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Tips & Guides — 30 Sep 2021
8 Referral Program Examples That Work
Aside from being a staple of financial growth and scaling, customer acquisition is often a pain in the neck. Whether you’re starting a new business or running the existing one, getting new customers sucks off your marketing budgets and the lion’s share of your team’s work time.
However, there is a way to ensure the influx of new clients without breaking the bank and stretching your marketers’ thin. All you need is to make the most of your existing customers’ loyalty and encourage them to spread the word about your product or service with a referral program.
To help you learn the ropes of referral marketing to scale your business, we’ll unpack these topics:
To kick things off, let’s explore what referral programs are and how they work.
A referral program is a marketing strategy that encourages your best customers, employees, or partners to spread the word about your product or service. Generally, happy customers are eager to share their experiences and recommend something to their friends or family members. Referral marketing incentivizes this natural aspiration by offering a reward — discounts, gift cards, free products, etc.
What does the referral process look like?
When joining a referral program, a current customer gets a unique referral link or promo code to share with their friends. When a friend registers via the referral link, a referrer gets paid or receives a gift.
It’s the basic scheme of how customer referral programs work. However, there are more ways to organize your referral marketing according to the goals you wish to reach. For instance, a great chunk of companies use referral programs for recruiting new employees.
Aside from bringing dedicated workers aboard, employee referral programs may be a great source of customer acquisition. Existing employees make great brand advocates. Thus, it’s important to educate them about your business and incentivize them to share their knowledge with others.
Finally, business partners and vendors can bring a lot to the table if you make them your referrers. They have access to broader audiences of their customers, partners, friends, and other people with whom they have long-lasting two-sided relationships.
When building and scaling a business, you may encounter countless troubles, from struggling with making your brand recognizable to floundering in customer retention. Starting a referral marketing program can help you take the teeth out of these hardships and make each marketing dollar go further. Let’s zero in on the main reasons your business needs a referral program.
Word of mouth is the primary source of brand awareness for 12% of gen Z, 18% of gen X, and 16% of boomers. The reason is referral programs somehow resemble multilevel marketing in terms of spreading the word. One person can give referrals to dozens of their friends. Each of them can refer a company to dozens of their acquaintances. As a result, you get the broad outreach without wasting a dime on PR activities or brand awareness marketing campaigns.
Doubling down on referral marketing is a surefire way to succeed if you save your customer acquisition budgets. Other marketing channels require constant involvement from your team and regular money influx. Meanwhile, with a successful referral program, loyal customers do the heavy lifting. However, it doesn’t mean you set up a referral program once and then leave it forever.
Word-of-mouth marketing is a powerful way to boost the credibility of your business, as the referrals from friends and family create more trust than other marketing strategies. According to Nielsen, 92% of consumers trust recommendations from their acquaintances. Referrals from a close circle remain more trustworthy than recommendations from celebrities or social media influencers.
60% of B2B marketers say referral marketing programs give them a high volume of leads. However, a more meaningful indicator of referral marketing efficiency isn’t quantity but quality. According to Statista, almost 60% of marketers deem referral programs to be the source of high or very high-quality leads. Moreover, such leads are more likely to convert into customers.
Refer-a-friend programs influence companies’ customer lifetime value and retention rate in two ways. First, referred customers are believed to have higher lifetime value compared to customers from other channels. Second, participating in referral campaigns may increase the retention rate and LTV for referrers as they stay engaged with a brand and constantly remember its values.
Referral marketing may work wonders if you need to scale your customer base, increase brand awareness, boost retention, or spend less time closing deals. However, please don’t rush to add it to your marketing strategy. Let’s explore some examples of the best referral programs to learn from before you get the ball rolling.
Word-of-mouth marketing may bring results not only for businesses selling consumer goods. Companies thriving in narrow niches may also benefit from this marketing tactic, as we can see from the Telsa example.
According to the company’s founder Elon Musk, Tesla has zero budget for advertising and marketing. However, the brand went viral, and a successful referral program played an important role.
Tesla experimented with its referral program countless times, looking for the most efficient options. In the past, the brand offered a $1,000 discount, invitations to exclusive events, and even free cars for top-performing referrers. As the program’s popularity grew alongside the number of referrals, the company had to develop more humble rewards.
