We all tend to trust a product or service more when it is referred to by a friend or family. Businesses are familiar enough with this fact, and hence, they incentivize existing customers through customer referral programs.
Based on research, 78% of marketers agree that word of mouth is the ultimate strategy to get more leads.
Yet, a small percentage of businesses utilize the referral system for lead acquisition. In this blog, I’ve shared the robust strategy to build a strong customer referral program and the benefits that come along with it. I’ll also show you a step-by-step process to create a customer referral program in your business. Let’s get started!
Table of Contents
- How valuable is a referral?
- What is a referral program?
- Benefits of Customer Referral Programs
- How to Create a Customer Referral Program
- Customer Referral Program Ideas
- Customer Referral Program Examples
How valuable is a referral?
Customer referrals are highly valuable because they don't cost much — if anything — to acquire. The exact value of a referral varies across different businesses, but it's roughly the lifetime value (LTV) of a customer, plus the cost of customer acquisition (CAC), which you can then use to acquire additional customers.
Data tells the tale: Companies found that referred customers have a 30% higher conversion rate, a 16% higher lifetime value rate, and a 37% higher retention rate than leads generated from other marketing channels.
The reality is, however, that you're effectively asking your customers to stand in place of your marketing and sales departments.
And when referrals are the heart of generating new business, operating with tact, consistency, and patience is extremely important.
What is a referral program?
A referral program is a word-of-mouth marketing tactic that encourages customers to advocate on behalf of your brand. Rather than writing reviews online or submitting customer feedback surveys, referral programs let customers share their brand experience with partners, colleagues, and friends.
Let’s say I found my favorite spot for coffee and sandwich. The very next day, I pay a visit along with my friend, and the business owner recognizes me as the regular customer. After my repetitive visits, the owner considers me a loyal customer and decides to offer rewards or incentives.
That’s why referral programs are created — to reward its customers for the referral.
How do referral programs work?
A customer referral program simply works by incentivizing the existing customer with rewards when they refer you to new customers. Most businesses use lead generation software to track their referral through the referral links.
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Free Customer Referral Templates
45 email & social media templates to ask for referrals and spread the word about referral programs
- Email Templates to Ask for a Referral
- Email Templates for Following Up with a Referral
- Social Copy Templates About a Referral Program
- And More!
Download Free
All fields are required.
When the new customer uses this link or a code to complete the purchase, the existing customer receives an incentive in the form of a discount, gift card, or promo code. The subsequent flow of referrals can drive more conversions for businesses without spending on their marketing campaigns.
Airbnb, for example, offers a $25 credit to the existing customer as well as the referred customer, increasing the likelihood of sign-ups. The referral program is a win-win situation for the business, existing, and even new customers.
However, the referral program should not be confused with the affiliate program. While the affiliate program relies on third-party brand advocates, referral programs are for existing customers who wish to spread the word to their social circle.
Benefits of Customer Referral Programs
As I mentioned in the previous section, customer referral programs are a win-win situation for all three parties involved. While existing customers are rewarded for their loyalty, customer referral programs are the most lucrative for businesses.
After all, you get to earn a lead or two without spending a dime on marketing. Below, I have shared the benefits of customer referral programs for businesses:
Attracts Warm Leads Through Trust
With a plethora of brands competing for the same customer segments, it’s hard to earn their trust and convert them into potential leads. Online reviews are less credible than they used to be, probably because of the fake reviews.
That’s when customers turn to more credible word-of-mouth marketing from friends or family. Recommendations from a known person earn a higher grade of trust as compared to the online forums or online ads.
For example, a person would recommend an automobile service that they have already used and know about what they have to offer. This way, a qualified lead has already been sent your way rather than spending on converting the cold leads.
Lowers Customer Acquisition Cost
Referral marketing is a low-cost acquisition strategy that barely involves any marketing expenditures. The only costs associated with the customer referral programs are: kicking off the program and rewards to referrers for brand advocacy.
