An Ultimate Guide on Referral Marketing For Small Businesses

Referral marketing is when you make your customers tell their friends about your business. 

Referral marketing at its crux, based on the word-of-mouth, so it can be conveniently called word-of-mouth marketing as well. 

At a minimal level, it happens organically. When you like a product or service from a specific brand and tell your friend about it, it is indeed referral marketing

However, here that company is not included. 

But since you are a small business and want to market your product to target customers, there is a way how referral marketing can work for you. 

You can deliberately encourage your customers to share their positive buying experiences to others, eventually influencing them to buy your product. 


Why Referral Marketing? 

Humans naturally tend to share great experiences with their friends. 

Especially when it is a great experience, humans are more inclined to tell their friends and family about it.  

Even with a bad experience, you will share it with others as well.

92% of consumers trust recommendations from people they know. 

referral marketing guide

So, due to the natural instincts to share experiences and trust we gain on something as coming from a reliable known source makes referral marketing so powerful. 

But not just natural phenomenon but statistics also favors referral marketing

According to McKinsey, referrals influence more than 50% of all buying decisions. 

Another study says referred customers bring in higher profit margins and are more loyal. 

Not to forget, referral marketing is basically free. 

Reasons To Choose Referral Marketing For Small Businesses

Generating more sales to incentivizing your customers

Using referral marketing you can incentivize your existing and even potential customers to encourage their friends to purchase your products. 

They act as a brand advocate for your business in exchange for rewards offered. 

For your regular customers, these rewards will give them extra support and value to be with your brand and share it further in their network. 

First reason to choose referral marketing for small businesses is generating more sales. 

For those customers who aren’t buying anything lately from you or haven’t for a while, rewards can be a good motivation. 

Low cost on acquiring new customers

Making your existing customers come back for more purchases is better than acquiring new customers. At least, it is cheaper.

You need to give your existing customers more reasons to come back for purchases. 

Whereas finding more customers through traditional marketing ways is way costlier than retaining existing customers.  

Empowering word-of-mouth marketing 

Referral marketing acts as a catalyst in word-of-mouth marketing of your product. It provides scalability to make it more impactful to a greater level. 

Word-of-mouth is a natural phenomenon. It happens simply when a customer likes the product or services, he or she further recommends it or encourages others to go for it. 

It happens with or without incentives. But using referral marketing, it becomes more prominent. 

It is a more aggressive form of marketing yet very organically played out in comparison to other forms of digital marketing and sales. 

Referrals definitely create more brand awareness and encourage people to get the word count. 

What is a referral Program? 

People only share something to their friends if it is exceptionally good. So, first you need to make sure that you are providing a great product or services.

To really get referrals, customers must be happy with what you offer. 

However, it is not always what a happy customer recommends without being asked. So, happy customers doesn’t necessarily mean they will tell others. 

And that’s why a referral program comes in the plan. 

A referral program is a process where you reward your customers for spreading the word about your product or services. It is about giving these customers extra incentive to advertise your product on their behalf. 

These rewards can be huge discounts, free cash, coupons, free access and others as well. 

You business surely need to provide this upfront cost to cover the expenses of rewards. 

But when it dramatically increases your revenue by bringing more customers out of your existing loyal customer base, it is far more than you invest. 

However, you still have to make sure you have a great product or services. 

Successful Referral Program Examples (To Learn From) 


Image Source: ShoutMeLoud

Paypal has started their ‘Refer-a-friend’ referral program where they were literally giving away free cash. 

They were allowing their users to get used to their product for free. It benefited not only the customers who were referring but also their friends who are being referred to. 

It was in fact, one of the most successful referral programs. This got them 7 to 10% daily growth boosting their user base to more than 100 million members. 

This referral program tends to achieve higher ROI than any other marketing form. After a huge mass of members, they dropped this referral program. 

They gained 400 million users just within a few months which was the direct result of their referral program. 

What to learn: But remember you can do free cash when you have that kind of money to spend. 


