

Businesses operating on subscription models (e.g., beauty, food, lifestyle) can benefit from referral codes to increase their subscriber base and foster a loyal community.

They can leverage the program to offer compelling rewards for their customers. It could involve cash, special discounts, or early access to limited-edition releases.

Software and SaaS companies

Referral programs also help SaaS providers and software companies increase user acquisition. They can encourage satisfied users to spread the word and attract new sign-ups.

This SaaS growth strategy leverages the power of word-of-mouth marketing, turning happy customers into brand advocates who help attract new users more organically and cost-effectively.

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Many SaaS companies, like Bench, offer free trials to attract users. After that, they can incentivize them to convert to paid services.

Travel and booking platforms

Travel agencies and booking platforms have the unique chance to tap into the passion and excitement of traveling. They use referral programs to encourage travelers to recommend their services.

For instance, Expedia gives customers a $30 discount on their next hotel booking if they refer a new customer.

So, the referral codes are perfect for enticing friends and family to book their next trip together. As a result, the companies can extend their vibrant and engaged community of travelers.

Online learning platforms

Students share with each other the valuable courses they learn. It’s more effective than relying solely on paid advertising, right?

Educational platforms can leverage the referral program to drive new enrollments. They recognize the collaborative nature of learning and offer incentives to enhance student engagement.

Students will share the brands across social media and their learning communities. Ultimately, they naturally expand the platform’s reach and visibility.

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Fitness and wellness companies

Last but not least, fitness and wellness companies can benefit a lot from word-of-mouth marketing. Picture this: Workout buddies share practical fitness programs with their friends. With truthful recommendations, they’ll bring the brand’s reputation far and wide.

Brands can expect a boost in sales and long-term subscriptions from fitness enthusiasts

Referral Code vs Referral Link. What is the Difference?

Referral codes and referral links are critical components of a referral marketing program. Sometimes, people use them interchangeably. However, the two terms have a subtle differences in format, function, and sharing.

Let’s talk about their format and function first.

As mentioned, referral codes are unique alphanumeric codes assigned to existing customers. They act as an identifier, allowing the program to track who referred whom and award appropriate incentives.

This code is typically short and relatively easy to remember.

On the other hand, referral links are complete URLs that direct to the website or landing page. They incorporate the referring customer’s unique identifier within their structure. Thus, clicking the links automatically applies the code and tracks the referral.

For example, if you use the custom referral link feature of the UpPromore app, it may turn out like this:

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Now, let’s see the differences in sharing and using these two terms.

Referral codes are shared verbally. Customers often spread them through text messages, word-of-mouth, and social media posts. For the offline method, codes appear in print materials like flyers or physical cards.

A referral bonus is claimed when users manually input the codes during the sign-up or checkout process.

Due to their formats, links are shareable through digital channels like social media platforms, email, and embedded buttons. Sometimes, customers integrate them into their referral marketing campaigns or website banners for a wider reach.

Unlike codes, there’s no need for manual input. However, links still have limitations in offline scenarios.

Why Use A Referral Code?

Referral codes have a significant impact on the business’s marketing program. keep scrolling for the main reasons why we should use this feature.

Impact of referral codes on customer behavior

The referral codes motivate customers to become loyal advocates.

We can’t deny that customers come to your brand for products and services. However, referral codes play a crucial role in retaining them over time. Ultimately, customers commit to brands that reward them for bringing in new business. It’s the allure of discounts, trials, credits, and other rewards.

The availability of referral codes can leverage word-of-mouth marketing.

When friends or family members share referral codes, it establishes trust and credibility. Statistically, around 90% of individuals value recommendations from people they know more than any other channel. So, referrals can significantly influence the purchasing decisions of potential customers.

Referral codes also contribute to a fast and continuous customer journey.

When customers know the incentives, they find ways to share the codes. When the referred individuals understand the benefits of using codes, they consider buying something. It’s the sense of motivation and urgency.

And you know what? The journey doesn’t end here. Beyond the initial purchase, they remain engaged through the program. The cycle of advocacy continues to enlarge.