In return, you get warm leads who are more likely to bring you new customers through referrals. Popular cloud storage service, Dropbox, gained a whopping 4 million users in just 15 months, with 35 percent of all sign ups coming from the referral program.
And what do they have to offer? A storage of up to 500 MB for two. In my opinion, that’s a great deal in exchange for a new paying customer.
Evident from the research by The Wharton School, referred customers generate 25% higher profit margins as compared to leads generated by other channels. So, the lower acquisition cost will likely bring more profit margins and better ROIs.
Higher Customer Lifetime Value
Customer referral programs encourage your existing customers to stay longer as they are rewarded with bonuses and discounts. Even the referred customers have a 16% higher retention rates and 18% lower churn rates as compared to customers gained from other channels.
The retained customers are worth ten times more valuable than their first-time purchase. For example, Super Hair Pieces used a reward program on their website to incentivize repeat customers through referrals. The brand witnessed a higher CLV (customer lifetime value) because of the loyalty program.
So, referral programs contribute to an increase in the loyal customer base.
Next, if you're ready to start leveraging word-of-mouth at your business, read on to the next section for tips on how to create a customer referral program.
How to Create a Customer Referral Program
- Start with customer referral templates.
- Set your goals.
- Research how referrals are coming to your business.
- Determine what a 'good fit' is for your company.
- List possible customer referral sources.
- Identify channels to host your referral program.
- Make a plan to reach out.
- Identify your referral incentives.
- Create resources to alert your customers.
- Set up tracking.
- Say Thank You.
- Follow up on your referrals quickly.
- Improve your referral program.
1. Start with customer referral templates.
Whether you're a one-person customer referral machine or part of a multi-person referral team, templates are a huge help in the process.
They can be adjusted to fit the voice and tone of your brand and utilized by anyone in the company that needs them.
These free customer referral templates can be used for creating a bank of:
- Referral request emails
- Referral follow-up emails
- Social copy about the business's referral program
- And more
2. Set your goals.
Ask yourself: what do you hope to get out of this referral program?
Are your goals tied more to growth and revenue? Do you want to add retention to that mix? Are you in an industry that requires an exceptional amount of trust-building?
Once you decide what your goals are, and explicitly define them, the next steps should lay themselves out for you.
3. Research how referrals are coming to your business.
A good place to start is by assessing where and how referrals are coming to your business — or if they're coming to your business at all.
This is where you should involve marketing, sales management, support — anyone who would be responsible for building customer relationships — and assess how they've been traditionally dealing with referrals.
This will give you an idea of where you already are.
You should also know what an existing customer is worth. Compared to time spent monitoring and managing onboarding programs, how many referrals do you need to break even?
It’s worth doing the math to see how much referrals could generate. You can then adjust your marketing spend accordingly.
4. Determine what a ‘Good Fit’ customer is for your company.
Before you tell customers to seek out referrals, you should first identify what an ideal customer looks like.
That way, your existing customers will refer leads that actually buy from your business, rather than just listing names to collect the program's incentive.
These descriptions should be placed right at the forefront of your customer referral program.
For example, if you have a form that customers fill out, you should describe what a “good fit” customer is right at the top of the form.
This will remind participants that you're looking for specific individuals who need your product — not just a friend who might be interested in your business.
5. List your possible referral sources.
I‘ll call these advocates, and they can be anyone whom you’re already connected to currently, or who you have been connected to in the past.
This list could include current customers, past customers, leads that may not have closed, industry leaders, your vendors, etc.
This will give you a solid footing to start with.
6. Identify channels to host your referral program.
For your referral program to work, you'll need a communication platform that alerts both your business and the referred customer when a referral is submitted.
Here's an example from Uber Eats, where the customer can share a referral code to a friend or family member using WhatsApp, Messages, or another available option.
When an invite is sent, not only does the referred customer get the message, but Uber Eats knows the original customer submitted the referral.
Uber can now turn to its marketing and sales teams to further engage the referred customer as soon as they sign up using the ride credit.
While you don't have to offer a $20 discount, your business should provide customers with a way to share their referrals. That way, the introduction to your company is through a trusted peer rather than a cold contact.
