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Tips & Guides — 25 Apr 2022
What is a referral program and 8 examples that work
Today we’re talking about all things referral programs. What are they? How do they work? And why do you need them?
More and more businesses are using referral programs as part of their customer success strategies. In fact, the market is growing fast, and it’s not hard to see why. Leads generated from referrals have up to a 30% higher conversion rate than those generated from alternative marketing channels.
Not only that, but 86% of companies with a strong referral strategy in place have seen clear revenue growth over the last two years. Sourcing reputable brand advocates builds customer trust, leading to satisfied customers who will continue the word-of-mouth chain on the ground by referring your products or services to even more customers.
Ready to launch your own referral marketing program? Not sure where to start? Don’t sweat it. We’re going to walk you through the entire process from start to finish.
We’ll be exploring…
A referral program is an ecommerce marketing strategy based on word-of-mouth advocacy. Referrals can be generated in many different ways from customer recommendations to official ecommerce marketing partnerships to increase brand awareness and boost sales.
Referral programs rely on customer, influencer, and business advocates to share their experience of your products and services with their sphere of friends and partners.
Ultimately, the aim is to generate targeted, high quality leads directly to your business. Referred leads are more likely to fit your customer profile closely, and will already have a good impression of your business based on the referrals made by individuals and brands that they already value and trust.
This combination of factors makes them ideal for nurturing into long-term customers.
In the United States alone, 49% of shoppers find new brands through referrals from family members and friends. Referrals are important (especially for businesses still in the growth stage) because they help you get your business seen and, perhaps even more importantly, trusted as a reputable figure in the industry.
Referrals reinforce your marketing efforts and encourage greater customer retention, trust, and loyalty. In fact, referral marketing is one of the top customer retention strategies, alongside email, social media, and content marketing. What do all of these methods have in common? Personalization and flexibility to stand up to new market trends.
Referral programs can be carefully targeted to speak to your unique customer demographic. Plus, a successful referral will also self-reproduce as more and more happy customers and partners spread positive news of your business via word-of-mouth.
Furthermore, referral marketing is incredibly agile and receptive to technology and, these days, there’s no shortage of great referral marketing software to choose from.
For example, Affise Reach makes it easy to find and establish business referral partnerships. Brands and agencies can use Affise Reach to partner up and expand their marketing channels in a quick and convenient way.
The concept is simple. On Affise Brands, advertisers post their offers, then agencies and affiliate networks apply as affiliates in the advertiser’s system. On Affise Vendors, brands can choose affiliate partners from a database of reputable affiliate networks and publishers.
Employing a referral program for your business comes with a lot of potential advantages, from superior marketing scope to cost savings, increased credibility, boosted customer retention rates, and more.
There’s so much to gain from referral marketing, as we’ve already alluded to, but let’s take some time now to delve into some of these amazing benefits in a bit more detail.
One of the biggest benefits when it comes to referral marketing is its ability to significantly increase marketing scope and reach. Word-of-mouth is a fantastic way to amplify leads.
Thinking about it this way, each referral has the potential to branch out into dozens of additional leads as friends refer to friends who refer their friends in return. 92% of customers trust referrals that come from people they know. Furthermore, 84% of B2B buyers start the buying process based on a referral.
Referral marketing broadens outreach beyond alternative marketing techniques like ads. Plus, (and we’ll get into this in just a sec), it’s a whole lot cheaper as well!
Let’s keep on the topic of money. We just mentioned that referral marketing is a whole lot cheaper than some other marketing techniques like paid-for advertising. This is one of the biggest advantages.
Generating quality referrals is relatively inexpensive (and sometimes completely free) and can lead to substantial long-term revenues. If you ask us, that’s a great return on investment. By relying more on referrals, you’ll cut customer acquisition costs and reduce the amount of up-front investment needed to start your campaign.
Wondering how to generate your first referral partnership? It’s not hard to get started. You don’t even need to develop an in-house solution. Simply sign up for a SaaS platform and start growing and scaling up your business right away.
Switching to a tech provider will help you avoid problems that arise when trying to reconcile your business goals with incompatible tools and technologies. Changing to a new SaaS platform (otherwise known as platform migration) is straightforward with Affise. We will prepare your system, migrate your offers and affiliates, and test links to get you up and running in no time at all.
