You make a lot of customers happy. Eventually, some of those customers tell their friends and family how amazing your business is—and those referrals become leads for your business.
A customer referral program systematizes that process. It motivates happy customers to refer people faster and makes it easier, so they do it more often.
Essentially, a customer referral program turns your best customers into your best salespeople.
In this guide, we’ll show you how to create your own referral program that not only generates high-quality leads for your business but also helps strengthen your relationship with existing customers.
Contents
- What is a customer referral program?
- What are the benefits of a customer referral program?
- How do you create a gangbuster customer referral program?
- 5 superb customer referral program examples
What is a referral program?
Let’s start with the basics. A customer referral program is a word-of-mouth marketing strategy that encourages your existing customers to refer people to your business.
AG1’s customer referral program.
As you’ll see in the examples below, customer referral programs come in many flavors. Some are simple, like offering a discount to current customers if they bring a friend on their next visit. Others are elaborate, with multiple tiers of incentives and a comprehensive promotion strategy.
No matter how they’re designed, the core component of a customer referral program is that they help you accelerate the process of getting new referrals from existing buyers.
🚀 Customer referrals help your business grow. Learn more growth tactics in the Easy-to-Use Growth Strategy Guide (+Template)
What are the benefits of a customer referral program?
Customer referral programs are an excellent way to generate brand awareness for your business. Here are a few other benefits they offer for your business.
Get high-quality leads…
A referral from a trusted acquaintance carries a lot of weight in our buying decisions. In fact, 92% of consumers say they trust recommendations from friends and family over all other forms of marketing.
This is the biggest differentiator between customer referral programs and other lead-generation strategies. With referrals, you’re getting leads that are more likely to convert because they start off with a higher level of trust in your business.
…at a lower cost to acquire them
You will get leads that are more likely to buy, and you’ll often pay less to get them compared to other marketing tactics.
This is true for two reasons. First, with a referral program, you only pay an incentive when a new customer converts. There’s no wasted advertising spent acquiring bad leads that never buy.
Second, those incentives are often less expensive than other paid marketing tactics. The 15% discount you give for a referral doesn’t hit the bottom line very hard.
It’s important to note that unless you have thousands of customers constantly providing new referrals, a referral program can’t reach the scale of a well-targeted Google Ads or Facebook ad campaign. So, think of your referral program as a compliment to those strategies.
Increase customer loyalty
Referral programs don’t just bring in new customers. They also strengthen your relationship with existing ones. When customers actively promote your business, they become more invested in your success and are likely to remain loyal longer.
Plus, the right referral incentive will encourage more purchases from existing customers. Say you offer 10% off to people who refer a friend. The person receiving the 10% discount now has a new reason to buy again.
Boden’s referral program rules promote customer loyalty and ensure it only pays after a new customer converts.
👋 Ready for more? Download The Definitive Guide to Lead Generation: 25 Ideas (+Tips & Examples)
How do you create a customer referral program?
You have some amazing customers who would be thrilled to introduce your business to their friends and family. Let’s create a referral program that makes the most of those positive vibes.
Set SMART goals
Goal setting should be the first step in creating any marketing strategy. But we don’t just want to jot down a random list of marketing objectives. We want our goals to be SMART.
Here’s an example of what SMART goals could look like for a home services customer referral program:
- Specific: Get customer referrals for our new quarterly HVAC maintenance plans.
- Measurable: Increase maintenance plan subscribers by 20%.
- Attainable: Offer current maintenance-plan customers a 15% quarterly discount for each successful referral and promote it on our website and social media.
- Relevant: Selling more maintenance plans increases repeatable revenue.
- Time-bound: Achieve this goal within three months.
Create the perfect structure
How you set up your referral program will depend on the types of products you sell, your industry, and your specific audience. Here are a few questions to consider.
Who will get the incentive?
Most referral programs will at least incentivize the current customer. But you may also want to offer a little something for your new customer.
Craft Coffee gives your friend a discount and you a bag of coffee for every referral.
A two-sided incentive lets your current customer feel like they’re giving a little gift to their friend.
Will there be incentive tiers?
A tiered referral program offers progressively larger incentives to customers who refer more people to your business.
For example, you could give customers a 10% discount for their first referral, 15% for their second, and 20% for their third.
While tiered incentives cost more, they can also help you scale your referral program faster since people are more motivated to send additional people your way.
This elaborate, tiered referral program is provided by South San Francisco Dental Care.
Do you want to gamify it?
Gamification is a growing trend in digital marketing. It means adding competitive, interactive gaming elements to marketing campaigns.
You can gamify a referral program by making it a competition. For example, you can create a leaderboard and offer high-value rewards to the customers who refer the most people. Or turn it into a raffle, where every referral “buys” one ticket.
GSI makes its whole rewards program feel like a game.
Match the reward to the request
Not every referral program needs to include an incentive. You can simply ask people to send their friends your way. But an incentive—like cash, gifts, or a discount—will motivate more people to participate.