7. Make a plan to reach out.
Now, refine. Narrow down the list of advocates and sources to a list of “inner circle” contacts.
These are people who know what value your business has and would refer you without any incentive. Finding your inner circle isn‘t a process that can be automated — you’ll get more benefit from this if you pull and segment these contacts manually.
Once you have your inner circle segmented out, you now have two things to take into consideration.
First, timing is everything. Identify appropriate times to ask these inner circle advocates to take part in your referral program. Because they are people you've worked with before, this is a less strenuous process.
When you start working with people who will need an incentive (which I talk about below), it's important to consider the relationship.
For some companies, depending on the service or product, asking for a referral needs to happen late in the relationship. For others, it could be upon the first sale (think apps, digital interface services).
Free Customer Referral Templates
45 email & social media templates to ask for referrals and spread the word about referral programs
- Email Templates to Ask for a Referral
- Email Templates for Following Up with a Referral
- Social Copy Templates About a Referral Program
- And More!
Download Free
All fields are required.
Then, once you've asked, wait some more. That might require a waiting period of months, or even a year, to remind them about the referral program again.
Additionally, you should also be picky with your advocates (even your inner circle ones).
Identify people whom you think could market your brand the way that it should be marketed.
Within that inner circle, who do you have a stellar, stand-out relationship with? Or do you have an existing customer that came from a referral and worked out?
And remember: Watch out for referral fatigue, and make sure you're not overburdening your contacts.
8. Identify your incentives.
There are two options for a referral program: an incentive and a non-incentive program.
During this step, you should break your contacts out by levels and decide which ones can receive which offer.
And don't forget the referrer — make sure they get something out of the deal, too.
Like our Uber Eats example above: When a customer refers to a friend, they get $15 credit — and when a customer first signs up, they get a $20 credit towards their first order.
9. Create resources to alert your customers.
Once you have a referral program, create resources you think would work well and alert your customers. Then, promote, promote, promote.
And consider multiple avenues of promotion beyond the time-limited email campaign to remind your customers of the program’s existence.
Those might look like:
- Newsletters.
- Blogs.
- CTAs and email signatures.
- Product updates.
Once you have the referral programs outlined, you'll have an idea of what resources you need for each one.
I've listed out a few resources you might need below:
- Emails for each type of contact telling them about your referral program
- A message explaining what types of customers fit well with your business. You need to paint a picture in their minds of your ideal customer
- A workflow that leads your contacts through the program and alerts your sales team when to call
- A landing page that provides a place for your contacts to give you their friend's information
- Scripts for your sales and customer support teams to follow when explaining your referral programs
- A referral kit filled with resources for your contacts to share with their friends: this can include case studies, testimonials, eBooks, videos, and anything that gives insight into working with your business
Whatever your medium, make sure it‘s consistent, persistent (though not over-the-top), and in line with your program’s revenue, growth, and retention goals.
10. Set up tracking.
Regardless of the size of your company (though this is especially relevant if your company has a larger customer base) you need to have tracking set in place.
This will ensure that you don't miss one detail — for referred accounts especially.
You should be tracking:
- Who was referred and who referred them.
- When they were referred.
- Whether or not they converted or were sold.
- How you're going to nurture and follow up with them, etc.
If you haven't already invested in a CRM (customer relationship management) system, then now is a great time to become familiar.
Keeping track of customer relationships is a huge component of customer success — the ability to individualize each account or relationship makes each customer feel like they're a unique part of your base.
11. Say, “Thank you.”
Thank the referrer for helping you out (this is where incentives might work, but also consider messaging that thanks them specifically as well), and thank the referred for joining.
Then, get to work — you've got happy customers to prove right.
12. Follow up on your referrals quickly.
When you do land a solid lead, be sure to take advantage of it right away. Don't let your referrals sit around for too long, or you might miss the opportunity to secure these new customers.
Remember, while your customer may have referred this person to your business, they may have referred them to other companies as well.
What‘s more, you don’t know what research the referred customer has done on their own, and you may have to swing them away from going with a competitor that they've been considering for some time.