One reason why businesses choose referral marketing is because of the increased credibility it generates for brands. Referrals from friends, family, colleagues, and other trusted organizations and industry influencers generate authenticity and trust around products and services. Despite the worldwide growth of influencer marketing, referrals from personal acquaintances remain the most trusted by customers.
Think about it this way. Imagine you want to invest in a new gadget (say a smart watch). You know what you want but there are dozens of similar products out there each claiming to have the very best features and specifications.
Customer decision-making fatigue is real.
A referral from a friend or trusted influencer who has used, reviewed, and recommended a particular smart watch, is likely to help you make your final decision, right? That recommendation has made the brand less risky, more credible, and more deserving of your hard-earned cash.
Referral marketing not only generates higher lead volumes, but it also generates a better quality of lead. And that’s super good news because, when it comes to lead generation, quality definitely trumps quantity.
So, what is it about referral marketing that brings in the golden customers? Well, first off, people (both individuals and business decision makers) who act on referrals are generally more or less ready to buy. They know what they want and just need that final recommendation to choose on a particular product or service. This means that referred customers tend to convert at higher rates.
Finally, another advantage that comes with referral programs is the increase in customer retention and customer lifetime value that businesses generate as a result.
Referred customers have been proven to be 18% more loyal than their non-referred equivalents. Not only this, but referred customers actually spend more with each repeat purchase. It’s a win-win.
A big reason for this is the continued level of engagement that referral programs encourage. Buyers who participate in referral campaigns interact and engage with brand advocates, the brand itself, and may even go on to engage further with more potential leads by sharing their recommendation with friends, colleagues, or (in the case of B2B referrals) other businesses.
So, how exactly does referral marketing work?
Well, it starts with a process of advocacy. Your brand advocate (that could be a customer, influencer, industry authority, etc.) shares a positive recommendation or offer with their friends, family, or relevant audience.
After this, the recipient checks out the brand via an offer link or by being routed to the company landing page. At this stage, ideally, the referred customer will claim an offer or make a first purchase. Finally, they themselves become the next generation of brand advocates and share their positive referral with their own friends or a respective audience.
We’ve talked a lot about referral marketing in the traditional sense— that is word of mouth, on the ground. But referral marketing works in many diverse and different ways.
These days, an increasingly popular way to carry out referral marketing agendas is through performance marketing. Performance marketing (sometimes also called partner marketing or affiliate marketing) is a strategy in which companies will compensate third-party affiliate partners for the business they generate.
Brands pay affiliates a fee for each sale they generate. Affiliates are therefore incentivized to promote a brand’s products and/or services amongst their audience. Brands benefit from a readymade audience and, in return, affiliates enjoy financial remuneration for their marketing efforts. There are three key types of partner marketing that brands can mobilize.
1. Unattached partner marketing
Brands using unattached partner marketing partner with affiliates that have no direct connection to their products or services. For example, unattached partner marketing could take the form of pay-per-click promotions in which affiliated partners receive a small commission every time a member of their audience clicks on their partner link.
2. Related partner marketing
Under a related partner marketing approach, affiliate partners promote products and services that they do have some connection to. These partners have some relevant expertise and influence that can be used to reinforce the reputability of a brand and generate high quality leads based on authoritative recommendations and reviews.
3. Involved partner marketing
Involved partners have a strong connection to the products and services that they promote. For example, they may have used and loved the product under question themselves. These partners can recommend your brand’s products and services based on real-life experiences.
Affiliate marketing has grown from strength to strength alongside increased internet primacy. Many brands now use internet personalities like YouTubers and bloggers to promote their products and services. In fact, up to 15% of ecommerce revenues can now be attributed to affiliate marketing strategies alone.
Think that referral marketing might be right for you and your business? Well, chances are you’re wondering how to get started. Any change can be daunting, but incorporating referral marketing into your business strategy planning need not be difficult. In fact, these days there are tons of intuitive and easy-to-use tools and platforms out there that can help you get started in no time.
Tools like Affise, for example. Affise provides businesses with multiple opportunities to generate referral partnerships, share data, and make wide customizations. With Affise you’ll be able to make marketing decisions based on real-time data—not unreliable gut decisions. Basing your projected profit margins on data analysis helps create more realistic, more-cost effective, and more competitive business goals and decisions.
Let’s take a look at how you can get started with referral marketing in your own business. Below we’ve outlined the key steps every business should take before launching their own referral programs to the world.
