Envision a world in which your best new customers come to you—no prospecting or advertising required. We’d all love to live in that world, wouldn’t we?
Well, it’s not possible to avoid all the heavy lifting required to get new customers. But a well-conceived referral program can create a world in which some prospects seek you out, already eager to buy.
So, let’s look at referral programs. What are they? Why should you establish one? And what tips and tricks can you discover by looking at referral program examples from other businesses?
Contents
- What is a referral program?
- The benefits of running a referral program
- Best referral program examples
What is a referral program?
Customers typically find you in one of two ways: through outbound or inbound tactics. Outbound tactics require you to do the bulk of the work. You’re actively reaching out to strangers and trying to convince them to do business with you. Outbound tactics include cold outreach, direct mail, and paid advertising.
Inbound marketing requires you to create content for interested consumers to discover. Your blog posts, website, and social media content are all part of your outbound tactics. This approach allows relevant consumers to find you rather than you steering all interactions.
However, there is a third way to connect with consumers already primed to buy. These people will come to you with a baseline trust in your brand because a friend or family member recommended you. A referral program can create a pipeline of these qualified leads.
How do they work? A referral program rewards your existing customers for recommending your business to people in their network. While the specifics vary from program to program, essentially, they encourage your current customers to refer colleagues, friends, or family.
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What are the benefits of creating a referral program?
There’s an old truism in retail: “An unhappy customer tells 10 people, a happy customer tells no one.”
While that’s not an actual statistic, sayings that stand the test of time often have a grain of truth to them. And if you think about your own post-purchase habits, you may notice this resonates.
When a product or service is incredibly disappointing, people spread the word because they’re frustrated and upset. The message is, “Don’t let this happen to you!” However, they might not think about mentioning it when they’re pleased. Perhaps this stems from our evolutionary drive to warn other humans about danger.
That’s why establishing a referral program can be hugely beneficial. It motivates customers to talk about your business when they have a positive impression of your work—an impulse that may not come naturally.
And the numbers show that referral programs work. Wharton researchers found that referred customers are, on average, 4.5 cents more profitable per day. Those customers are also more loyal—they churn at a rate that’s 18% lower than their non-referred peers.
Best referral program examples
Sometimes, the best way to learn is by analyzing what others are doing. Read on for a spin through some examples of referral programs in the wild.
1. A home improvement business referral program
HVAC company Quality Comfort Services features its referral program prominently on its website. This referral program example below has a dedicated tab in the top navigation bar, making it very easy for customers to spot.
Once they click on the link, they’ll see the details of the program, which offers tiered monetary rewards depending on the type of service the referred customer books.
For each newly referred client, the existing client can fill out a form and claim a Mastercard or Amazon gift card. And there’s no limit on the number of people a single customer can send to QCS.
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2. A SaaS product’s referral program
For businesses that prefer not to offer a gift card or cash back, structuring their referral programs to reward customers with additional services is another option.
As a SaaS company, it’s easy for Dropbox to offer free additional storage—no shipping or pickup required! And its program rewards both the referrer and the referred.
While this structure is especially easy to execute for digital products, it can work for brick-and-mortar businesses, too. A garage can offer a discount on oil change services for both the first-timer and the referring customer, for example. Or, a florist can add free stems to the next arrangement a referring customer orders.
3. A local gym refer-a-friend
The following local gym offers its customers a $25 discount on their next month’s membership for every new customer they bring through the door.
To make the process seamless—and encourage more referrals—the gym has opted to build its program in their existing customer app. By using a tech tool their customers already rely on, the gym makes it easy for gym-goers to share their unique referral link via text, email, or social media post.
4. A monthly membership referral program
Brands love subscription programs because they generate recurring revenue. Every month, the subscription renews, and the business gets to collect its membership fee.
So, there’s a benefit to lowering the barrier to entry on that first month of membership. That’s exactly what Book of the Month Club does with its referral program.
The program offers each new customer a steep discount on that first month’s membership. From month two onward, the new member will pay the full price. That is, unless they refer new people themselves! When they do, they earn credits toward future months’ books.
5. A referral program for families
Summer camp can be a major line item for young families looking to keep the kids busy during school break.
This referral program for a summer camp offers the referring family a $100 reduction in fees for each referred family that registers their child—a deduction that can add up if the family can refer more than one friend.
This referral program has some fringe benefits, too. The children at the camp are more likely to be with friends they already know, which can make the experience more fun for all the kids (especially those who are nervous or homesick). Plus, it can reduce the logistical load for parents. If families already know each other, it’s easier to arrange a carpool to and from camp.
6. A startup brand’s referral program
This referral program from supplement brand AG1 splits benefits between the referring party and the new customer. While the existing customer enjoys a discount on their upcoming monthly subscription cost, the new customer receives extra products to try.
This is a savvy way to structure your program, as it gives existing customers something that’s valuable to them (a discount) while encouraging new customers to discover a wider array of products. By introducing new customers to additional products, the brand increases its chances of upselling in future orders.
7. A B2B supplier referral program
If you don’t want to give cash or your own product or service away at a discount, another way to build a referral program is to offer a third-party gift card.
The following program from an office supply brand sends a $5 Starbucks gift card to the referring party for every new account they refer. Starbucks is the world’s largest coffee chain, so odds are good your customer has a location near them and will appreciate the gift card.
And this referral program proves another point: You don’t need to offer the biggest, most lavish reward to build a successful program. Even a small gesture of appreciation can go a long way.
8. A community bank offering cash rewards
More than 60% of millennial and Gen Z customers hold accounts at the four largest financial institutions. So it’s not surprising that community banks want to encourage consumers to make the switch to them.
The bank in the referral program example below serves the southeastern US and has created a referral program to drive new clients to open checking accounts. It devised a coupon system, where current customers can hand a referral coupon to a friend or family.
When the referred person opens a new checking account and presents the coupon, both they and the referring party get $20 deposited into their respective accounts.
9. A dental practice with a super-sized referral program
This dental office has built a referral program with an extra twist. In addition to the $75 gift cards they hand out to clients for each referral, they also have a monthly raffle as a second potential reward. Any client who has had two referrals come to the office is entered to win a big prize.
This type of referral program won’t make sense for every business—a dental office can likely sustain it because each appointment can result in significant revenue. But if this is workable for your business, it likely generates even more excitement than your standard referral program.
10. A tutoring business’s referral program
Parents can be cautious when hiring a tutor—they want to be sure they’re selecting someone who can really help their children learn. A referral from a fellow trusted parent can help assure them that a tutor is a kind, competent, smart teacher.
That’s why this referral program example from Sylvan below is so effective. It makes it easy for parents to refer the business to other parents via text or email. When the referred parent registers their child, both families receive a free week of tutoring.
Make marketing a little easier with a referral program
Digital marketing requires that your brand consistently create new content for your audience to discover and engage with. It’s a lot of work, and anything you can do to make it easier for pre-qualified prospects to approach you is worth the effort.
A referral program helps you tap into the network of happy customers you’ve already built. By rewarding them for spreading the word about your brand, you continue to generate goodwill with your current customers and create an opportunity for new, relevant prospects to find you. For more help bringing your business’s next referral program to life, see how our complete suite of digital marketing solutions can help!