Now, Tesla owners and their referred friends can earn 1,000 miles of free Supercharging for buying a car. The rewards program for Tesla’s solar panels and Solar Roof solution implies a $100 bonus for a new customer and $400 remuneration for a person referred to the product.
Takeaway: A successful referral program may require outstanding bonuses, especially at first. Don’t be afraid to offer generous rewards and change your referral program terms and conditions as your business evolves.
Casper is well-known for revolutionizing its business niche by moving mattress sales into eCommerce. The company took a customer-centric approach and has come up with a bundle of brilliant ideas for promoting its business, from delivering mattresses packed in a box right to the buyer’s door to offering one of the best-performing referral marketing programs.
Casper’s referral program offers existing customers a $75 worth Amazon Gift Card for referring a mattress to a friend. The company also added an incentive for new customers; they get a 20% discount for making an order through a referral link.
Takeaway: Offering rewards both for referrers and prospects is a golden standard in referral marketing. This tactic helps increase the conversion rate alongside making existing customers happier.
Startups love referral programs because it’s an effective growth marketing tactic that costs you next to nothing. The key is to use cheap yet effective referral incentives, as Dropbox does. Their referral marketing program has made the company a legend and ensured a 60% customer base growth in 2010.
Dropbox offered 500 MB of free storage space for each new user brought by a referrer to achieve these incredible results. Loyal customers on the Plus и Professional plans get a higher reward — 1 GB for each accepted invitation. Thus, the company constantly gets bundles of new customers with low investments.
Takeaway: Try to think outside the box when searching for referral rewards. There is no need to stick to discounts, dollar credits, or free products. Sometimes, going for low-price and intangible rewards bring incredible results.
Uber’s referral program superpowers are personalization and tech-savviness. Once a new user or driver joins Uber, they get a unique code to share with their friends. Another option is to add a referred friend directly from the app. With the referral code, a person can offer others to join Uber as a new customer, taxi driver, or a courier for Uber Eats.
The referral bonus is paid once an invitee hits a specific goal, such as the number of rides. Remunerations vary from region to region; the exact reward is shown to a referrer in their app. A referrer can track their friends’ progress in the app and get a notification once the bonus is paid.
Takeaway: When setting up the reward, think about the goals you want to achieve with your referral program. You don’t have to give a bonus for simply acquiring a new user; instead, spot the point where they will pay off and stick your bonus payout to it.
This marketplace has one the largest and best-performing affiliate marketing programs — Amazon Associates. We’ve explored every nook and cranny of it in a stand-alone article. Consider dedicating some time to look through it and get insights for building your referral program.
However, in 2021, Amazon decided to launch an additional Brand Referral Bonus program. According to its conditions, eCommerce stores can get approximately 10% of sales from the traffic driven to Amazon from external sources, such as contextual advertising or social media promotion.
Takeaway: A referral program doesn’t have to focus on customer acquisition. Indeed, you may employ referral marketing to reach other goals, such as driving traffic to your website.
Watch brands stockist WatchShop provides an A+ example of combining partner marketing with a referral program. The company offers a £10 gift card to a supermarket chain Tesco for each referred friend that placed an order on the website. To incentivize a new customer to purchase via a referral link, the WatchShop gives a 30% discount.
Offering a gift card or a discount in another shop works great if a company sells only one type of product with a high price and long lifetime. The discount on other watches probably wouldn’t motivate a loyal customer to refer to a product. In contrast, the same discount on essential products fuels the motivation more effectively.
Takeaway: If you give a discount or freebie, try to estimate how soon a loyal customer could use it. When the span is too big, consider partnering with some essential goods provider.
A user behavior tracking system, Hotjar reaps the benefits of referral marketing as well. The company uses a partner referral program; people registered with a website as partners may refer Hotjar to their customers and get rewards. The bonus is the percentage of recurring revenue Hotjar gets from a referred user.
The most interesting part of this program is its progressive scale of remuneration. The longer the subscription period a new user chooses, the bigger the bonus a referrer gets. The reward can grow up to 25% of revenue for referred friends that have signed a multi-year contract. The referrer continues to earn rewards for as long as their friends use Hotjar. This smart tactic allows Hotjar not only to acquire new customers but also to increase their LTV.
Takeaway: Consider scaling referral bonuses for your program as well. They may bring a lot to the table if your business runs on the subscription model or relies on long-lasting customer relationships.