Image Source: Neil Patel

Uber offers a referral program for you where you can further extend the benefits of discounts on first ride and other coupons to your friends. 

They aim to provide affordable and convenient transportation to millennials and others with just their smartphones. Only thing they discovered about Uber.

Uber’s referral program made sure people recommend their services to their friends in order to provide them a cheap transportation solution. 

It was unique, fresh and benefiting to both ends 

Being a small business, you need to come up with such referral programs to promote your brand initially.  

What to learn:  Focus on designing referral programs in a way that it benefits the maximum people and also lift up the entire business ecosystem as well. 


Image Source: Buyapowa

Koodo mobile is a telecommunication company facing increasing rates to get more customers. So they need to find a way to acquire customers at less cost. 

So, they created this “double-sided” Koodo refer a friend referral program where if you will bring a friend in, you both get $25 off on your first bill. 

Just through this referral program, the customer acquisition cost is reduced by 167% bringing 75,000 new customers in two years. 

What to learn: You can focus on making things so easy for customers to do referral that effort seems least but profit the most. Koodo focussed on providing seamless program experience. 


Image Source: All About Airbnb

Airbnb comes with a unique referral program focussed highly on the ‘social proof’ concept and took it even further. 

Since it is out that 84% of people trust recommendations by family, friends and even acquaintances. 

Airbnb gave special attention to making their customer happy and leading them to spread the good word about them. 

Their effort towards referral marketing made them millions of dollars in revenue. 

When they found out the overwhelming result, they decided to focus more on a proper referral program. 

They started this email referral  marketing campaign where users can connect to their existing contact by inviting them to use Airbnb. 

They have made this API reading contact behaviour on the web determining which contacts are most likely to use or need airbnb. 

 The result was amazing! 

Airbnb noticed a 300 percent increase in their bookings through referrals, also more than non-referrals. More hosts are coming in through referrals as well. 

What to learn: Understanding your customer base is essential. Then, just go for A/B testing to see what works. Be out of the box to find creative ways for your referral program. 

Stitch Fix 

Stitch Fix is well-known subscription-based brand that utlizes technology for the personal styling and preference recommendation to their customers. 

They recommend personal style accustomed on the basis of various size, budget, color, material and style. It offers clothing items in packages. 

The company was founded in 2011 and now it values at $300 million. Now, amongst their secret for the success, one surely is their referral program. 

Stitch fix focus on customer happiness and captilize it further to encourage customers to share their positive buying experience. 

 What to learn: Use referral program to encourage customers share their positive buying experiences in exchange of the rewards. 

Referral Marketing Examples 

Example 1 : Dropbox 

Image Source: Viral Loops

Dropbox is a file hosting cloud service started in 2007. It was a startup back then struggled to expand their user base. 

They went with search engine marketing to grow their reach but came out as a great failure. 

The cost per customer consumed with other forms of marketing was around $338 whereas their dropbox product was just $99. 

No way it was going to work out! 

Eventually they decided to go with referral marketing by setting up a referral program. 

 If you ask, how successful it was? 

They reached 10,000 users to 4,00,000 users in just 15 months, and grew to be a multi-billion dollar startup. 

So clearly that worked like a charm. 

Example 2 :  Dollar Shave Club 

Image Source: PromoAffiliates

Dollar Shave Club is a subscription-based grooming brand that gets their business started through a referral marketing campaign itself. 

What they did is they have released a Youtube video title “ Our Blades Are F**ing Great”. 

The video featured their CEO Michael Dubin speaking in sarcastic manner. 

Well, that video went viral. It has got 25 million views. 

The first two days of the video made 12,000 people signed-up for their delivery services. Just at the end of the week, they got 25,000 customers. 

People loved that video so much that they shared their friends. It was shared a lot, and that’s why it went viral. 

Now it is not the classic case of referral marketing through a referral program but the basics here are the same. 