At the end of the day, the sooner you can make your impression, the more likely you'll be to close the deal.
13. Improve your referral program.
As I mentioned earlier, there's no universal blueprint for creating a perfect customer referral program.
The best program for your business will be unique and potentially quite different from your competitors, depending on how you assess customer needs and preferences.
The important takeaway here is that it may take some time to figure out what works and what doesn‘t — and that’s perfectly normal. You should be testing your program regularly to see what you're doing well and where you can stand to improve.
Try sending your customers feedback surveys to see what they think about your program and be sure to apply that feedback moving forward.
After all, the better your referral program is, the more leads it will generate for your marketing and sales teams.
Now that I‘ve explained how to create a referral program, let’s explore some ways you can put this plan into action.
Free Customer Referral Templates
45 email & social media templates to ask for referrals and spread the word about referral programs
- Email Templates to Ask for a Referral
- Email Templates for Following Up with a Referral
- Social Copy Templates About a Referral Program
- And More!
Download Free
All fields are required.
Customer Referral Program Ideas
1. Contests or Giveaways
Contests or giveaways can incentivize customers to refer new leads.
For example, you can host a contest where customers are only entered if they refer a certain number of leads to your business. This can mean providing a list of emails or getting signups for a free trial or membership.
The one risk that you run with contests is the quality of leads. If customers are randomly selecting their peers, you might not obtain leads who are interested in your business.
This will cost your marketing and sales team time as they sort contacts who aren't a good fit for your company.
Be sure to create contests that encourage customers to refer high-quality leads. You can do this by basing your entry fees on conversions rather than referrals.
If a customer wants to be entered into the contest, they need to get people to sign up for or purchase your product, rather than simply providing an email. This will ensure that you're rewarding customers for providing high-quality leads to your business.
For example, this Gold's Gym giveaway included a host of physical prizes, such as dumbbells and workout benches in exchange for referrals.
Why It's Effective
This strategy is effective because it appeals to our inherent desire to win something. It might be a free product or subscription to a service, or it could even be a cash prize.
By giving away something customers want for their help in finding quality referrals, businesses can zero in on their target market.
Who It's Best For
This approach works for any business, so long as you have something worth giving away. Retail brands could give away a high-quality, high-value item, while service companies could offer to cover the cost of services for a month, six months, or a year.
How to Measure the Program's Success
Measuring success means making sure that customer referrals are driving quality referrals and conversions. As a result, it's worth tracking the amount spent on contest prizes versus the volume of spending driven by referred customers.
When to Implement It
It's worth implementing this strategy when referral numbers start to dip. The caveat? Only run it for a fixed period of time — such as two weeks or 30 days — to keep interest high.
2. Social Gifting
It‘s easier to motivate customers if they don’t feel like you're trying to manipulate them.
When you send out a coupon that says, “refer five people and get 25% off,” customers know that you're trying to get something from them and are more dubious of your offer.
Instead, you can leverage social gifting as a way to encourage referrals without directly asking for them.
Take the example below.
Instead of rewarding customers for providing a certain number of referrals, this offer rewards them for sharing a coupon with their peers.
This way, the customer not only gets to give a gift to a friend but is also rewarded each time their referrals redeem the coupon.
That provides them with extra incentive to reach out to as many people as possible.
Why It's Effective
Social sharing provides a way for existing customers to give and get something — and something they‘ll actually use. Since you’re relying on customers to do the leg work, however, make sure that your social gift is worth their while.
The example above shows a $15 off coupon for both referrer and referee; numbers lower than that, such as $5 off a purchase, probably won't motivate action.
Who It's Best For
Social sharing is often best for brands with a product that benefits from a specific or percentage discount. This is especially true for brands that don't typically run sales events, since it gives customers the rare chance to get items at a lower cost.
How to Measure the Program's Success
Use unique coupon codes or other methods to track the use of your discounts — one for current customers and one for new referrals — to make sure the program is paying off.
