An overview of referral programs, strategies, and techniques to drive customer referrals and grow your business.

Your Guide to Referral Incentives

Your Guide to Referral Incentives

Customer referrals are powerful tools, especially when it comes to your sales and marketing efforts. With 83% of people relying on the opinions of family and friends to make their purchasing decisions, referrals from satisfied customers are a great source of new business. At its core, a customer referral program is simple. The ultimate goal is to encourage existing, satisfied customers to recommend your product or service to the people in their networks.

When a customer sends you a referral, you’re not just receiving a new lead. You’re receiving a qualified lead. By recommending your product or service—and by sharing the details of their personal experience—your referring customers are essentially taking out the guesswork for your prospective customers. As a result, referred customers are often further along in your sales cycle and can be automatically qualified as a prospect.

Simply put, offering a reward increases the likelihood of receiving a referral. Based on the numbers from our own referral program, 83% of satisfied customers are willing to make a referral when offered an incentive while only 29% make one unprovoked.

The data is on your side when it comes to incentivizing customer referrals, but that’s not all you can do to increase your referral rates.

How to Scale Your Incentives

Many of our clients find that matching the value of the reward to the size of the ask increases their referral rates. Securing software demos, for example, typically requires more time and effort in a sales process. For that reason, you should expect the reward value for software demos to be higher than program sign-ups or app downloads. Here are some general examples from our clients:

Program Sign-Ups & App Downloads
$1–$5 to a referrer when their referred contact signs up for a program or downloads an app

Consumer Goods
$15–$50 to a referrer when their referred contact purchases a consumer good—such as a fridge or washing machine

B2B Software
$50–$100 to a referrer when their referred contact signs up for a demo
$50–$100 to a referrer when their referred contact makes a purchase

There are different types of referral programs—from direct and implied to tangible and community. As a business owner or program manager, you may decide to incorporate different types of referrals into your overall program.

Direct Referral Programs
Direct referral programs, commonly known as refer-a-friend programs, are simple and effective. You communicate an offer to your existing customers that encourages them to recommend your product or service, which in turn leads to a new customer. Imperfect Foods—a sustainable grocery delivery service—is a great example of this.

Members of Imperfect Foods access their unique referral link to share with friends. When a friend or family member signs up using the link and receives their first order, both the existing customer and their referred contact get a $10 credit.

Implied Referral Programs
In an implied referral program, you don’t directly ask for a referral. Instead, you simply make your work for someone else obvious and known. Fence companies, for example, will often put up a sign with their logo and contact information in front of the home or business they’re working for. As the fence goes up, people in the neighborhood are able to clearly see who’s doing the job. The same concept can be applied digitally, too.

Blog partnerships, for example, can help grow your audience and generate referrals—without the need to directly promote your service. Ultimately, implied referral programs let your work speak for itself and encourage referrals to happen naturally.

Tangible Referral Programs
In a tangible referral program, you offer an existing customer something of real value—such as a free sample or a gift card—that they can give to a prospect in their network. The item you offer shouldn’t only shed a positive light on your businesses, but also offer insight into your product or service. Ultimately, the goal is fuel referrals through a positive experience.

Community Referral Programs
In a community referral program, you’re committed to supporting a specific not-for-profit organization. This can be done in a number of ways—from donating time and participating in events to driving donations. Many businesses also donate a percentage of their sales over a specified period of time.

In a community referral program, your not-for-profit partner directly benefits from the action you take. In return, the organization helps spread the word about your business to its audience, which fuels referrals.

A direct referral program is one of the most common programs we see. Before launching this type of program, consider these necessary components:

Make Your Offer Desirable
The key to a successful direct referral program often comes down to how desirable your offer is. Ultimately, you want the value of your reward to match the size of your ask. You know your customers best—so consider a reward value that would be most appealing to them.

 

Clearly List Offer Criteria
You risk losing participants if your offer is confusing or overly complicated. You can avoid this by clearly listing your offer criteria. For example: Refer a friend and you’ll receive a $50 gift card once they complete our demo. This example clearly states the task and the reward value. For more complex offers, you can add additional information—such as offer dates or reward limitations.

 

Track Every Reward You Send
Any reward you send should be tracked. Here are the most important details to include in your reports:

  • Name of reward sender
  • Name of reward recipient
  • Email or address of reward recipient
  • Reason reward was sent
  • Reward amount or value
  • Date reward was sent

The most common approach to tracking referrals is through a unique code or URL that you give to your existing customers. It’s important to track each referral you receive. You can do this manually with your CRM, through an app or plugin, or by joining a referral platform. Below, in our Platforms and Apps for Referral Programs section, we list several referral platform options.

 

Communicate Your Offer
Once you’ve finalized the details of your direct referral offer, the next step is to spread the word. Here are some common strategies:

  • Newsletters and emails—These are ideal places to include a mention of your offer.
  • Social media posts—Do you have a following on social media? Post your offer a couple times each month.
  • Website mentions—Include a mention of your offer on your website.
  • Physical flyers—Create a flyer about your offer to post in your lobby or office.
  • On-hold messages—Add a mention of your offer to your company’s on-hold message.
  • Employee involvement—Educate your staff about the offer and ask them to mention it to customers after completing a service.

Cash, e-gift cards, and product or service discounts are the most common referral rewards we see. While we believe e-gift cards are the best option for most programs, we always recommend offering a reward that makes the most sense for your customers and your business.

Cash
You’ve likely heard the phrase “cash is king.” While we agree that cash can be an attractive referral incentive, there are two potential drawbacks:

Becoming Unmemorable
By offering a cash reward to customers, you risk becoming unmemorable. According to the Incentive Research Foundation, non-cash rewards outperform cash rewards because recipients often use the cash to pay for everyday expenses—like utilities, groceries, or car payments. Non-cash rewards, on the other hand, are more likely to create lasting memories and positive brand associations.

Cost Prohibitive
Processing a cash transfer or cutting a check can be cost prohibitive depending on the value of the cash reward. However, if you’re rewarding cash in large amounts or if your recipient is a business—not a person—cash can be a great option.

 

Discounted Services or Products
A discounted service or product is a great value, but you’ll want to consider if it’s enticing enough to secure a referral. You also don’t want to train your customers to expect discounts from you, so be careful when using this as a reward.

 

E-Gift Cards
E-gift cards are a great fit for any referral program because they’re easy and cost effective. Here’s are some of the reasons our customers choose e-gift cards:

  • Customers Like Having a Choice
    When it comes to receiving rewards, your customers love having a choice—and the ability to choose is exactly what e-gift cards provide. They also arrive instantly, making customer satisfaction immediate.
  • E-Gift Cards Are Budget Friendly
    The majority of our reward solutions are completely free, which means 100% of your budget goes to the incentive in most cases. You don’t even need a large budget for your program to be successful—try starting small.
  • Gift Cards Offer Digital Advantages
    Our digital reward catalog has 350+ global gift card brands, saving you time that normally would be spent at the store buying gift cards directly.

Curious where to start when it comes to platforms? You can use Rewards Genius, our free, self-serve web portal, to manage rewards or work with one of our partners below. These providers offer a variety of options that can help you secure referrals, all while offering e-gift card rewards from Tango Card.