How To Generate Referrals For Your Small Business

Make Your Product Perfect

To make referrals really work, you need to come up with the product worthy to talk about. So, it’s better to start from perfecting your product or service. 

Focus on your product and how confident you are about it’s quality and credibility to provide the required solution. 

If the product or service itself is not up to the mark, your customer’s won’t be motivated enough to promote it. 

After all, referral marketing begins from a happy customer. 

Don’t rush into a referral program for your company if your product isn’t ready. Remember, that a bad product also can lead to negative publicity as well. 

So make your product or service perfect for referral marketing.  


Create Your Referral Program

When you are starting out your referral program, it is recommended to go for something simple. 

You can even begin with offering a little word-of-mouth referral fee to your existing customers to bring in more customers. 

It is also to understand every customer segment and business is unique. So something might work for a particular business but not for another. 

When you have a successful referral marketing program, it makes it easy for your customers to refer to others. 

You also need to find the balance about the reward you’re offering and what ROI you are getting. 

The referring should be easy for customers but profitable for you at the same time, so the whole referral program can be successful. 

Starting with something that isn’t hard and getting it successful even with less profit is better than going ambitious and failing at the beginning. 

Once you get to know how it works, you can do various A/B testing to see what kind of referral program gives you the best results. 

Tips For Starting Out With Referral Program : 

  • Find balance between ease in referring for customers and not giving away too much as reward 
  • Keep your referral marketing very simple
  • Use short and attractive headlines to communicate its benefits
  • Create trackable links to analyze
  • Make FAQ landing page 

Give Incentives 

Giving incentives is providing that extra motivation for your customers to refer to your products or services. 

You can offer rewards to your referrer or the referee to make it profitable for both parties. 

These rewards can be credits which will make the referrer and referee both return to purchase.  

Then, you also offer free coupons, discounts, cashbacks and even cash amounts as well. 

For Example:  Skillshare referral program or affiliate offers you to earn $7 on every new customer you refer to their trial as well as paid plan.  

Promote Your Referral Program

how to promote referral program

Even with a great referral program, if you are not able to reach a maximum audience, it won’t convert. 

So it is essential to promote your referral program. 

To find the best way to do it, is to look at who your audience is, where they are available most and what they resonate to. 

Social Media Marketing 

Social media is certainly one of the best ways to promote your referral programs reaching out to your target audience. 

Don’t hesitate to invest in a paid social media advertisement campaign whether it is Facebook Ads, Instagram Ads or Twitter Ads. 

With least investment, they tend to give higher ROI if you get your target audience. 

You can start from any one social media platform where your target audience dominates. 

Email Marketing 

The best way to push your referral program is to include it in the post-purchase email to your customers. 

You can also start a fresh email campaign as well just to promote your referral program. 

Offer your customers to gain benefits or earn using your product or services. 


Create a landing page just alone for your referral program. 

Explain everything about your program, what benefits customers can gain, how it works and everything. 

This will make it even more legit and real for customers. Don’t forget to put FAQ at the bottom of the website. 

You can bring traffic to this landing page using all other mediums included here such as social media or emails. 

Once they land on this page, it should be convincing enough to get them working. 

Pro Tip:  Use videos to explain your referral program. Focus on telling how easy it is to do and the benefits the customers can get. 


When you interact with your prospects and customers, encourage them to enroll in the referral program. 

Talk to them about the benefits of a referral program and how easy it is to go for. Also, focus on training your employees to do the same as well. 

Text Messages

Just like email marketing, SMS marketing also works wonders in some specific kind of products or services. 

You need to identify the potential where it is more than just reaching out but more of reminding your audience about the product or information. 

So, it works out really when promoting the referral program where you can just link your referral program landing page.  

The open rates with SMS marketing sometimes even surpasses the email marketing if not matches it already. 


Another effective way to promote your referral program is collaborating with influencers to spread the word. 

You need to look for the influencers in your niche. You can offer them rewards to refer your products and services to their audience. 

How Small Businesses Can Implement Referral Marketing In Their Marketing Strategy?