First thing’s first, it’s time to take a step back and set some targeted business goals. There’s no point launching in without a plan. That’s a recipe for a referral disaster. In order to get the most out of your referral program, you’ll need to be clear about what it is you’re trying to achieve.
For example, consider whether your referral program is going to lead towards scaling your new business, or whether your primary aim is to generate as much revenue as possible. Of course, these can go hand in hand, but it’s important to have a clear primary objective before you begin.
At this point it can also help to decide on a few key performance indicators (KPIs) that you plan to measure throughout the marketing process in order to monitor success. For example, customer retention rates, customer lifetime value, customer satisfaction scores, return on investment…the list is endless. Hone in on a few that align with your unique business goals and objectives.
Other top referral marketing KPIs to consider include:
Next step is to define your marketing message. For your campaign to be a hit you’ll need a foundation of strong referral messaging. In short, referral messaging is the information you communicate to your potential referees and their respective referrals. It is the information that existing customers and partners share with their friends and audiences when promoting your products or services.
It’s important to set out a clear brand message for this purpose that tells prospects exactly who you are, what you offer, and what you’re about in a concise and engaging way. Referral messaging should be clear, succinct, memorable, and avoid over-exaggerated claims (after all, this will only damage reputability long-term).
You can then distribute your referral messaging via influencer channels, email templates, a partner’s blog, or social media platforms, for example.
Defining a clear referral slogan is a great place to start. This is your key brand message. It should encapsulate your brand identity whilst encouraging prospects to convert. Most importantly, your referral slogan should be easily shareable. Confusing or unclear referral slogans are a sure-fire way to turn prospects away.
It’s time to think about where you’re going to source these referrals from. Start by making a list of all the possible sources of customer referrals available to you.
If you already have a few referral leads, make a note of them. Liaise with your customer support and services teams to assess how they’ve been managing informal referrals in the past. Now unify these channels under a formalized process.
Possible sources for referrals include existing customers, past customers, leads who are yet to convert, vendors, industry leaders, and social influencers. If your business is not engaging with multiple referral sources already, it’s time to branch out.
The most basic way to get referrals is through customer satisfaction. If your customer base is happy then chances are you won’t even have to ask them to refer your brand to their friends and family. By providing exemplary customer experiences, you’ll be setting yourself up for referral success. These types of business referrals are a natural byproduct of great service.
Additional ways to source referrals include:
The next step is to seek out channels where you can host your referral program. What do we mean by this? Well, in order for your referral program to be the resounding success it deserves to be, you’ll need a way to manage all referrals that are submitted.
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.
Partnership platforms like Affise offer businesses a simple and intuitive way to manage and monitor customer referrals. Affise is specifically designed to meet the needs of brands, advertisers, and agencies, and help them scale their partner relations.
The platform makes it super easy to manage, analyze, optimize, and customize with custom dashboards, data breakdowns, AI Smartlinks, and fully tailored, customizable user interface designs.
With a centralized platform in place, it’s time to start creating bespoke resources to share with your audience. These resources will form the central pillar of your referral program promotions.
Ideally, you’ll want to pursue multiple promotional channels in order to widen the reach of your campaign. Consider promoting your affiliate messaging via newsletters, emails, social media, blogs, videos, landing pages, and product updates regularly.
Some brands choose to create their own bespoke referral kits complete with all the resources necessary for partners to share with their audience and friends. Kits tend to include things like case studies, scripts, eBooks, videos, informative documents, etc.
Next up, it’s time to start thinking of some killer incentives. Incentives and rewards are a super important part of any referral program. This is what will incentivize and motivate your customers and partners to make those referrals. There are many kinds of incentives and rewards to choose from, so it’s best to think about what will work effectively for your type of business.
Here are some options to choose from:
This one is often overlooked when it comes to optimizing referral programs. Businesses tend to focus more on their offers and sourcing their advocates, and often forget about the importance of their own website and (specifically) landing page in the process.
When it comes to managing referrals, it is of utmost importance that your brand has a central destination where existing and new customers can access your referral program.
Your referral page should be clear, concise, and—most importantly—easy to find! Ensure that all referral links work effectively and direct customers quickly to your referral landing page. Here they should immediately find your key message, a clear CTA, and information about how they can submit or claim referral rewards.
Many businesses choose to include a digital referral form from which customers can make referrals to friends, family, and contacts quickly and easily directly from the website itself.