Effectiveness of referral programs

Picture a program with no referral codes. Customers refer others to your program. However, you don’t know who performs those successful referrals. Terrible!

The referral code provides a reliable way to track recommendations. Every step is automatically recorded. It allows brands to evaluate the success of individual advocates and distribute rewards precisely. This transparency is ideal for motivating both advocates and new customers to participate in the program.

Referral codes also create a sense of ownership for advocates. They know that the code is uniquely made for them. It’s the one and only. Thus, they feel more confident while promoting your brand. This strong connection will drive the overall effectiveness of the program.

So, referral codes facilitate the management of your program. Imagine how to run a referral campaign with no tracking codes implemented, especially when the customer base is large. Prepare for chaos!

Trends in referral marketing

Referral codes can contribute to the development of trends in referral marketing.

First, note that referral marketing has a close association with digital channels. Customers can share codes across social media platforms, messaging apps, and other channels. This integration takes the visibility and accessibility of referral programs to the next level.

Second, the fact is that customers value personalized marketing experiences. Meanwhile, the referral code enables customized incentives. It serves the customers’ need to differentiate themselves from others. Businesses can also offer rewards based on individual preferences and results.

Another trend in referral marketing involves the dominance of mobile usage. Since referral codes are adaptable to mobile platforms, customers find it convenient to execute their referrals.

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Last, the impact of influencers in promotion is undeniable. Referral codes facilitate influencer partnerships, especially micro ones, by providing them with unique codes to share with their audience. This influencer-friendly nature of referral codes helps leverage influencers to extend their reach and drive potential customers to the programs.

Best Practices to Create A Referral Code

It’s not a challenge to create and activate a referral code. However, getting an effective code requires a strategic approach. Review some tips below to master this stage.

Keep it simple and case-insensitive

The referral codes should be easy to remember and share. While you have a wide range of options, avoid complex combinations of letters and numbers. Instead, a code that can be easily communicated verbally or in writing is preferred.

This way, any customer shares the code with friends and family with no hassle. It helps reduce the likelihood of errors during the sharing stage and speeds up the overall process.

Here are some tips to simplify the code:

– Keep the code short and clear. Aim for around 5-10 characters. This length is ideal for a balance. It’s short enough to easily remember and share while long enough for uniqueness and against duplication.

– Avoid special characters or symbols that may complicate the code.

– Exclude characters that can be easily confused. Common misspelling cases are ‘O’ and ‘0’, ‘I’ and ‘1’, or upper case of “i” and lower case of “L.”

– Keep the code case-insensitive. Ensure that the system recognizes and accepts codes regardless of letter case. For instance, “BESTIE20” or “Bestie20” is acceptable.

Personalize the referral code

Why should we personalize the referral codes?

First, it creates a stronger emotional connection between customers and the referral program. They feel ownership when they see their name or initials in the code. This personalization can increase enthusiasm for sharing the code with friends and family.

Second, personalized codes are more memorable. Undeniable! Something like “SKIN15” is more memorable than “ZEHXYVF15.”

Last, custom codes have the power to spark conversations. Customers can easily share the codes with friends while chatting or suddenly mention a related topic.

Here are some tips for code personalization:

– Use initials or a name. For instance, if the customer’s name is PaulSmith, the code could be “PSCODE” or “PAULREFER.”

– Align with the customer’s interests or preferences. This approach enhances relevance and targeting. For instance, the code might appear as “FITNESS20” or “TRAVELCODE.”

– Some brands allow customers to customize their codes. It fosters elevated personalization and creativity. However, they need to follow specific guidelines.

Make it in the same format

A consistent format ensures clarity for all the referral codes. It’s easier for customers to understand and use the codes correctly.

Consistency also contributes to brand cohesion and increases the organized appearance of your program. Additionally, the tracking process will become much more effective when you achieve a standardized format for referral codes.

So, how to manage code consistency?

You need to determine a clear structure for your referral codes. Is it a string of letters followed by numbers or a combination of customer initials and numbers?