Giving A Shareable Buying Experience To End Users  

You need to customize the buying experience of customers to make it shareable. 

It is all about coming up with creative ideas regarding your product or service initiating some interesting activity by your users. 

You can design your products into exciting packaging to unbox so buyers can share it on social media platforms. 

Image Source:  RealSimple

For example, there are brands such as Trunk Club and StitchFix that offer subscription-based unboxing experiences. 

Users can customize themselves these packages with their preferences. It is more like an experience to unbox these and ideal to share with others. 

So, you need to also come up with such shareable buying experiences to offer your end users so they can refer to others.

In this way, a brand encourages their customer to talk about the product or their buying experience on social media platforms on a subliminal level. 

It should be something that reflects in your brand personality. 

Creating Viral Content For Your Brand 

There is a limitation to how much your brand can get around within the product. Word-of-mouth is not something you rely on completely. 

Lots of brands aren’t exciting enough to get across. Such as some car parts and accessories brands, stationary or furniture. 

These products are boring and nobody is going to talk about them on social media with great enthusiasm. 

So you have to create the content for your brand which can go viral on the internet. 

For Example :

  Blendtec is the brand that sells blenders. Not such an interesting product to tell stories around, for sure.  

But the brand decided to create videos on blending various stuff with their blender. These things range from iphones to sports balls where the Blades withstand everything. 

Image Source: Youtube 

Now, that is something interesting and cool to see! So as a result, they have 868K Subscribers on their youtube channel. 

Well, you can replicate the idea to your small business as well. Especially if it is not something interesting enough to create brand stories around. 

Offer Exceptional Customer Experience 

The concept of referral marketing doesn’t come from incentivizing the customers. 

It is started only because a happy customer couldn’t stop himself/herself telling people about his/her buying experience. 

People refer because they find the product great and highly satisfied with their buying experience. 

So before giving out too many incentives, you should start focusing on the product itself. 

More than that, you need to provide exceptional customer experience.

If you want your customers to share about your brand, you have to make them happy enough to do so. 

You have to think as a customer and understand the psychology of why a person shares their buying experience or talk about a product in the first place. 

There are a lot of examples of exceptional customer service where customer support person or employee have gone the extra mile to make their customers happy.  

Those are the cases when customers wouldn’t shy away to boast about the great experience they had with a brand. 

Pro Tip: Make your customer service more personalized and involved with the customer so you can connect to them on a bit more deeper level. Focus on resolving their issues. 

How To Create Viral Content For Your Small Business 

why viral content for business

Well, this is an important aspect of growing your referral marketing or to make it effective. 

Creating content works great to spread the word about your product or services. Viral content for that matter, is faster and more effective as well. 

It is an integral part of implementing referral marketing to your small business. 

In a lot of cases, creating viral content and/or great marketing campaigns works best for the business for referral marketing. 

This happens if your product is not interesting enough to come up with a direct sellable idea with it.  

Suppose you sell car parts, you cannot make the product or experience itself a shareable or attractive idea for referral. 

So, the best idea will be to create a viral content around your product to reach out to the maximum people. 

Then, a referral marketing campaign will make more sense to your product or services.  

But before then, here’s how you can create viral content for your small business 

Looking at the Competition 

To create viral content, first you need to understand what type of content gets viral in the first place. 

And, that you can start looking at your competition or simply the content performed great in your industry. 

Find the most trending content on the web related to your type of products or services or in your industry. 

Use tools such as Content Explorer from Ahrefs to see the content that is most shared on the web. Type in the relevant keywords to find out. 

It will show you numerous articles on the particular keyword that is most shared or popular. This will give you an idea of what sort of content is working in your industry.

Jott down your own ideas to create the viral content for your brand as well. 

You can also use Google Trends to find the most trending content on the web, and also check its popularity over time. 

This will further help you in creating a content marketing strategy to boost your referral marketing potential. 