When to Implement It
This approach can be used any time of year for retail or eCommerce brands. One piece of advice? Make sure your giving is two-sided; both the referrer and referee should get something out of the deal.
3. Fundraisers
Fundraisers are a great way to connect with your customers‘ values in a way that doesn’t involve your product or service.
By getting involved with a cause that your customers care about, you're demonstrating that you understand more than just their buying habits. You recognize their personal values as well as what they are looking for from your business.
Additionally, fundraisers present a referral opportunity as well. It's easy for customers to share fundraisers with their peers, and as more people donate and participate, your team will build a database of leads who share the same values as your company.
This makes it more natural for your business to follow up with these new leads and shift the conversation toward your products and services.
Why It's Effective
Fundraisers take the focus off your brand and put it onto a worthy cause. While your brand is associated with the effort — and can gain some goodwill as a result — the best fundraising efforts make sure that the cause takes top billing.
Who It's Best For
Any company can use fundraising as a referral program. The concept is simple: Create a fundraiser for a cause your customers are passionate about and then ask them to share the details with friends and family.
How to Measure the Program's Success
Done well, fundraisers can bring in new customers via direct referrals. But this isn‘t the primary purpose: Instead, you’re looking to build goodwill and community reputation.
As a result, you may see downstream effects when customers recognize your company name and choose to engage with your social media channels or make a purchase. Ask them where they heard about your company to get a sense of the fundraising campaign's effectiveness.
When to Implement It
Fundraisers can happen at any time, but it may be worth aligning them with local holidays or festivals that have customers feeling more generous with their time and money.
Free Customer Referral Templates
45 email & social media templates to ask for referrals and spread the word about referral programs
- Email Templates to Ask for a Referral
- Email Templates for Following Up with a Referral
- Social Copy Templates About a Referral Program
- And More!
Download Free
All fields are required.
4. Customer Loyalty Tiers
So far, I’ve discussed referral program ideas that encourage one-time referrals. While these are certainly effective, it’s tough to host a daily contest or start a fundraiser every other week.
Instead, it’s more efficient to have a referral program that motivates customers to refer multiple people over a long period of time.
To accomplish this, you can create customer loyalty tiers that reward people as they continue to refer leads. Each tier has unique benefits. When customers refer to a specific number of leads, they’re promoted to the next loyalty tier.
With this setup, customers are constantly motivated to refer new leads, even if you’re not hosting a contest or promotion.
Why It's Effective
Access to greater discounts or rewards can be a significant driver for some customers, especially if they regularly spend large amounts of money on your site or in your store.
Since these customers are already loyal, they're more likely to sing your praises to friends and family regardless of any rewards offered.
Adding a tiered referral option simply adds motivation.
Who It's Best For
Companies that sell a large variety of products at different price points can benefit from this approach. Lower tiers may offer discounts on lower-priced items, while higher tiers could provide both money off and early access to new products.
How to Measure the Program's Success
Measure success by tying the number of new referrals and conversions to current, high-tier customers. If you reach a saturation point where the number of high-tier members outstrips the number of conversions, consider adding a new tier or phasing out the program altogether.
When to Implement It
Implement this program just prior to a new product launch or social media campaign to help drive interest and engagement with your brand.
5. Seasonal Campaigns
Seasonal campaigns are always a timely way to draw in new customers.
You can promote holiday discounts, annual sales, and long-term deals that can be used every year. And, if you execute these campaigns consistently, your customers will look forward to them year-round.
Why It's Effective
Spending ramps up around many major holidays, making them the perfect time to capture customer attention with a great deal or discount. Do it right, and customers will look forward to your seasonal campaigns all year long — and they'll also tell their friends.
Who It's Best For
Seasonal campaigns can work for any product or service brand, so long as your messaging is clear and you make sure to advertise the upcoming event prior to the season or holiday itself.
How to Measure the Program's Success
Since these campaigns happen over a fixed period of time, measuring success means comparing the number of referrals and conversions generated over the seasonal period compared to previous campaigns.
When to Implement It
Start your implementation around a month before the seasonal event itself to give customers time to think about what they want to purchase and who they want to refer.