Besides, specify the ideal length for your referral codes. Choose a standard number of characters for all codes to ensure uniformity.

3 Examples of Companies Using Referral Codes

Businesses worldwide use referral codes to leverage their marketing efforts. We’ve curated a list of three well-known names for your reference. Let’s explore their offers!

The Body Shop

Let’s meet the successful referral program by The Body Shop. This is a cosmetics and skincare company renowned for its sustainable beauty products.

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The company allows its customers to register and get the referral codes right on its “Refer-a-friend” landing page. Users will enter their first name, surname, and email address here. The system will automatically generate the code precisely as their full names. This way, referrals can easily share the codes with friends and family.

There’s also a referral link provided. The Body Shop offers a pre-written message to promote the link via email. Users can use it for convenience. They can also share the unique link on other platforms they might have.

What’s the reward?

Both the referrer and their friend receive enticing discounts of 20% on their next purchases. As new customers use the code, the system will send an email to inform the referrers.

The company set a general rule for earning the reward. It’s valid for two months for referrers and one month for the referred customers.


The second example is about Dropbox, a technology company. It specializes in cloud-based file storage and synchronization.

By leveraging the power of referral codes, Dropbox attracted more users and established itself as a leader in cloud storage services. Their program is a prime example of effective customer referral strategies. It combines simplicity, clear communication, and valuable rewards for users.

More details?

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Dropbox’s program offers incentives for both the referrer and the referee. Referrers receive additional free storage space for each successful referral, while referees get extra storage upon signing up through the referral link. The reward ranges from 500 MB to 1 GB of free storage, depending on the user account type (Basic or Plus).

The company designed its program with simplicity in mind. They integrate the referral program within the user dashboard. Thus, customers can find their unique referral link and understand the reward structure. Plus, they can send email invitations directly from the interface. It’s convenient to reach out to their friends and colleagues.

Even better? The referral tracking details are displayed in the same interface. So the users can monitor their progress and see the amount of additional storage space they have earned.


Ibotta is a leading cashback and rewards platform. The company allows its customers to earn cash back on various products, including clothing, electronics, etc.

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Its referral program gives referrers and their referred friends a $5 bonus. It’s applied when new users complete their first qualifying purchase using the referral code.

Customers can spread the Ibotta codes through email, social media, or even at a dinner party.

Ibotta assigns a specific period for applying the referral codes to keep things fresh. It’s 45 days from the day they registered the codes.

Customers can keep track of their referral success within the Ibotta app. It fosters transparency and motivation in promoting activities.


Is a referral code necessary to run a referral program?

It’s essential to consider using referral codes in a referral program. It offers a convenient and transparent way to track and attribute referral rewards. The codes will contribute to the program’s success along with other features, such as referral links and automated tracking.

How do you get a referral code?

First, you need to join a referral program. Then, locate the referral section. This could be in your account settings, a dedicated referral page, or within the app (if any). You’ll often find options to generate your unique code or to get an existing code automatically generated.

What does referrer code mean?

A referral code is a unique string of letters, numbers, or both. It’s assigned to an individual as they join the referral program. This code is responsible for identifying and tracking referrals. It’s also a base for calculating rewards.

How do I share my referral code?

You can share code through digital channels or offline interactions. The former method includes email, social media, messaging apps, blogs, etc. The latter involves face-to-face conversations or printed cards.

When is the suitable time to generate referral codes for customers?

There’s no fixed golden time to generate codes for customers. However, you can offer codes after customers purchase or positive feedback  to attract their attention. Other cases are during promotional launches, customer milestones, or other special occasions.


In short, the referral code plays a crucial role in every referral strategy. This term serves as a bridge that connects your business with potential customers. It also helps you reward dedicated individuals who build that bond.

You’ve explored what a referral code is and how it works. Now, incorporate this key component into your program. If you need extra reference, we recommend visiting your competitor’s programs to see how they perform.

Keep our guide on hand and let it contribute to the successful launch of your new referral marketing strategy.

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.