The Rewards Genius Guide to Referral Programs

Referral program ideas, incentive strategies, and techniques to drive customer referrals and grow your business.


Introduction to Referral Programs

Referrals are simple. People purchase products or services based on the influence of someone else. In fact, 92% of consumers trust recommendations from people they know. Referrals are a powerful sales channel since people often trust the opinions of others, especially when during the buying process. A referral is not only a lead, but a qualified lead at that. Referrals take away the guesswork from the prospect (or referee), allowing them to depend on the quality of the endorsement provided by the customer (or referrer) who referred them. Thanks to the referrer, the referee is far enough along in the sales cycle that they automatically are qualified as a prospect and good fit for the product or service that’s being sold.
 

 
Why are Referral Programs Important?

Referral programs are powered by customers. When a customer has a great experience using a product or service, they are willing to share it with their peers. In fact, 83% of satisfied customers are willing to make a referral while only 29% make one unprovoked. This means that you probably have plenty of willing referrers available to help.

Providing a referral program that offers customers the opportunity and structure to share their positive experience with others is valuable for all parties involved. From a business aspect, acquiring new customers and growing sales is easy when leveraging the voice of established customers. From a customer aspect, the incentive of providing a referral and receiving a reward in return is a simple concept that requires little to no effort on their part – if the right program is in place of course.

 
Why Referral Incentives and Rewards are Important

It’s simple – offering a reward increases the likelihood of receiving a referral. Data from our own referral customers tell the story:

Many of our customers have also found that matching the value and brand of the reward to their clientele also increases referral rates. Here are some general examples from our customers:

The value of the reward matches the size of the ask:

    App/program sign up

  • $1-$5 on sign up (and/or purchase) to the referrer
  • Consumer goods – tech hardware, furniture, appliances, etc.

  • $15-$50 on the sale to referrer and sometimes referee
  • B2B software and services – primarily SaaS platforms with longer sales processes

  • $50-100 on the demo to the referrer
  • $50-100 on the sale to the referrer

And when it comes to choosing the rewards, we see pairing of clientele interests with reward choice. There are several common types of referral rewards – see the Common Types of Referral Rewards section.

 
 

 
 Common Types of Referral Programs

Direct Referral Program – Known commonly as a refer-a-friend program, a direct referral program is simple: a referral offer is stated to current customers that they will receive a reward if they make a successful referral. A direct referral program the most straight forward way to encourage satisfied customers to make referrals to your business.

Choosing the referral offer, the definition of success, and the referral reward are all part of setting up a direct referral program. Dig in below with The Components of a Direct Referral Program section and the Types of Referral Rewards section.

Implied Referral Program – The goal of an implied referral program is the set up the referral by making it obvious that you are working successfully and satisfying your customers. Two common examples of an implied referral program are a contractor sending letters to neighbors notifying them of a project or a real estate agent posting a “sold by” sign outside of a recently sold property. Online examples include blog partnerships, partner exchanges, and the recent rise of advocate marketing. The beauty of implied referral programs is that they let the work speak for itself and sets up the referral to happen naturally.

Tangible Referral Program – A tangible referral program is about giving your customer, the referrer, and a prospect they know, the referee, an experience that will shed positive light on your company. One example is to send your best customers a gift card and suggest they share it with a friend or colleague. Other examples revolve around giving a friend or colleague a free sample of your product or service. Like the implied referral program, the tangible referral program seeks to set up the referral with a positive experience instead of a display of work.

Community Referral Program – The community referral program is about giving back. Partner with a community organization and work together to drive donations. A common example is to give a percentage of sales over a certain amount of time to a specific community organization. Have that organization help spread the word about the community referral program both online and offline.

Here are some additional resources with real examples of referral programs and the strategies behind them:

6 Referral Program Examples (& the Strategies You Can Steal)
9 Stellar Referral Program Examples

 
 

 

 
The Components of a Direct Referral Program

The most common type of program is a direct referral program – driving satisfied customers to refer friends and colleagues with the promise of a reward. Below are the necessary components to launching a successful direct referral program:

Referral Offer – The referral offer is the cornerstone of your referral program. Making your offer desirable and easy-to-understand is essential to driving customer participation. Two main elements go into the offer: the rules and the reward.

The criteria for reward – Make it very clear what must happen for a referral to be a success and a reward to be delivered. For example: “Refer friends and when they buy a mattress you will get a $25 gift card.” This offer is very clear – stating the rules for success and the value for the referrer. Other rules should include program dates and a limit on number of referrals or definition of success other than a purchase; such as completing an application, demo, or consultation.

