How to Launch a Customer Referral Program in 6 Steps (Plus Examples)
Table of Contents
Some of the biggest companies in the world have achieved explosive growth thanks, in part, to their referral programs:
- Dropbox: get free storage space for you and the person you invite
- Uber: refer a new user, get points for rides
- Airbnb: earn $200 for every host you refer
As it did for those companies, referral marketing can turn your best customers into a profitable, self-running sales team. It motivates your existing customers to recommend your business to other people in their networks.
Most marketers know referrals are valuable, but few manage to make them work as well as they’d like.
The reality is that although customers are generally open to giving referrals, many companies struggle to entice them to take action.
This is called the referral gap. And it can be a chasm: In a study of over 1,000 clients, 83% said they’d be comfortable providing a referral. Twelve months later, only 29% actually did.
The referral gap is one critical reason why so many businesses avoid implementing referral programs altogether.
But there are ways to reduce it.
In this article, we’ll walk you through the steps to launch a successful referral strategy—the kind with a narrow referral gap and a wide referring customer base. We’ll dig into the mechanics of effective referral programs so you can build your own.
Here’s what we’ll cover:
- The difference between referrals and word of mouth
- Why you should have a referral marketing program
- The 4 parts of a successful referral program
- 6 steps to add a referral program to your growth strategy
- 8 examples of businesses using referral marketing to grow
- Cheat sheet
First, we’ll clarify a common misconception: that referrals and word of mouth are the same thing.
The difference between referrals and word of mouth
In a perfect world, you wouldn’t ever need to go actively looking for new customers because they would hear about your brand through word of mouth (WOM). Your product would be so good, your service so exceptional, that each of your existing customers would gush to everyone they know about how great your business is.
Unfortunately, that’s not how people actually behave. Often, they need motivation to spread the word.
Customer referral programs are a manufactured version of WOM. They encourage WOM by offering an incentive for recommending your business to others.
- When you tell your friend over Slack about the language-learning platform you’ve been using, that’s word of mouth.
- When you invite your friend to the platform because you’ll get $10 when they make a purchase, that’s an incentivized referral.
Important: Your customers won’t refer others to your product through either WOM or incentivized referrals if they don’t think it’s that great. So before you get started on any of the tactics in this article, make sure your product is truly recommendable.
We cover word of mouth in our article on organic virality. It’s a companion piece to this one that discusses the different types of non-incentivized viral marketing.
Why you should have a referral marketing program
Some marketers focus solely on acquiring customers for the cheapest cost possible, using channels like viral content or organic social media.
That can work. But it can also lead to low-quality customers who will negatively affect your business down the road. If someone loves your viral content, it doesn’t necessarily mean they’ll love using your product.
Referral marketing avoids that fallout by considering not just customer acquisition costs (CAC) but also the lifetime value (LTV) and retention of each new customer. In one academic case study, referred customers had an 18% lower churn rate and 16% higher LTV than non-referred customers. According to research from Deloitte, the retention rate for customers acquired through WOM and referrals is 37% higher than non-referred.
When done right, referrals are a highly profitable marketing channel.
The reason is simple: Consumers trust recommendations more than other types of messaging. It’s why user-generated content (UGC), social proof, and testimonials are the hallmarks of so many successful marketing strategies.
Referrals are equally effective for new and established brands because they create a network effect around your marketing efforts. Each existing customer becomes a node to share their experience with an unlimited number of new, like-minded potential customers.
Those like-minded prospects can become new product advocates if they start using your product and then referring others to it.
If it’s so effective, why doesn’t everyone do referral marketing?
Referral marketing can be tough to get right. You could end up giving away more rewards than you’re getting in revenue in return, having an inefficient rewards program that depletes your team’s resources, or launching an incentive that doesn’t motivate enough customers.
We’ll help you avoid those risks. By going over how to offer the right incentive at the right time, we’ll provide guidance that will allow you to reduce your referral gap and increase your ROI.
The 4 parts of a successful referral program
Creating a successful referral marketing program requires four key considerations:
- Channel: How will you communicate with your customers and prospects?
- Timing: When and how often should you ask for referrals?
- Incentive: Does your offer align with your business model and customer’s motivation?
- Friction: How easy is it for customers to refer others?
Channel: How will you communicate with your customers and prospects?
Depending on your business model, the channels you use to communicate with and acquire new customers will vary. This is an important consideration for your referral program because you’ll want to use the channels your customers are comfortable with.