Making Your Content Stand Out & Sharable 

Well, the more your content stands out and attracts people, more chances there will be to get shared. 

More it gets shared, the better referral program it will make out of your product or services. 

Either you package your product developing a great shareable buying experience or use the viral content to make it shareable, content plays an integral part here. 

However, using viral content to make your product or services shareable definitely needs more focus on the content itself. 

So, you need to improve your content. 

You need to get more social shares on your blogs and videos. 

Here are few tips to improve your content: 

  • Make more of solution-oriented content for your industry
  • Be consistent and up-to-date 
  • Use more of the professional graphic designing and presentation skills.
  • Make out-of-the-box videos related to your product.
  • Do more entertaining short videos.
  • Create something so crazy, unthinkable, entertaining or weird content that compels people to share with their friends & family. 

Promote your content 

There is a limitation to the organic discovery of your content on the web. So, If you do not promote your content, it won’t be discovered. 

Whether it is a social media post or a video, you need to invest as much concern, time and energy on promoting the content  as much you’ve spent on creating it.

Utilize multiple social media platforms to promote your content to your target audience. 

Here are few tips on promoting your content:

  • Focus on reaching it to a certain group, community or people within common interest. 
  • Optimize the social media content for the best results.
  • Use relevant hashtags, tag relevant profiles and share to relevant groups.
  • Encourage people to engage and share the content. 
  • Use social media paid advertisements every once in a while 
  • Share your content on public forums such as Quora and Reddit. 

Go for influencer marketing 

Influencers possess a large audience which you can leverage to promote your product. 

People follow social media celebrities and content creators and even rely on them for product recommendations or simply interested in what they use. 

You can utilize social media influencers to promote your product and spread a good word on your product or service. 

Small businesses can start from micro influencers where you can promote your product to a target audience in a limited budget. 

Image Source: Newsfeed

You can also promote the referral marketing programs through influencers. 

It gives more credibility to your product and also a push to the referral marketing campaign. 

Your refer programs must be beneficial and attractive for a user who is already interested in your niche/industry. 

This becomes more powerful when promoted through influencers. The point of influencer marketing is to reach out a larger targeted audience. 

Referral for that matter, helps to promote your product further without investing in them as much you do for influencer marketing

So it works complementary. Just start small, calculated and balanced between these two forms of marketing initially.  

Pro Tip:  Remember, influencer marketing is altogether a different game. Here you are utilizing it in a minimal investment to increase the reach of your product and promote referral program eventually. 

Implementation of referral program 

Referral programs work the best when you are able to reach out your audience with a much more confident product. 

Once you produce viral content to attract people towards your product or service, this can be the best time to come up with a referral program. 

Referral programs help you spread the word about your product or services through existing customers to new potential ones. 

Make sure you incentivize your customers heavily to give them enough motivation to promote your product around. 

The success of a referral program is based on two different components such as incentive and promotion. 

If you optimize these two at its best level, with trending content, a referral program will help you to scale your business and generate sales. 

How To Start Referral Marketing : Step By Step Process 

Step 1 :  Planning A Referral Program

Now, you’ve learned a lot about referral marketing. It’s time you get started with your own referral program. 

To begin with, you need to lay down a strong foundation, exceptional customer service and very precise marketing goal to go with. 

Let Your Product Do The Talking 

You’ve learnt the significance of an exceptional product in a referral marketing program. Well, you have to take that one step further. 

Focus more on developing an exceptional product that has potential to convert well in the first place. 

You cannot bring a lot out of a referral program if the potential of your product is saturated or limited. 

Either your product itself can be insufficient to the promised solution or it is wrongly positioned in the marketing of the product. 

Lot of the time, referral marketing fails because the product is not upto the level of being shared, helpful or effective. 

Even if not, it is sometimes the limitation of its potential that reflect in your referral marketing results at the end of the campaign. 