6. Exclusive Events
Customers like to feel like they‘re a part of a community, especially if it’s exclusive.
By hosting events that are reserved for members of your customer loyalty program, you can capitalize on customer advocacy and attract new leads.
For example, you can provide extra tickets to an event so customers can invite their peers and introduce them to your brand through a casual setting.
Rather than bringing them into one of your stores, leads can attend a company outing or event where there's no pressure to close a deal.
Why It's Effective
Messaging from companies will never equal the impact of recommendations from friends and family.
If you can provide customers with unique experiences that introduce your brand without making it the focus of the entire event, loyal customers won't feel strange about sharing invites with their social circle.
Who It's Best For
This is often a great approach for B2B companies to help expand their current corporate network connections. If you can carve out a reputation as a company that hosts great events, it's even easier for current customers to convince friends and family to tag along.
How to Measure the Program's Success
Compare your spending on the event to the number of referrals received and the number of conversions related to these referrals.
Expect to take a loss the first few times as potential customers become familiar with your events, but if low numbers persist, consider changing your approach.
When to Implement It
Implement this strategy when calendars are fairly clear. For example, just after the holiday season is a good time — prospective referrals are often feeling a bit down and looking for an excuse to have a good time.
7. Referral Discounts
If your customers are looking for a more direct return on their referrals, you can also offer them discounts based on how many leads they bring to your business.
Remember, acquiring a new customer is much more expensive than retaining an existing one, so the money you lose on the discount will be made up for with the leads that you convert.
Why It's Effective
Large enough discounts on products people want can convince them it‘s worth their time to refer to their social connections and help promote your brand. The caveat? Do your research to make sure the discount you’re offering is substantial enough to drive action.
Who It's Best For
This method works well for brands with high-value items such as electronics, jewelry, or clothing. If you can offer a significant discount for the number of referrals brought in, you're more likely to see success.
How to Measure the Program's Success
Remember that when it comes to referral programs, what you lose on discounts, you make up for with new customers. Track sales from customer referrals over a specified period — for example, six months — to see if discounts are paying dividends.
When to Implement It
Consider running this type of campaign during the launch of a newer and more expensive version of your product or the debut of an entirely new product line.
Free Customer Referral Templates
45 email & social media templates to ask for referrals and spread the word about referral programs
- Email Templates to Ask for a Referral
- Email Templates for Following Up with a Referral
- Social Copy Templates About a Referral Program
- And More!
Download Free
All fields are required.
8. Product or Service Upgrades
Product or service upgrades are excellent incentives for customer referral programs because they both attract new leads and encourage existing customers to continue using your products.
If you don‘t have an upgraded product or service to offer, you can instead introduce customers to beta features, products, and services that the rest of your customer base doesn’t have.
Not only will this “wow” customers with what your product development team has been working on, but it will also make them feel like part of an exclusive group that has VIP access to these special features.
With this approach, you're not just offering an incentive in return for new leads.
You're encouraging customers to share positive feedback while simultaneously adding value to their customer experience over time.
Why It's Effective
It's always nice to be part of the “in” group, especially if it gives you access to new services or features. Craft a stand-out experience here and customers will be happy to talk up your company.
Who It's Best For
Service-based companies and software developers are good examples of where this approach may excel. By giving repeat customers early access to new features and functions, they feel appreciated and are excited to tell everyone else about it.
How to Measure the Program's Success
Access to features and functions still in testing is extremely cost-effective since you're not currently marketing these to customers. As a result, any sales that come from referrals can be considered a success.
When to Implement It
I would suggest implementing this type of program whenever you're rolling out a new product or service. You get the benefit of free beta testing and customers are happy to be included.
9. Charity Connections
Here, you're helping yourself by helping your community.
Instead of rewarding customers with discounts or exclusive events, you partner with a local charity organization and make a donation every time an existing customer provides a new lead referral.
This is particularly useful to help build brand reputation and trustworthiness over time — both of which are now a priority for consumers.