A safe rule to go by is to execute your referral program using the same channels that led to the original sale.
For example, if you’re an ecommerce store, it’s typical for your sales and onboarding processes to take place over email and SMS. So reaching out to ask for a referral through email or SMS would be appropriate.
But if you’re selling a high-ticket SaaS product, and your sales reps lead your outbound sales program, consider asking for a referral over the phone or in person, then following up through email.
Timing: When and how often should you ask for referrals?
We’ve seen businesses make two common mistakes when it comes to timing their referral programs.
Mistake #1: asking customers for a referral right at the end of the sales process, before they’ve even tried the product.
That’s like asking someone if they’d recommend a movie as they’re waiting in line to go watch it.
It doesn’t work. And it will lead to a low adoption rate and annoyed customers.
Instead, look for moments when rapport is high between you and your customer.
That could be:
- Right after your customer gives you a high net promoter score (NPS) in a survey
- When your customer renews for another billing cycle
- When your customer actively engages with your marketing efforts (e.g., they reply to an email newsletter, send a social media DM, or comment on a post)
It’s during these moments that your business is top of mind. Use that awareness to your advantage by engaging loyal customers in your referral program.
Mistake #2: asking customers for a referral only once.
As with any marketing initiative, it might take a few reminders.
Asking more than once—and in more than one way—will probably require some coordination between teams. For example, maybe your sales team asks for a referral over the phone when checking in with new customers. Your product team could arrange for an in-app referral request. And marketing could post about the success of your program on social media, in your newsletter, on your blog, and through other passive channels.
But don’t bombard customers with referral requests, or you’ll face a backlash.
Incentive: Does your offer align with your business model and customer’s motivation?
Some common referral program incentives include dollar or percentage discounts; free products, product units (e.g., videos hosted, megabytes), upgrades, or time (like a week or month free); credits/points; and gift cards.
Whichever incentive you test out, it needs to align with:
- Your business model: With each new customer, does your business lose or make money? Can you cover your CAC?
- Your customer’s motivation: Is the incentive good enough that your customer will take action?
- Your prospect’s interest: Will the referred prospect convert into a new customer?
Insight: Focus on value over cash
Before we discuss incentives for B2B, ecommerce, and SaaS specifically, a general rule of thumb for incentives: Wherever possible, focus on value over cash.
Most people don’t care about earning a small amount of cash. They didn’t start using your app or buying your products to make a few bucks.
That’s why many of the best referral programs dole out value that’s aligned with their product’s key value prop. Instead of giving out cash, they give you more access to the product.
Think: Dropbox offering storage to referring and referred customers. Or the fitness tracker Whoop offering a free month when you give your old device to a friend who then becomes a member.
Many ecommerce businesses award points that can be redeemed for exclusive discounts and promotions. Referring a friend to online consignment shop thredUP, for instance, gets you store credit.
Below, we’ll discuss some instances where cash discounts do make sense. That might be the case if your product can’t be doled out in units, or if it wouldn’t be feasible for your brand to offer credits or points. For retailers in particular, cash could very well align with a brand’s key value props.
But if you take the cash route, make sure your offer is significant. To motivate people, it will need to be.
Incentives for B2B businesses
The following incentive designs came from the industry experts we spoke to while researching this article—they’ve operated referral programs for thousands of businesses combined.
First up: B2B.
Unless you’re speaking with the founder or CFO, B2B users won’t generally be motivated by discounts, since they won’t see any direct reward for making the referral.
A reward tailored to the customer’s interests or personal preferences—e.g., a gift card to a local shop or restaurant—would be much more effective.
For long sales cycles, reward customers at short-term milestones that have value for your business. For instance, you could offer a gift after receiving a demo request or adding a new user.
Examples of B2B referral incentives:
- Hotjar (website heatmaps): Possible referral rewards include a hoodie, T-shirt, or free lifetime account.
- Zendesk (customer support): Get a bottle of wine for every referral that results in a meeting. (This appears on Zendesk’s Australian microsite.)
Incentives for ecommerce businesses
Ecommerce customers are much more likely to respond to discounts or significant cash offers, since these directly benefit them.
Your cash offer or discount needs to be large enough that it will catch the attention of your customer.
Tier your reward to offer a large upfront incentive without drastically increasing your CAC. For example, you could offer a $30 incentive for the first referral, then $10 for each subsequent referral. Using dollar-cost averaging, your average CAC will decrease the more referrals an individual makes.
