How to Build the Best Referral Program in 2024
Some of our favorite products that we buy often come from being referred to us by friends or family. We noticed someone with a similar product or have asked our inner circle for a referral when we are searching for something to buy.
The key to a good referral is trust. Referrals bring in new customers and reward your loyal customers at the same time. Implementing a world-class referral rewards program gives your customers the nudge they need to start recommending your store to their friends. It’s estimated that “92 percent of consumers around the world say they trust recommendations from friends and family, above all other forms of advertising.”
What is a referral program?
A referral program has to be rewarding to both the person making a referral and the person receiving a referral. According to Shopify, a referral program “is a system that incentivizes previous customers to recommend your products to their family and friends.” This system is set up by the ecommerce business and rewards the customer making a referral and the first-time customer in the forms of a discount, gift cards, or sometimes free products.
Provide desirable rewards to both the sender and receiver
The best form of marketing is word-of-mouth. It always has and always will be because it carries trust and good intentions. In order to build the best referral program, you want to reward both parties for a successful referral. Turning your current customers into brand advocates requires an incentive. These rewards can take many forms (the more creative, the better!) but we’ve found the most effective rewards for new customers are fixed discounts, percentage-off coupons, or free products for their first purchase.
Lyft has a successful referral program because it rewards customers for being brand advocates. By referring a friend to ride with Lyft, they get a discount while you earn $10 in credits. If you refer a driver to sign up for Lyft, you can earn up to $750 in credits. This concept of rewarding both parties is so effective for two reasons:
- New customers have the incentive to try out your brand for the first time.
- Your existing customers will want to refer as many friends as possible to keep earning rewards.
Reward both new and returning customers equally so they find value in your program. When you have a strong referral program, you can also begin to cut down on your customer acquisition costs. Every time one of your customers brings in one of their friends, you are saving on the cost of the ad that you would have otherwise used to get them there, allowing you to invest more into your profitable retention strategy. This form of word-of-mouth marketing is effective and consumers find it to be 2 to 10 more reliable than paid advertisements.
Encourage customers to share on multiple channels
Every customer is different in the way they shop and search for products. In order to have success with referrals, you need to ensure you’re providing a variety of options on what channels your customers can share referral messages.
There are 2 different categories of referral channels: public and private. Public channels like Facebook and Twitter allow you to blast a referral link to your entire network and are great for reaching a wide audience. However, for those that prefer more private channels, SMS, email, DM’s, and WhatsApp offer more of a personal experience. It’s always best to use at least one public and one private channel to maximize your program’s accessibility.
Jibby Coffee has been successful in creating a word-of-mouth strategy that rewards referring and new customers. “The majority of our customers have come from positive word-of-mouth,” explains the team at Jibby Coffee. “We’ve used our loyalty program to continually provide value to our most loyal customers so that they can spread the word and attract more customers.” Jibby Coffee allows customers to share their referral code and message through Facebook, Twitter, or email. Both customers can earn a $10 off coupon for every referral. Let’s say influencers can share their referral link in their profile and it’s a win-win for all parties.
The most successful programs offer social media sharing, email, copied referral links, and direct messages for a more private referral experience. Giving your customers many ways to share will maximize the number of referrals you receive because your customers aren’t limited by channel.
Create motivating share messages
To maximize the effectiveness of your referral program, you need to create a compelling message that will actually drive conversions. Branding, imagery, wording, and tone all have a big impact on your referral messaging success. It’s what everyone will see when you send a referral message either through email or social media.
Creating motivating share messaging can be done in a few basic steps:
- Add your logo to the feature image to make sure your brand is getting exposure and customers know where the referral is coming from.
- Make sure the image you choose shows what you sell.
- Add a clear description of what customers will gain by following the referral link.
- Make the message personal by using words like “I” and “my”.
BrüMate does a great job at having a referral message that is attention-worthy and effective. When a referral is shared on social media they signal to others that through their link, anyone can receive a free gift. Customers also have the option of sending a referral code through email and giving friends and family a reward of a 15% off coupon.
Optimize your referral program for mobile sharing
It’s estimated that 70.5% of referral messages come from mobile phones. One key point Smile offers in setting up a referral program are ensuring it is optimized for mobile sharing.
Lyft has success with its referral program because they’ve set a standard for how easy it should be to refer a friend while on the go. You could be in the backseat of a Lyft with a friend and get them to create an account with your referral link by the time you reach your destination. Replicating this practice will allow you to generate more referrals than ever before.
BrüMate’s referral program appears the same way on mobile as it does on desktop. That way customers will be able to easily receive their referral link and shop on whichever device they are on. The best referral programs allow for easy sharing across all devices because that increases the likelihood of referrals coming to your store.
Explain how it works
If you want new customers to really get excited about your program, they need to understand how it works. A fantastic way to create personalization in your referral program is by creating a landing page. Instead of sending a referral to your homepage, customize the landing page that explains the ins and outs of your referral program. Focused on the why, what, and how of earning rewards with referrals, this page will clear up any confusion new customers may have upon clicking the link.
Eco-friendly brand, Zero Co. has a great explainer page that is simple and bold. It lets both customers know what they are getting when they refer customers and receive a referral. At a glance, you know exactly what you are getting and where to sign up. This increases the desire to participate and engage with other areas of the brand.
Getting someone to click on a referral link is only half the battle, so make sure they actually make a purchase by clearly explaining the value they are receiving. Build an explainer page for your referral program so you can clear up any confusion as quickly as possible and reduce program abandonment.
Use referrals to make the most of your existing customer base
If you’re not leveraging your current customer base to bring in new customers, you are spending way too much on your acquisition efforts. Adding a referral program will incentivize your best customers who already enjoy your store to get their friends to try it out, too.
Referral programs are one of the most trusted forms of marketing that makes the most of your existing customer base. Referrals are built in trust, with 92 percent of consumers around the world saying they trust recommendations from friends and family, above all other forms of advertising. Additionally, it’s a great form of retention that turns those referred customers into additional brand advocates. According to ecommerce insights, referred customers are 4 times more likely to refer your brand to others. Referral programs are effective when set up to succeed.
To build a high-caliber program that gets the most out of your customer base, make sure you are providing value for both parties, giving customers many ways to share, creating motivating messaging, optimizing for mobile sharing, and explaining how it all works.
Editor’s Note: This post was originally published on February 27, 2018 and was updated for accuracy and comprehensiveness on January 5, 2023.