When you’re picking the incentive for your referral program, you want to strike a balance so the reward is:
- Sustainable: If your profit on a product is $10, giving away a $10 cash reward isn’t sustainable.
- Reasonable: The more work a customer has to do to participate, the bigger the reward should be.
- Irresistible: Will your customers respond more to a cash reward, discount, or physical gift?
Dermstore’s significant referral coupon will incentivize a lot of participation.
Promote your referral program far and wide
Asking for referrals is the most important piece of your referral program. Make use of every opportunity you can think of to request referrals and remind customers to provide them.
Here are several channels to use.
Website or app
A referral page is a good addition to a website focused on lead generation. Often, that means creating a specific landing page for your referral program with prominent links to it on other high-traffic pages.
First Community Bank has a dedicated landing page for its customer referral program.
In-person
If your team has face-to-face contact with your customers, make sure they’re all well-equipped to promote your referral program.
Additionally, consider creating signage and cards that explain the program. Don’t forget to add a QR code so people can quickly scan and get right to referring someone.
On social media
Social media is a great place to remind your current customers about your referral program. And it’s also a savvy way to let potential customers know what they’re missing.
Rancho Express Lube promotes its referral program on Instagram.
On receipts and post-purchase messages
Timing is critical when asking for referrals, and there’s no better time than when the excitement of buying from you is fresh. So, place those referral requests on physical receipts, purchase confirmation pages, and post-purchase emails and texts.
Swap sends a post-purchase thank you text with a referral request.
In email signatures
Think of all the emails your team sends to customers. Each message is a valuable opportunity to encourage a new referral. Have your employees mention your referral program in their email signatures.
Consider using a tagline like, “Ask me how you can get 10% off your next order by referring a friend,” to stoke people’s curiosity.
Track your results
You’ve set SMART goals, and you’ll want to know how you’re progressing against them. Create a plan to monitor the results of your referral program at regular intervals.
To do it, make sure you can tell when a lead comes to you from a referral. Providing a specific coupon code or a unique link is one popular way. You can also use referral program software that tracks your program for you. A referral form on your website will also work.
You may even consider using a different code or link, depending on which channel the referral comes from. That’ll help you know which channels are most effective and where you may want to tweak your strategy.
5 superb customer referral program examples
We’ve pulled together five customer referral programs that each have their own individual flair. Have a look and use them for inspiration as you design your program.
1. Make it social: Dia & Co
You know when you finally find the perfect fit and can’t wait to share it with your friends? That’s the secret sauce of a great referral program.
Apparel brand Dia & Co leans into the social effect of shared discovery with its referral program.
Dia & Co helps its customers share their new favorite brand.
Notice the headline, “Share your style secret,” and the offer to get and give 25 dollars. It all adds up to a great way to treat a friend and yourself.
2. Make it clear: The Park Slope Day Camp
One thing you don’t want in your referral program is ambiguity. Clear directions and outcomes will keep customers from being confused and frustrated.
Here’s how The Park Slope Day Camp makes sure everyone is on the same page with its referral program.
The Park Slope Day Camp provides clear rules for its referral program.
It may look a little cumbersome. But since the offer is valuable ($100 for every referral), it’s worth it for the camp’s customers to make sure they follow the rules.
3. Make it compelling: Quality Comfort Services
Asking customers to refer their friends to your business is a big deal. To make your referral program successful, offer as much of an incentive as possible.
Quality Comfort Services, a local HVAC sales and service business, will give you $100 for every successful referral and another $25 if they sign up for a service agreement.
Quality Comfort Services provides a tidy payout for every successful referral.
The best part is there is no limit to how many referrals you can submit. That’s a pretty substantial reward!
4. Make it easy: RZone Fitness
Friction is the enemy of any action you hope a customer will take. When designing your ideal referral program, it’s best to make it super simple, so no one gets lost in the process.
This program from RZone Fitness is a great example—just click a button in the app and send your workout bestie a free trial.
RZone Fitness lets you refer your friends with a tap in the app.
Don’t forget to include a strong call to action like RZone Fitness has. It’ll help your customers know how to take the next step.
5. Make it trackable: Casper
The more you know about how new referrals happen, the more aspects of your program you can tweak for better results.
There are several ways to make your referrals trackable. At Casper, customers get a personal referral link to share with friends.
Casper uses personal links to make their referral program more trackable.
That link makes each referral easily trackable. It also gives a little more personalization to the process (like you’re getting a special invite from your friend).
Design your own customer referral program
As you’ve seen, no two customer referral programs are exactly the same. Brands use different incentives, platforms, copy, and promotion methods to build theirs.
As you consider your referral program, think about your audience. Will a free product, cash back, or a discount on a future service motivate them more? What communication channels do they pay the most attention to? And when is the absolute best time to ask them for a referral?
Once you’ve answered those questions, you’re ready to put the pieces in place—and turn every satisfied customer into an evangelist for your brand.
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