Examples of ecommerce referral incentives:
- Bloomist (garden and household items): Get $35 off your next order when someone uses your referral link to place an order of $50 or more. They’ll get $35 off their next order too.
- Zoma (mattresses): Get a $50 gift card when your friend completes their sleep trial. Your friend gets $150 off their mattress.
Incentives for SaaS businesses
If you have a low-ticket self-serve SaaS business, your customers are likely paying out of pocket. Discounts or free upgrades will appeal to your price-sensitive customers.
High-ticket SaaS with long sales cycles will require individualized incentives that depend on the persona of the person you’re selling to.
Offer incentives that only trigger as the referred prospect moves the deal forward. That might motivate your customer to encourage the prospect to close the deal.
Examples of SaaS referral incentives:
- Airtable (project management): Accumulate credits (worth $10 each) for every person you invite.
- Sweat (workouts): Get three months for 99¢ when you refer three friends.
Friction: How easy is it for customers to refer others?
Getting customers to agree to your incentive is the first step. But the deed is far from done.
Closing the referral gap means your customers need to actually reach out to new prospects. Friction will kill any momentum you’ve built up and keep your customers from making the referral. Even the slightest amount will drastically reduce your referral program’s conversion rate.
Friction can come in many forms, including:
- Technical friction, like a broken link or slow web page
- Effort friction, like having to compose a message to send to the prospect
- Emotional friction, like not finding meaning in sharing a referral
To increase the likelihood that your customer will send a referral, strive to minimize the number of mouse clicks your referral process takes.
In practice, that means:
- Pre-writing all referral messaging for your customer
- Eliminating all unnecessary logins or credentials
- Providing your customer with simple tools and instructions
Once you’ve launched your referral program, look for spots where customers are dropping off—that’s where you’ll find friction points.
We’ll discuss friction reduction in a number of the upcoming tactics.
Follow these 6 steps to add a referral program to your growth strategy
As mentioned earlier, referral marketing is a manufactured version of word-of-mouth marketing (WOM). It will help increase the amount of WOM you’re getting, but it won’t begin to create WOM.
Said another way: Referral marketing is like putting gasoline on an existing fire, not like getting a fire started.
- If you don’t have customers yet or your customers are unsatisfied with your solution, spend your resources and time on that first.
- If you do have satisfied customers but they’re not talking about your brand or products, consider how you might expand your organic virality before launching incentivized virality.
If you have both criteria—1) existing customers who 2) are referring others to your business through WOM—follow these six steps to implement an effective referral marketing program:
- Identify your desired outcome.
- Analyze your existing referral sources.
- Create a shareable—and remarkable—product experience.
- Design an irresistible referral incentive.
- Grow your referral program in three phases.
- Get the word out.
Step 1: Identify your desired outcome
When designing your referral program, start with the end in mind. Ask yourself: What outcome are you hoping to achieve?
Consider the current maturity and reach of your brand. Young brands, early-stage startups, and brands with limited reach won’t receive as many referrals simply based on the size of their existing customer base. As long as your referral program aligns with your desired outcome, that shouldn’t discourage you.
Here are the five most common outcomes of referral marketing:
- Generate brand awareness
- Reduce the cost of customer acquisition
- Manufacture urgency
- Amplify social proof
- Increase revenue
Generate brand awareness
Asking your early-adopter customers for referrals can increase awareness of your business within a target audience.
- You can create a network effect—each new customer could become a node to share information with others.
- If customers are referring others because they get a boost of social currency—e.g., it makes them feel in the know—they’ll give cachet to your brand.
- Prospects might not convert to revenue-generating customers if the product is super new or different.
- The incentive will likely need to be expensive to get new customers to take action.
Reduce the cost of customer acquisition
Referrals can convert a prospect into a new customer using less investment than other channels like ads or offline outreach. The average deal size and cost of your incentive will dictate how much lower your CAC will be.
- Your customer will become an inexpensive salesperson for your business.
- You’ll have a direct line of communication with a pre-vetted lead. That’s likely to require less lead nurturing than blind outreach tactics like cold emailing.
- Your target CAC might be low, but your actual CAC will depend entirely on how many purchases your referral program leads to.
- Even if they’ve been referred, potential customers might still require marketing or sales interactions.
Adding a time limit to your referral program can increase the urgency of the deal. And urgency is a powerful psychological trigger that encourages quick action.