The time has come to get your message out there and spread the word. You need to market your referral program across numerous channels including email, social media (e.g. LinkedIn, Instagram, Facebook, Twitter), on your website, landing page, checkout page, customer pages, blog posts, and more. If you want people to know about, and engage with, your referral program, then you need to promote it!
And here’s how.
They may not participate first time around, but if they become a recurring customer then you’ll have set the referral process in motion and built awareness about your referral program.
Last, but not least, remember to treat your referral program like a living organism. You need to keep working on it even after your campaign is launched. One of the best ways to achieve this is with statistical analysis and metric tracking.
Statistics analysis can help grow your partner marketing business exponentially by helping you create more realistic business goals, locate your ideal audience, manage company finances, align with trends, and improve business decision making based on precision data.
Monitoring your key performance metrics and seeking customer feedback regularly will help you work out what’s working and what’s not in your referral program.
By doing this, you can constantly tweak and improve your referral marketing tactics for optimum results. Some businesses, for example, send out periodic customer feedback surveys asking customers what they like and dislike about their referral program and what could be improved.
Technology also offers tremendous scope when it comes to making targeted improvements to your program.
Digital products such as Affise BI can help you manage all of your unstructured data from across multiple marketing channels. Thus allowing even those without a technical background to mobilize the power of data when making business decisions. Plus, with Affise CPAPI, you’ll be able to transfer data and connect your systems with offer sources.
Ready to start trying out a referral program of your own? There are lots of different types of referral programs that you can try out, from giveaways to product upgrades.
Take some time to think about and research what your customers will respond to best. Every business is unique, so it’s important to offer referral incentives that work for your specific target demographic.
One of the most popular types of incentive that businesses can offer their customers come in the form of giveaways.
Giveaways are promotional offers in which prizes are given out (usually to a randomly selected winner). So, for example, you could incentivize customers to make referrals by making all referees eligible for your next prize draw.
Building a bit of buzz around your referral giveaway contest will help even more. Start by sharing a link to your referral contest on your landing page, social media platforms, and marketing emails, and make sure that customers can easily share the referral link with friends and acquaintances online.
Another effective referral program model uses customer loyalty tiers. Customer loyalty tiers motivate customers to make multiple referrals over a period of time by rewarding customers more and more, the more referrals they make.
The motivation to make a referral doesn’t die out after the first instance. Customers will want to continue advocating for your business in order to reach next-tier rewards. If we think about this in terms of basic human psychology, it just makes sense. Engagement is enhanced by the element of competition, progress, and reward.
Referral discounts are product and service discounts offered to customers in return for making a referral. For example, a business might offer its referees a 10% discount on their next purchase after making one referral, 25% after two, etc. This is mutually beneficial both for the customers making the referrals and the business itself. Onboarding new customers is generally more expensive than rewarding the loyalty of your best customers.
Finally, consider offering your customers with the best referral history a product, service, or features upgrade. Product upgrades offer double the benefit as they encourage repeat custom from existing clients as well as generating new leads in the process. These upgrades will make your referees feel valued, exclusive, and most importantly, rewarded for their advocacy.
Before launching head-first into your own referral marketing program, it can be helpful to look at some case studies. We’ve selected eight companies who have aced their referral programs to offer you some much-needed guidance and inspiration as you embark on your own journey.
So, without further ado, let’s take a look at these top referral program examples:
Tesla is a prime example of a specialized and highly niche company using word-of-mouth marketing in their campaigns. In fact, Tesla’s founder Elon Musk has even made the claim that Tesla assigns zero budget for advertising and marketing. Instead, the brand found viral success after a successful referral program.
But Tesla’s referral program wasn’t a lucky whim. Far from it. In the early days, the company experimented with a range of different strategies to find the most effective and efficient option. Tesla has experimented with everything from $1000 discounts, free cars for top performing referrers, VIP invitations to exclusive events, and more.
As the company grew, Tesla’s offers diversified. These days, the company offers referred friends Supercharging miles, solar solutions, bonuses, new customer remuneration offers, and more. The offers are smaller, but just as effective thanks to the success of word-of-mouth.
Casper is a well-known mattress company acclaimed for revolutionizing its business niche by moving mattress sales into ecommerce. Casper achieved this by employing a customer-centric approach to promotion. For example, the company has done everything from delivering box-packed mattresses to the customers’ doorsteps to referral marketing.