So create a product that is – 

  • Offers effective solution
  • Can have Shareable buying experience
  • Has potential to scale through referrals
  • Is exceptionally good for word-of-mouth

Prioritizing Customers

Referral marketing is a customer-centric way of marketing. 

It is the way where customers gain the profit on either side of the bargain along with the brand. 

And that’s why it works so well. 

So it is important to remember that customers are an essential component in this equation. 

You need to prioritize your customers while developing a referral program then only, it can work.   

Putting your customers first here, means – 

  • Developing customer relationships
  • Making referral programs more profitable for customers.
  • Making it easy for them to actually do it. 

Focus on communicating with your customers and try to have more conversations with them. 

This makes your brand more connected with customers building a strong relationship where they are more motivated to promote your products. 

Remember, all these customers who you will communicate with are the direct line for apprehending the market. 

At the end of the day, if you provide a great customer experience to your customers where you are more engaged with them, they will be happy to share your product. 

Steering Through Clear & Precise Marketing Goal 

You are onto building a referral program for your business but it is crucial to find out why you want to set up a referral program. 

Apart from the sales, what are you expecting from your referral program? 

It is essential to find a clear and precise marketing goal. 

You can make your focus on any aspect but it is required to be very particular. For example, it can be to build brand awareness, or drive customer acquisition or even increase customer loyalty. 

Once you decide your precise goal with referral marketing, it becomes a parameter to analyse how well you are doing in it. 

It helps you identify your goals, measure the success of the program and analyse the more specific aspects of it. 

Step 2 : Building A Referral Program 

Once you have laid out a basic planning on designing a referral program for your small business, you can get started with starting building it. 

Designing of your referral program is one of the most important parts of your referral program. It decides the look and the feel of your program. 

It is what makes customers attract towards your program and actually get interested in it. 

Use Catchy Headlines To Pull Audience Right In 

headline for referral program

Before you get the referral from your customers, you need to get their attention. 

No matter how good your referral program is, if it doesn’t attract the audience in the first place to go for it, then it won’t work. 

So headlines here play a crucial role in joining customers for a referral program. 

A catchy headline pulls people right into the offer. It makes the customer interested enough to read your proposal whether it is long or short. 

Your catchy headline must include the benefit for the customer. That’s what makes them check it out. 

The punchline should be ‘what they are getting from it. Also focus on making the task sound very easy to do. Referring a friend is easy anyway. 

Use the words that draw attention such as ‘free’ ‘ now’, ‘get’, ‘extra’ and more. h

For Example 

“It pays to have a friend. Literally”  

This is a really eye-grabbing headline for a referral program. “Pays” is the word which offers benefits to the customers. 

“Have a friend” is the task which makes it sound easy or readiably or already available. 

Also, it sounds interesting to hear. It further intrigues you to the extent that you will check the next sub-headline mentioning the exact details on it. 

“Refer your friends to Verizon and get upto $100 Visa Rewards Card. Each friend gets $50 Visa Rewards card, too” 

This is at the sub-headline where you further describe the offer. 

If you have done well with your headline grabbing the attention and withholding the interest, then the customer is definitely going to read the offer here. 

Here you should focus on providing the exact details about the benefit the customer is getting.  

Draft Your Referral Messaging 

When you tell your customers to share the product or experiences with their friends, consider providing them referral messaging as well. 

Referral messages are basically ready-to-send pre-filled messages that makes it even more easier for customers to share your product or services. 

It makes the recommendation or referral process easy and quick for customers. 

Image Source: Referral Rock

These messages are also quite effective but more than they are efficient to send without investment time to write at the moment. 

Having said that, you also need to provide the option to edit those messages as well. It is great if customers can add few of their own lines or even re-edit the whole as per their need.

Lot of customers prefer to send personalized messages to whom they are referring to your product or services.

On another aspect, do remember that your customers know about your business already but their friends may not.  

So it is highly possible that these referral messages will be their first exposure to your brand or business. 

So make sure you make it more understandable and introductory as well. 