- Your program will motivate action and decision making.
- You’ll be able to quickly disqualify prospects who aren’t ready to take action.
- Your sales team will have a reason to reach out to prospects to see if they can help speed things up.
- If they feel rushed, some prospects might be discouraged from moving ahead.
- You might need to make exceptions if people miss deadlines.
Amplify social proof
Referrals can help you generate social proof at scale. Each referral represents a happy customer spreading the word to others.
- Referrals are a natural way to ask your customers to provide testimonials.
- The success stories your referral program generates can be used in your other marketing initiatives, like paid ads or collateral.
- You’ll need to get permission from all parties involved before using testimonials and social proof publicly.
- Using referrals for social proof requires another “ask” from your customer.
If you designed your incentive to align with the economics of your business model, referral programs can be a lucrative way to add revenue to your business.
- This is a systematic way to continually bring in new customers.
- It’s a semi-closed system, making it pretty easy to calculate CAC and ROI.
- You can explore new customer bases without needing to invest heavily in marketing efforts.
- The success of your referral program isn’t firmly in your control. You’ll need customers who are willing to participate.
- Your conversion rate will differ depending on the incentive, your business needs and model, and the customer persona you’re targeting.
Step 2: Analyze your existing referral sources
Before investing in building a referral program from scratch, explore where your current customers heard about your business. Measuring your WOM can reveal how your customers are already sharing information about your brand and products. You can use those findings to select your referral channels.
To understand where your customers heard about you:
- Check your website analytics.
- Conduct research on social media.
- Send out a customer survey.
Check your website analytics
What other sites are referring to yours? Use your website analytics to get a sense of your online WOM.
In Google Analytics, navigate to the Acquisition tab > All Traffic > Source/Medium. The “source” identifies which website or domain the user came from. The “medium” lets you know whether the source is direct traffic, search traffic, email, a paid ad, etc.
Take note of any sources that are referring a significant amount of traffic.
It’s likely that a lot of your website referrals are coming from social media—you can see them in Google Analytics under Social > Overview. We’ll cover how to get more granular and dig up those posts in the next section.
For now, explore all non–social media referring domains to understand the context of why they’re linking to your site.
If a website is reputable and speaks fondly of your product, reach out to its owner. Establish a relationship. Provide a gift as a token of appreciation, and begin to test a more formal referral program.
Set up goal tracking in Google Analytics to measure the number of new users who visit your site from a referral source. Use that data as a source of truth when negotiating compensation or other forms of incentives with partner websites.
Conduct research on social media
To find out how customers are talking about your business organically, search social media networks.
On Twitter: Type in the URL https://twitter.com/search-advanced. This will bring up the advanced search window.
Type your product and business name in brackets in the “any of these words” section. Doing that will show you all the public tweets that mention your business or product. (You can refine your search further, e.g., by specifying a time frame or filtering for just replies.)
Engage with high-quality posters, and ask for permission to use their posts as marketing assets. Ask if they’d be willing to participate in your formal referral program.
On LinkedIn: In the search bar, type the name of your business.
Then click Posts > Date Posted. Set the time frame to “past month.” Click Show Results > Sort By > Latest > Show Results.
You now have a filtered list of all the posts from the last month that mentioned your business. Search the results for any that speak highly of your brand. Reach out to the person who posted to see if they’d be willing to refer anyone they know.
Send out a customer survey
When onboarding new customers, add a question to the process that asks where they heard about your business.
This will help you understand your existing referral channels and establish a baseline from which you can measure new initiatives.
Step 3: Create a shareable—and remarkable—product experience
Remember: Referrals are like adding fuel to your existing WOM fire. If people aren’t talking about you to begin with, referrals won’t help much.
To boost WOM, give your customers an experience they’d be excited to talk about at the dinner table. Look for opportunities within the delivery of your product to create moments of unexpected “wow” for your customers.
Here are a few ways to impress your customers through your product delivery and onboarding.
Unboxing: The first impression your customer has of your product takes place when it arrives at their front door. Look for ways to enhance the design of the package it’s shipped in and how it opens to reveal the contents within. Unboxing is one of the only times when a message you send will have a 100% open rate—make it count.
Post-purchase communications: Between the moment your customer hits “buy now” and the time your product reaches them, help them out and boost anticipation.