Why It's Effective
Reputation matters for customer retention. While buyers are happy to get a discount or a free gift, if you’re willing to make a donation for every new referral, it improves their perception of your brand and, in turn, their willingness to share your campaign.
Who It's Best For
This approach has widespread appeal. The caveat? Do your research and make sure the charity you're donating to is one that your current customers care about.
How to Measure the Program's Success
Since your goal here is reputation rather than direct revenue, focus on social media shares and positive online interactions with your brand. This indicates that your campaign worked, and conversions should naturally follow.
When to Implement It
While charity is a worthwhile goal any time of year, charitable giving may have more impact during or just after a crisis or high-profile event that has people looking for ways they can help.
10. Mystery Gifts
Who doesn't love a gift?
And while picking your own from a lineup of potential presents is great, sometimes it's even better to get a surprise.
This is the idea behind mystery gift referrals — when current customers refer potential prospects, you send them a mystery gift. It doesn't need to be anything extravagant, just something that shows your appreciation.
Why It's Effective
Mystery gifts are just that — mysterious. They offer a surprise for potential referrals that may help them take action and sign up for your emails, follow your page, or start making purchases. Useful, not expensive, is the goal here.
Who It's Best For
While any company can implement the mystery gift idea, this approach typically sees more success with retail and eCommerce brands that already sell physical products.
For example, although a software design company could send out a free gift to potential clients, it's harder to connect this type of referral to the service being offered.
How to Measure the Program's Success
When it comes to measuring success from mystery gifts, take a look at spending versus revenue.
If giving gifts to current customers and their referral prospects leads to enough business that you offset the cost of your gift program, keep at it. If costs consistently outpace revenue, consider another approach.
When to Implement It
Everyone loves a free gift — use this approach wherever and whenever to drive new business.
If you‘re still not sure how to use these strategies, let’s look at a few companies that have successfully executed these customer referral ideas.
Customer Referral Program Examples
- Dropbox
- Acorns
- Stitch Fix
- T-Mobile
- Healthy Paws
- MeUndies
- Google Workspace
- DoorDash
1. Dropbox
Dropbox offers free products or services in exchange for users referring new customers: You can earn more cloud storage space in exchange for referring a friend. I like the catchy referral slogan that Dropbox uses.
Though they don’t reveal the amount of storage here, the free storage is enough to grab the eyeballs.
How to Make It Work For You
- Offer something that makes existing customer accounts or services more valuable.
- Not sure? Ask customers what they'd like before spending on a referral program.
2. Acorns
When you refer a friend to Acorns, an online micro-investing service, you get $5 deposited in your account when they start investing.
It‘s called Acorns because it’s all about investing small amounts of money to accumulate wealth, so $5 goes a long way.
Sometimes, people just want money — but especially if they're already using a money management app.
How to Make It Work For You
- If you're opting for money as your referral award, make sure the process from referral to deposit is clear and easy to follow.
- Make sure to highlight any restrictions, such as the number of friends that customers can refer to.
3. Hostinger
Hostinger, a globally trusted web hosting provider, allows you to earn up to $200 for each friend, family member, or colleague you refer through their referral program.
When your friend signs up for a 12-month or longer web hosting or VPS plan using your unique referral link, you'll receive a 20% commission on their purchase. Your friend also benefits from a 20% discount automatically applied at checkout.
Your commission will be credited after your friend’s hosting plan stays active for at least 45 days. Depending on your preference, you can receive the payments from Hostinger via PayPal or wire transfer.
How to Make It Work For You
To ensure your referral program succeeds, offer generous discounts to referred customers and competitive commissions to those who refer. Keep the process straightforward, so everyone understands the value for both themselves and their friends.4. Stitch Fix
When you refer a friend to Stitch Fix, an online styling and shopping service, you get a credit on your next order.
It's an easy step to go from telling someone where you got your outfit to sending them a link to try it themselves, so pairing that with a compelling credit or discount makes this program successful.
I liked this example since it directly asks for referrals from the customers. The referral also comes with a slogan that asks for curating the items and recommendations from the stylist.