The reward itself – Make it clear what the referrer and the referee will receive. In our above example this is clearly a $25 gift card for the referrer. Another option would be also giving the referee a gift card or perhaps a discount on the product. Choose incentives that are both worth your customers’ time and that make sense for your product margins.

Referral Tracking – You’ll need to have a way to track referrals in place. This could happen manually, using your CRM, using and app or plugin for your ecommerce site, or using a referral platform. The most common type of tracking happens via the use of a personal referral link or code. We have a list of many referral platforms in the Platforms and Apps for Referral Programs section.

Communication of the Offer – Once the offer is ready to go you’ll need to spread the word! There are many ways to spread the word about a referral program, but here are some common strategies proven to work:

Online – Do you have a website or web presence? Create a page, post, or digital flier clearly stating your offer and explaining how to complete a successful referral.

Newsletter – If you have a newsletter you send to customers and followers this is an excellent place to mention a referral program.

Offline – Create a flier or poster that touts the program and clearly states the criteria, reward, and dates of referral program.

Staff – Educate your staff and instruct them to talk about the program as they speak to customers.

Payout – Finally, if you’re offering an incentive, deliver that reward immediately and close the loop! Closing the loop quickly is another way to influence more referrals from the same customers – all while rewarding them for their efforts. Depending on the tracking and communication methods you are using, you may be able to automate the sending of rewards. The following section dives into common types of referral rewards.

 
 

 
Common Types of Referral Rewards

Cash, discounts, and e-gift cards are the most common types of referral rewards we see. While we believe e-gift cards are the best, most reliable choice based on 100s of referral programs, we always recommend offering a choice that makes the most sense for your customers and your business.

Cash – While many people agree, “cash is king,” and cash certainly makes an attractive referral incentive, cash has two drawbacks we have discovered. First, “non-cash” incentives outperform cash when given as options in the same program. The second drawback is that processing a cash transfer or cutting a check can be cost-prohibitive depending on the value of the cash reward. However, if you are giving large amounts or if your recipient is a business – not a person – then cash can make a lot of sense because it will be most useful to the recipient in these cases.

Coupons/Discount/Rebates – Giving a discount on your product or service is a solid referral reward because it’s low cost and can create a repeat customer out of the referrer and a new customer out of the referee. However, you need to be honest with yourself if a discount is an enticing enough reward to drive multiple referrals.

E-Gift Cards – E-gift cards are a great fit for any referral program because they are easy and cost-effective to work with, can be delivered instantly, and inherently give the recipient a choice of rewards. Not to mention, people tend to spend them on something special and memorable whereas cash will disappear into bank accounts and be spent on necessities. With a few simple clicks, customers can select the reward of their choice and start shopping. The instant gratification of receiving an e-gift card motivates customers to become advocates and champions for your brand, effectively doing most of the leg work for you.

 


Referral Rewards FAQs

A: A referral is not only a lead but a recommended lead from a trusted source. Referrals take the guesswork away from the prospect, allowing them to depend on the information and quality-of-service promise provided from the customer who referred them. In fact, Nielson recently found that 92% of consumers are more likely to trust recommendations from people they know. So, referrals are pretty powerful when it comes to increasing sales and acquiring new business.

A: Absolutely! We’ve conducted some of our own research into this and polled 19 companies who utilize rewards for referrals and found that over half of them experienced a 61-100% increase in referrals since implementation. That’s a pretty big increase!

A: We get asked this a lot. The answer is easy – it’s up to you! We offer a variety of rewards ranging from brand name retailers to groceries, gas, restaurants, spa treatments, hotels, airlines, the list goes on and on. We also offer a handful of non-profit donations if you prefer a more philanthropy-focused approach to your reward program. Check out our catalog here of reward options here. If you’re not sure how what kind of rewards to send or how much, reach out to success@tangocard.com for guidance.

A: One great feature of Rewards Genius is that you have the option of re-sending rewards if something happens. If you’d like to take a less hands-on approach or have a bigger problem, we have a team of real people who are happy to help with any reward issues that may occur. They can be reached Monday – Friday from 7:30 am – 5:00 pm PST via email at cs@tangocard.com or by telephone (877)558-2646.

A: We’re glad you asked! Please fill out this form to get started and someone from our team will be in touch with you shortly.