Teach them how they can incorporate your product into their daily routines. Share stories of other users and the transformations they’ve had. It’s too early at this point to ask for a referral, but by strengthening the customer-brand relationship with helpful, friendly communications, you’ll lay the foundation for positive WOM and referrals.
Micro-moments: Software has the unique quality of defying all laws of gravity, space, and time. Use that to your advantage by creating “micro-moments” that entertain or make the user experience more enjoyable.
Project management software Asana features “celebration creatures” who fly across your screen when you complete a project. This feature doesn’t have any core functionality, but it does celebrate the user’s small victories, encouraging them to finish more projects. It’s a “remarkable” feature in that it’s fun to remark on—and tell your friends about.
Frictionless sharing: Remove all the friction that would prevent users from sharing a link to your product. Allow them to access their contact list, share directly to social media, or copy the link easily. A sharing feature lets a new user try your product without having to register or sign up.
TikTok allows users to share links with their friends, who can then view videos without needing to download the app. After a video is over, the viewer sees that they can watch more content like it by downloading.
Step 4: Design an irresistible referral incentive
Motivate your best customers to refer others by giving them something worth way more than their time and effort.
Here are the most common ways to structure a referral program. Select the one that aligns best with your business’s goals and economics, as well as your customer’s persona.
One-sided incentives provide compensation to only one side of the referral transaction (either the existing customer or the prospect, not both).
An example would be a B2B SaaS that sends you a gift card when another business is activated.
- Keeps the cost of acquiring a new customer low
- Incentivizes your customer to give you a referral, or your prospect to become a customer
- No motivation for the un-incentivized party to take immediate action
- Possibility that customers will refer low-quality prospects to get the referral reward
Two-sided incentives give both your existing customer and prospect compensation for participating.
An example would be an ecommerce store offering you a free pair of socks when you refer a friend, and your friend getting 20% off their first purchase. Or a “give $20, get $20” offer.
- Win-win for both referrer and referee
- Different incentives can be used to appeal to different recipients’ interests and desires
- Discounts and giveaways promote repeat purchases
- Higher CAC than with one-sided incentives
- You’ll need to design multiple incentives that are attractive to different types of people
Tiered incentives encourage your customers to refer more people to get a larger prize.
An example would be an email newsletter offering you a set of stickers when you refer five people, a T-shirt when you refer 25, or a trip to visit their HQ when you refer 1,000.
- No limit to the number of referrals a superfan can make
- Average CAC will stay low because the cost of the referral prize will be divided by a larger number of customers (e.g., a $1,000 airplane ticket / 1,000 new customers = $1 CAC)
- Requires infrastructure and effort to deliver the incentives
- Will need fraud protection measures in place to ensure referrals aren’t fake
Create an ongoing leaderboard that allows your brand’s fans to “compete” with each other. Leaderboards can reset monthly and be run concurrently with individual incentives.
An example would be a SaaS product giving away a lifetime account for the top referring customer during a particular time period.
- Re-energizes your customers to refer again each month
- Creates friendly competition to encourage sharing
- Prizes can be swapped out and tested
- Requires robust tools to ensure fair competition
- Giving away lifetime accounts can become costly if your business model depends on recurring revenue
- You’ll need fraud protection measures in place to prevent fake referrals
Step 5: Grow your referral program in 3 phases
Test your incentives before investing a lot of time and resources into automating your referral program. It won’t matter if you’ve completely automated everything through your referral marketing software—if no one wants your incentive, there won’t be any new customers to automate.
Test, then invest.
There are three referral program phases: the Testing Phase, Proven Phase, and Scaling Phase.
The point of this phase is to test your incentive as quickly and cheaply as possible. Iteration is the action, profitability is the goal.
Find your top 10-20% most engaged customers. Run a pilot with them by sending them individualized emails describing your referral program.
Fulfill the incentives manually. Engage with new prospects 1:1. Refine your messaging, incentive, and process over time.
Invest time in the testing phase. Early-stage referral programs are not yet “set it and forget it.” Just like any other marketing channel, they must be actively monitored and improved before you start scaling up.
Once you find an incentive that converts and messaging that resonates, begin to remove all friction from the process.
Optimize the experience to make it as few clicks as possible (for the customer first, then the prospect, then your internal team). Start using low-cost automations for repetitive tasks.
Continue to refine your messaging and learn from your new customers.
(Experts from those platforms contributed independent insights to this article, but it’s not sponsored, and we don’t get an affiliate kickback for mentioning them. We just think they’re good.)