How to Make It Work For You
- If any of your services are fee-based, waiving them is a great starting point. The caveat? Make sure it‘s enough to cover something for customers so they feel like they’re coming out ahead.
- Keep it simple, especially if your program has several components. Consider creating a referral program website that explains the process in detail.
5. T-Mobile
Customers who refer cellular carrier T-Mobile to their friends can earn up to $50 per friend who purchases a T-Mobile plan and up to $500 per year.
Friends, meanwhile, enjoy discounts on their new plans to help encourage the referral process.
How to Make It Work For You
- T-Mobile's referral program depends on the quality of service. If you have a service-based business, make sure you make current customer satisfaction a priority before branching out into referrals.
- Opting for a multi-referral process lets current customers earn substantive rewards — this often drives better results than a single, large-payout referral.
6. Healthy Paws
Healthy Paws pet insurance has a referral program that donates $25 to homeless pets on behalf of referrers when referrals are completed.
It's a smart choice to offer this type of referral for an animal-focused insurance business — the compassionate nature of the reward is likely to attract both current clients and new customers alike.
The slogan or message of this referral program is strong enough to entice the visitor to donate and refer to their known ones.
How to Make It Work For You
- This type of program is great for encouraging referrals and gaining social capital for compassionate giving. The caveat? Carefully select charities or nonprofits to ensure they’re legitimate.
- Be upfront about what charities do and the amounts they've raised - feature them on your website and regularly review them to make sure money is spent responsibly.
7. MeUndies
Online underwear company MeUndies offers a win-win situation for customers who like their product: New buyers get 20% off their first order, and existing customers get $20 off their next order.
Here's how it works: Customers with an active account and at least one purchase can generate a referral link and send it to friends.
When friends use the link to make a purchase, the 20% discount is automatically applied, and existing customers get a $20 credit on their account.
Simple? You bet. Effective? Absolutely.
How to Make It Work For You
- In the case of more niche products like underwear, your referral program depends on the quality of your product, so it's worth cultivating a loyal customer base before rolling out a widespread referral campaign.
- Companies like MeUndies also charge a premium price for their product — for similar brands, it's critical to offer a substantive discount, such as 20% or more on the first order, to capture new customer attention.
8. Google Workspace
Search giant Google also has a referral program that offers cold, hard cash for bringing new users into the fold.
Existing Google Workspace customers simply sign up and get their referral link, which they send to friends or colleagues.
Unlike many other programs, however, Google doesn't bother with discounts or free gifts — if new customers use referral links, referring customers get a monetary reward deposited directly into their bank account.
How to Make It Work For You
- This program targets workers and their colleagues, which makes function the key connector: Since employees are less likely to rave about productivity software or business apps to their co-workers, your product needs to stand out from the crowd.
- Consider a tiered reward model; Google offers differing cash amounts depending on the type of product referred.
9. DoorDash
Food delivery company Doordash is always looking for new drivers, and their referral program is designed to target areas where demand is highest.
Current drivers can check their app to see if drivers are needed in their area — if so, they'll see a “Refer Friends” banner at the top of their screen.
They can then send referral links to friends looking to become DoorDash drivers — when these new drivers complete the required number of deliveries, both referrer and referee can earn cash bonuses.
Worth noting? The amount earned scales with current demand. In high-demand areas, new “Dashers” and those who refer to them could earn up to $1,000.
Current drivers can also refer up to 15 new drivers.
How to Make It Work For You
- The DoorDash program is based on demand. If you're a service-driven business, this is a great way to generate interest. The key to success? Aligning your rewards with local needs to drive growth where you need it.
- DoorDash also encourages referees to work quickly — if targets aren‘t met before bonuses change, they don’t receive the full amount. This can be a great way to drive interest, but make sure you're up-front about how the program works.
Overall, a customer referral program is a great way to retain customers and drive word-of-mouth marketing. Creating advocates for your company will keep the flywheel spinning.
Editor's note: This post was originally published in June 2021 and has been updated for comprehensiveness.
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