Service scheduling software Jobber stresses its service part and makes sharing a referral link 100% convenient for a customer. A referrer can either copy a link or tap the social icon to spread the word on social networks. If a user chooses the second option, Jobber automatically adds the description of their platform.
However, the truly unique feature of Jobber’s referral program is a reward. Alongside a free month of using the platform, a new customer gets VIP treatment. This tactic helps eliminate fears of getting started with complex software and boosts conversion.
Takeaway: Sometimes, the surefire way to make your referral program more shareable is to make the sharing process convenient. Also, a rewards program may be designed to eliminate your potential customers’ fears and concerns.
Practice is the best teacher, but a few pieces of actionable advice may up your chances to succeed in referral marketing. Let’s take a look at some of the best practices that’ll make your referral program thrive.
Referral rewards are a big deal, as they are staples of your own referral program success. Thus, incentives should be enticing enough but still not pulling the last buck out of your marketing budget.
Below you can see the most popular types of bonuses used in referral marketing. However, they need to be applied to your strategy smartly.
Companies with tight marketing budgets may go for intangible incentives, such as special treatment or flex. Yep, if your brand is strong enough, people may get motivated by a simple highlight on social media. However, you first need to ensure that such bonuses provide value for your brand advocates.
The popular tactic of offering a higher reward for the first or any other milestone referral may work well. You can implement tiered incentives, so your existing customers would get more and more valuable rewards for each referred customer.
However, the essential tip for your referral rewards is to give bonuses for actual sales and conversions rather than prospects or registrations. So, make sure a referrer will get a remuneration only if their referred friends purchase from you.
To bring the best possible results, your referral program needs promotion too. So, consider putting time and effort into making it noticeable and enticing. You can approach referral campaigns the same way as any other marketing activity.
The first step would be to frame your referral offer into a catchy and clear headline. Make the value a customer gets from referring your product obvious and add a strong call to action. Here are a couple of ideas you can use for your inspiration:
Another key point for making your referral program noticeable is creating a landing page for it. Make sure it contains attention-grabbing visuals and explains referral program terms and conditions clearly. Remember to optimize the landing page for search engines, so potential referrers can easily find it. Make sure your referral program page is easily accessible from the website’s main page.
Apart from it, you can employ other channels that help you reach your marketing goals. Remind your social media subscribers about a referral program, integrate promotional messages into your blog posts, email campaigns, and printed collateral.
Customers are ready to share referrals when they are engaged with your brand the most. So, you need to pick the right time to ask for recommendations. One of such perfect spans is immediately after purchase when a customer is excited about it. Thus, you may place the offer to join a referral program on a confirmation page or email.
The next slot is right after the delivery. Ask your customer how they did like the delivery process and timing. If they have given you five stars, tell them about your referral program in the thank-you email or a retargeting ad campaign.
Another perfect time to ask for a referral is after a successful interaction with a customer support service. Once their problem has been solved, a client feels thankful and more inclined to share the product with a friend. So, ask a support specialist to remind a customer about the referral program.
Apart from catching customers in specific touchpoints with a brand, you can launch separate promotional campaigns for your referral program. A winning strategy is to coordinate them with holidays or anniversaries, such as a year since the first purchase. Finally, you can invent a customer appreciation day in your company and reward loyal customers with extra bonuses for sharing a referral.
Keeping track of your referral marketing performance is essential. You may need to change your referral program conditions from time to time to reap more benefits. For instance, you can experiment with bonuses to see which of them bring more to the table.
You may even find out that you have to close this marketing channel; it happens even with the best referral programs. For instance, Airbnb and Evernote, whose referral marketing programs used to be exemplary, have decided to end them.
The basic things you need to keep your eye on are the number of referrers, referrals, and conversions. Apart from it, you may want to watch after a customer journey, LTV, and engagement of customers you got from a referral program.
The bigger your referral program is, the more sophisticated tools you may need to track your referrals. So, in the very beginning, you can get by Google Spreadsheets, but as your program scales, opt for referral program software.
Referral marketing can be an effective and cost-effective customer acquisition strategy for your business. It boosts your brand awareness and credibility, provides you with high-quality leads, shortens the sales cycle, and increases customer lifetime value and retention rate.
To run the best referral program for your business, you need enticing rewards and a well-designed promotion strategy. Learning from other companies may accelerate your program success as well, so consider returning to the examples we’ve listed in this article from time to time.
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