Create feedback loops so your referrers know their efforts are paying off. Even if their sharing doesn’t yield a referral, seeing that their friend clicked and viewed is still encouraging (and might spur another referral).
Keep an eye on your economics to make sure CAC is comparable to your other acquisition channels. Monitor the quality of your prospects to keep out any fraudulent gaming of the program.
Step 6: Get the word out
Now that you have a functional referral program, it’s time to let the network effect work its magic.
Your customers are now your sales team. And like any high-performing salespeople, they’ll need tools to get the job done. Those tools include swipe copy, a dedicated landing page, and your distribution channels.
Create swipe copy
Salespeople have scripts. Referrals have swipe copy.
Swipe copy is pre-written content your customers can copy and send to their friends or colleagues. It reduces friction by taking the responsibility of message composition off referrers’ shoulders—and it ensures that your message is on brand.
The best swipe copy doesn’t feel like it was written by a marketer. It feels like a friend sending a casual, personalized recommendation.
For inspiration, go on social media channels and see how your existing customers are wording their messages of thanks or praise. Swipe what you can.
For example, the following tweet includes some great sensory language:
Here’s how you might turn that into swipe copy:
- “Ready to upgrade from prehistoric video editing tools? Try Descript…”
- “I now feel like a caveman when I use any other video editing tool. Give Descript a try free for 30 days…”
When possible, incorporate practical value and social currency into your pre-written referral messaging.
To add practical value, be clear about the problem your product fixes:
- “I know X is something you’re also trying to fix…”
- “This tool has saved me so much time, and I think it’ll help you too.”
- “This is something I know you’ll find useful.”
To add social currency, highlight the personal relationship between the customer and prospect:
- “Wanted to share this product with you knowing you love X…”
- “I always appreciate your recommendations, so I want to return the favor.”
- “I thought this tool might be helpful in your new role…”
Make it easy for your customer to send a message through various channels in one click (email, Twitter, Facebook, SMS, LinkedIn).
Dedicated landing page for referrals
The swipe copy your customers send should include a link to a landing page. This is where the conversion might happen.
Here are some important considerations when building your referrals landing page:
- One landing page per persona. If you’re targeting specific customer personas, build a dedicated landing page for each. Make sure your messaging is extremely relevant to the visitor.
- What’s in it for me? Explain the benefits from the get-go. What’s the draw? What are the terms? This isn’t the time to explain your product or features. Focus on the benefits—and the incentive that should make prospects want to take action now.
- Simple messaging. Write clearly so your content is easy to understand. Even if you have a technical product, make the referral landing page as simple as possible. Don’t create unnecessary questions for the reader. Include a short FAQ that’s hidden unless someone clicks to expand it.
- Leave a clear call to action. Be explicit about what the next step is. Two options for your CTA are to focus on the key benefit (“get the gift of no downtime”) or incentive (“get a $50 store credit”). If you’re not sure which will increase conversions, A/B test both.
Promote your referral program through your distribution channels
Email: Send a message to your email list when your program goes live. Mention it in your regular communications such as receipts, confirmations, newsletters, and updates.
Also encourage employees to link to your referral program in their email signatures.
Website: A lot of companies make the mistake of tucking their referral page into a hidden corner of their app, off a settings page that requires multiple clicks to get to. Instead, use a modal, banner, above-the-fold slider, or thank-you page to highlight your referral program. Provide a clear option to close the modal, banner, etc., so the user experience can continue uninterrupted.
You can also add a referral section to your customer’s login, to make it easy for them to find their unique referral URL.
Social media: Promote your referral program through your social feeds regularly. Be on the lookout for customer case studies and success stories you can highlight.
Include a link to your referral program in your bio if appropriate. Mention it on relevant subreddits, in Facebook groups, or in other forums where prospective customers spend time online.
Influencers: Engage in an influencer marketing campaign to drive awareness of your product and offer to a larger audience.
Incentivize the influencer to share with their audience multiple times over a spread-out period of time. Single promotions might create spikes in traffic, but long-term partnerships tend to be more positive for both parties.
8 examples of businesses using referral marketing to grow
Although the following referral strategies look different from one another, each successfully implements the four key considerations of a referral program:
- Channel: What channels are your customers comfortable with?
- Timing: When should you ask for referrals?
- Incentive: Does your offer align with your business model and customer’s motivation?
- Friction: How simple is it for customers to refer others?