In fact, Casper’s is one of the best-performing referral marketing programs out there. The original program employed rewards such as $75 Amazon Gift Cards to everyone who referred a mattress to a friend.
Other tactics used by the company include 20% discounts for new customers making an order through a referral link. Casper has aced the reward scheme method to great success both for business outcomes and overall customer satisfaction.
Here’s an example of a company acing referral programs for a digital product. Dropbox used cheap but effective referral incentives to fuel a successful growth marketing campaign. And it sure was successful.
The company’s referral marketing program has made Dropbox a household name and generated a whopping 60% customer base growth for the company back in 2010.
So, what exactly was Dropbox offering? Well, the company offered 500MB of free storage space to each new user brought in by a referrer. The company also rewarded loyal customers on Plus and Professional plans with even higher rewards.
The take home?
Low investment. High reward.
Next up, let’s talk about everyone’s favorite city get around—Uber, of course. Uber’s referral program gives new users and drivers a unique code that they can share with their friends. New users also have the option to add a referred friend directly from the Uber mobile app.
Once the referral code is issued, the recipient can make further referrals to new customers, drivers, and couriers, in return for a bonus that will be issued once the invitee hits specific targets (e.g., a set number of rides).
The referrer can access their rewards directly from the Uber app, where they can also track their friends’ progress and opt-in for notifications to let them know when their bonus is issued.
So, what can we learn from this? When setting up the reward, think about the goals you want to achieve. You don’t have to give a bonus just for acquiring a new user; instead, spot the point where they will pay off and stick your bonus payout to it.
We can’t talk about referral programs without talking about the biggest name in ecommerce, Amazon. Amazon’s affiliate program is called Amazon Associates and is one of the largest and best-performing affiliate marketing programs out there.
For more information about Amazon Affiliates, check out our stand-alone article on the topic, where you’ll be able to find in-depth insights into Amazon’s referral program and tips for building your own.
Amazon’s marketing continues to go from strength to strength. In fact, in 2021, Amazon launched an additional program—their Brand Referral Bonus program where ecommerce stores can get approximately 10% of sales from the traffic driven to Amazon from external sources (e.g., contextual advertising and social media promotion).
Amazon shows us that a referral program doesn’t have to focus solely on customer acquisition. Instead, referral marketing can also be used to help increase the flow of traffic to your website or relevant landing page.
Watchshop is a watch brand stockist with a fantastic combined referral and partner marketing program.
Watchshop gives out £10 gift cards to popular supermarket chain, Tesco, for every referred friend that places an order on the supermarket’s website. New customers are incentivized to make a purchase via the designated referral link with a 30% discount in the form of a gift card or a discount to be used in another shop.
Hotjar uses a behavior tracking system to optimize their referral marketing strategy for success.
Hotjar’s partner referral program works by allowing people to register as partners with a website and refer Hotjar to their own customers in return for rewards. The reward offered by Hotjar is a bonus based on the percentage of recurring revenue Hotjar generated from a referred user.
This kind of referral program is based on a progressive remuneration scale. This means that the longer the subscription period chosen by a new user, the bigger the bonus received by the referrer.
In this case, for referred friends that sign up to a multi-year contract, rewards can grow up to 25%, and the referrer will continue to earn rewards for as long as their friend continues to use the service. This is a super smart tactic which helps Hotjar increase customer lifetime value.
Last, but not least, let’s take a look at service scheduling software, Jobber. Jobber’s referral program strategy is designed to be as simple and straightforward as possible, by making referral links easy to share and 100% convenient for the customer.
Under Jobber’s referral program, customers can simply copy a referral link or tap the social icon to share news and updates about Jobber’s referral opportunities across their social networks.
Jobber even automatically adds a description of their platform to each post shared on social media. Furthermore, Jobber doesn’t fall short on the rewards either. Each new customer gets a month’s free use of the platform and VIP treatment to help ease any anxiety or confusion when getting to grips with the new software.
Referral marketing is a cost-effective strategy for boosting customer acquisition and customer lifetime value.
Referral programs aren’t just about bringing in new clients. Rather they are equally (if not more) effective at nurturing existing customers and encouraging them to become long-term brand advocates in return for rewards, bonuses, or another incentive program.
If you haven’t already started implementing a referral marketing strategy in your business, now is the time!
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