Here’s what you need to make sure in a referral message draft : 

  • Mention the benefits right away.
  • Make it quick and easy to understand 
  • Write something impressive and introductory about your brand in one sentence but make it sound as you as a friend telling it. ( optional)
  • Make it a personalized message. 
  • State a clear call to the action for them. 

Make Referring Easy For Your Customers 

It is one of the most important aspects of referral marketing that you need to know. 

A good referral marketing program should be easy for customers to refer. 

Even if customers are happy with your product, they are not likely to refer to their friends if referring to friends is too much of a task. 

They might just refer on a personal level but that’s very least of the case. 

Referral programs run on the incentives offered to the customers in return of referrals they do. So incentive should be good to make referral marketing successful. 

But the next most important factor here is- convenience! 

How easy is it to refer to other people? 

Because even when the incentives are good but you make the process hard or just clumsy to refer to their friends, they won’t stick around.  

Provide your customers different ways to share, so they go for what suits them. 

It increases the chances of your referral program getting shared. 

Use referral software tools that come with multiple options for sharing such as social media, text message, emails etc. 

For Example 

Image Source: Referral Rock

A popular clothing retailer brand American Apparel will allow their customers to send a pre-filled email to their friends. 

They encourage customers very often with pop-up windows with this pre-written email draft to send it to their friends right away. 

Not just that, they also put a unique direct link to share as an alternative to the email. It is again even easier to do. 

They put the benefit of the referral program right there. It says subscribers and their friends both get 20% off on the purchase through this referral. 

Well, this referral program got quite successful but it wasn’t just because of their incentive but more on how easy it was to send or share. 

It was just so easy to send the referral offer to your friend right at the moment by just entering his/her email address. Or even more easier with a direct link. 

Tracking & Analysis 

When you are starting out with a referral program for your small business, testing is essential to do. You need to find out what really resonates with your customers. 

It is more like A/B testing where you use different combinations of copy, design and other factors and see what changes in results you have. 

It is simply to see what works and what doesn’t. 

You need to implement analytics on your referral program to understand the referral link distribution, impressions, click rates and other specific datas. 

There are various referral marketing tools out there to track the activities in your referral program on a consistent basis. 

Through this, you can learn what referral marketing strategies to adapt and what to discard. This will help you improve and get better results over time. 

Step 3: Selecting Your Referral Rewards/ Incentives 

Why would any customer spend their time and effort to refer your business to their friends? 

Even if they like your product or services, they won’t really take out time to refer your products around. 

Definitely, you need to offer some incentives or rewards to the referees ( customers) to encourage them. 

For that, it is essential you learn about selecting the rewards for your referral program.


Who to Reward? 

The very first thing you need to think of while selecting the rewards for your referral program is who to offer reward. 

You can offer incentives to the referee ( your customers) or the referred ( potential customers) or even both. 

One-side rewards or incentives are the type of rewards offered either to your existing customer or to the referred customers but surely not both. 

Here, you have to choose any one of them : 

  • If you reward existing customers, it will motivate them to refer more to their friends. 
  • If you reward referred potential customers, there are more chances of sales but not many referrals will be there. 

So, both of them have their own advantages and disadvantages. It also depends upon what your precise marketing goals are with this referral program. 

Two-sided rewards are the kind of incentives offered both to the referee and referred in a referral program. 

Double-sided rewards/ incentives have the most engagement as it profits the both parties. 

For example :  If a certain product is bought through the referral program which is when an existing customer refers it to their friends, both will get 20% or $20 off for their next purchase. 

Just to put out there, if you go with no incentives or rewards, it won’t really do anything for the success of the referral programs. 

Even with successful and popular brands, without incentives people don’t really put their time to do so. 

So it is better you focus on providing rewards to either one of both or both. 

What Reward To Offer? 

Once you have decided who to offer the rewards or incentives, now you figure out what rewards to offer. 

To start with, just know that since every business is different, so every referral incentive will be different as well. 

So, a good reward is basically what your customer truly values.  