1. MeUndies (clothing)
- Channel: Post-purchase email, social media, website
- Timing: Once the customer has tried the product and is interested in purchasing more
- Incentive: Two-sided incentive. Practical value and social triggers. Store credit for customer, discount on prospect’s first purchase.
- Friction: Customers get a unique referral link, which is accessible through their profiles. Customers can share it as widely as they want.
2. Olipop (beverage)
- Channel: Post-purchase email flow, website
- Timing: Follow-up with new customers
- Incentive: Delayed two-sided referral (the prospect must make a purchase before the credit is released to the customer). Practical value and social triggers. Discount for customer and prospect.
- Friction: Create a referral link by registering through email
3. Mindbody (booking software)
- Channel: Promotion on website, shared with sales team to mention when the opportunity is right
- Timing: Health and wellness operators (e.g., yoga studios, gyms, massage therapists) will know which of their colleagues has an issue with accepting bookings. They will then refer that prospect to sign up for the software.
- Incentive: One-sided incentive. Practical value and social currency. Customer gets a $500 gift card.
- Friction: Requires the person doing the referring to provide quite a bit of information. The sales team would then reach out to the lead and mention the person who made the referral.
4. Fiverr (marketplace)
- Channel: Promotion on website, through email, and in notifications on the platform
- Timing: Registered Fiverr users can get a portion of the value from their friend’s first “gig.”
- Incentive: Two-sided incentive. The customer gets a cash equivalent of 10% of the prospect’s first order amount (up to $100), and the prospect gets 10% off their first order. Practical value and social currency.
- Friction: Referral link generated for every customer. Users are prompted to share the link with prospects through email and social networks.
5. Duolingo (language training)
- Channel: Email and notifications on the platform
- Timing: Once the customer has successfully completed a lesson
- Incentive: One-sided incentive. Customer gets one week of Duolingo Plus for free.
- Friction: Referral link generated for every customer. Users are prompted to share the link through WhatsApp, text, social media, or by copying the code.
6. Wealthsimple (investing)
- Channel: Notifications on the platform and email
- Timing: Once the customer has successfully deposited an investment
- Incentive: Two-sided incentive. Customer and prospect both get up to $10k managed for free for 12 months. Practical value, social currency, and emotions.
- Friction: Referral code generated for every customer. Users are prompted to share the code with prospects through email or by copying the code.
7. Whoop (fitness wearable)
- Channel: Post-purchase email flow, promoted through the app and website
- Timing: A notification appears on the app a month or so after the customer has begun using the product.
- Incentive: Two-sided incentive. The customer gets a free month of the subscription service for every referred friend; after their prepaid period, the prospect gets a month free too. Practical value, emotions, and social currency.
- Bonus incentive: Get a month free when, after ordering new Whoop hardware, you give your old device to a friend, and that friend becomes a member. Your friend gets a free fitness device, plus two months free.
- Friction: One tap in the app generates swipe copy and a referral link that can be copied or sent through SMS, email, or social media.
8. The Hustle (media)
- Channel: Email newsletter
- Timing: Daily newsletter
- Incentive: Tiered incentive. The customer gets prizes ranging from an ebook to a meeting with the founder. Practical value, social currency.
- Friction: Share on Facebook, Twitter, WhatsApp, or SMS, or copy a referral link
Referral marketing in a nutshell:
- It’s a manufactured version of word of mouth.
- If you’re already getting WOM referrals, adding an attractive incentive will drastically increase the volume of referrals from customers who are unable or unwilling to cross the referral gap.
- Don’t ask for a referral until your customer has gotten to use your product and experience its value.
- Don’t ask for a referral just once. It might take a few reminders.
- Create an incentive your customer and prospect can’t resist. Test new incentives until this is true.
- Align your incentive with your business model, customer’s motivation, and prospect’s interest. Where possible, focus on value over cash.
- When designing your referral program, start with the end in mind. Ask yourself: What outcome are you hoping to achieve? Possibilities: brand awareness, lower CAC, urgency, social proof, revenue.
- Optimize existing channels before investing in building your own referral program. And research existing referral sources to understand where leads are coming from.
- Remove as much friction as possible from the referral sharing process. Create swipe copy. Arm your customers with all the tools necessary to help sell your product.
- Test, then invest. Track and optimize your referral program before you scale.
- Referrals promotion channels: a dedicated landing page (one per persona), email, your website, social media, influencers.
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