Whatever matters for your customers in particular can be a potential reward. 

For example

  A packaged food brand might offer their customers free discount coupons in return for sharing referrals. 

On other hand, a software company might give free accesses to their premium account for a limited amount of time as reward. 

So, that’s how reward changes as per the customers. 

Now you have to think what reward or incentive will be great for your customers. 

You need to ask some basic questions to find out what referral reward you will offer : 

  • Who are my customers? 
  • What type of reward or incentive would they love most? 
  • Do this referral reward relevant to my brand?
  • Am I going to offer monetary or non-monetary rewards to my customers? 

According to studies, it suggests customers prefer ‘gifts’ as it makes them happier as compared to straightway cash. 

So, you need to be more creative to come up with an incentive that is both profitable and eye-catching. 

Here are some few examples or types of rewards: 

  • Discount cards
  • Coupons
  • Credit points
  • Company swag
  • Gift cards
  • Freebies
  • Service upgrades
  • Donations to charity
  • Store credit
  • Free access 
  • Digital products

These are just some common ways you can reward you customers in return of their referrals.


Deciding the Structure of the Reward

reward structures for referral program

The last part of deciding rewards for your referral program is setting up the reward structure. 

Reward structure is basically about when and how your customers will get their reward. It deals with the ‘how’ of rewarding the customers. 

Here are some popular options to choose from:

  1. Standard Reward Structure 

The standard reward structure is the most common, simplest, and popular structure form widely used in referral programs. 

Here, you offer the reward or incentive for successful referrals which directly and automatically sent to them when they referred a friend buys something. 

In this structure, you don’t have to track your customers closely. Once customers referred their friends, then everything depends on the friend to make the purchase. 

Also, the reason this structure often lose its motivation in time. 

  1. Tiered Reward Structure 

This particular reward structure offers customer their rewards in multiple levels depending upon number of referrals. 

For example, customer may earn $20 for first three referrals and then $10 for every further referrals. This can be done in different set of combinations too. 

  1. Multi-Step Reward Structure

In multi step reward structure or stage reward structure, customer get rewards in different stages through various steps to fulfil in the process. 

This reward structure is more detailed. Here you can customize the reward system to motivate your customer on different levels. 

For example, customer might earn $5 for making their friend go for free signup, then another $10 on getting them to buy the service and further more some on renewals. 

Step 4 : Using Reviews To Boost Referral Marketing

Referral marketing isn’t a product for customers to take interest in. 

So, for customers to get more interested in it, the best way is to give out some social proofs so they can be more comfortable going for referrals. 

Customer reviews are the best way to complement your Referral marketing program. People trust on reviews before getting into any online decision. 

It specially works for the new customers coming across with the referral programs as well. 

91% of consumers prefer to buy from the brand that has most positive reviews. 

So to make your referral marketing works at the best, reviews can go hand-in-hand to make sure the conversion takes place. 

Customer reviews are also the form of word-of-mouth, again something very relative to the referral marketing. 

How To Leverage Positive Reviews For Referrals 

Positive reviews have a great influence on the potential customers in the market. Reviews and testimonials can make a skeptic potential customer into a believer in your brand. 

You can actually leverage positive reviews for referrals and the vice-versa as well. 

Here are two ways, positive reviews and referrals can go hand-in-hand together : 

  • You can actually create a referral program where customers get reward for sharing reviews on social media.
  • You can also leverage positive reviews to make people believe in your product and it complements your existing or new referral program as well. 

Reviews Boost Word-of-mouth Marketing 

Again, exploring the second point of leverage positive reviews for referral marketing here, it also boosts word-of-mouth for your small business. 

Word-of-mouth marketing is amongst the most effective form of marketing for your business. 

However, for that, you need to have more credibility and social proof, comes from positive reviews. 

Reviews empower the word of mouth. It creates good reputation of your business eventually making referral works better. 

Whether you have a lead through referral or potential customer for direct sale, reviews directly impacts the results here. 

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