10 Best Practices For Launching
A Successful Referral Program

Most of us turn to recommendations from friends and family before making a purchase. We trust them, and if they had a great experience, we’re more likely to try it too.

In return, we love sharing the brands we enjoy, because it feels good to help someone make a smart decision. That’s the power of referral marketing: real people sharing real experiences that influence others.

Referral programs tap into this natural behavior to grow your customer base, reduce acquisition costs, and boost loyalty. In this post, we’ll cover 10 best practices to help you launch a referral program that drives results.

Referral marketing is a strategy that utilizes word-of-mouth referrals to grow your customer base.
Think about your most loyal brand advocates. These are the people most likely to share their positive experience. Their influence on their loved ones can have a big impact on your customer acquisition process.

In fact, BigCommerce reports that

• 74% of consumers identify word of mouth as a vital factor in their purchasing decisions.
• 92% of consumers believe referrals from friends and family rather than paid ads.

These studies prove that brand advocates are a powerful tool in your marketing arsenal.

For many, talking about their positive consumer experiences have become an important part of daily conversations. Likewise, if we had a great customer experience, we'd share the story with people in our network—both online and offline.
Eventually, our friends and family purchase from the businesses that we recommended and become paying customers.

The answer is simple: launching a referral program.

A referral program incentives brand advocates to give referrals through rewards.
These rewards may be in the form of freebies, cash, discounts, and exclusive products.

Casper - a mattress retailer - gives brand advocates a $75 Amazon Gift Card when their friends buy a mattress using their personal referral link. Meanwhile, their friends receive 15% off their first order to incite them to make their first purchase.

The brand advocates receive a reward for a successful referral and referred friends get discounts off their first purchase. Not only that, businesses also get more paying customers.
It's a win-win-win situation!

In this guide, we’ll walk you through 10 best practices to help you set up a referral program that drives results.

The first step to launching a successful referral program is to have a great product or service.
Remember: people will only recommend businesses that they like. If a product or service is superb, people will naturally encourage their network to try it out as well.

Without a strong product, a referral program won’t be effective. No one wants to risk their friends or family experiencing hassles or inconveniences—they only refer the best of the best.

For example, AllPlants, a UK-based meal delivery service, offers nutritious, plant-based meals made with sustainable ingredients. As part of their referral program, they promised to plant a tree for every successful referral. This eco-friendly incentive encouraged advocates to promote the brand and stay loyal to a vegan lifestyle.

Not only that, but planting a tree for successfully referring a friend is a worthy cause.

When customers share their unique referral offer, it'll naturally segway into discussing the brand's passion for sustainability and veganism. This makes it easy for brand advocates to convince their friends and family to sell your product.

In contrast, businesses that have a subscription-based model offer a free subscription period in exchange for a referral.

For example, Trello's premium plans are worth $5/month. But thrifty consumers can refer their friends in exchange for a free 1-month subscription.

Each customer can refer up to 12 friends and receive up to 12 free months.

Besides converting new customers, Trello's referral program gives users a taste of their premium plans. By the end of the free subscription period, both parties will likely pay up to continue enjoying their premium features.

That said, there are many types of referral program rewards. However, choosing the ideal incentives will depend on your business model and customer preferences. Our Ultimate Guide to Referral Rewards breaks down different types of incentives and how to choose the right one for your audience.

Ask yourself:

• What kind of reward will motivate my customers to share?
• Is the reward worth their time and effort?
• Will it excite both the advocate and the friend they refer?

Think about the type of rewards that will motivate your customers to convince their friends. Will your referral reward motivate them? Is your referral reward worth their time and effort? What kind of incentives will your customers appreciate?

Once you've made your decision, it's time to do the math.

Now that you've chosen a referral reward, the next step is to consider cost vs revenue.

One of the main perks is that you will only pay for a successful referral.
To calculate whether you can break even from your referral reward, consider the average cost of customer acquisition and your customer lifetime value (CLV).
Ideally, referral rewards should cost around 10% to 20% of the value of your product.
If you can't predict the outcome of your referral program (yet), you can start by offering a small incentive. You can then modify your referral program incentives based on the results and revenue you gained from your referral program.

Pro tip: A good tip is to include a minimum purchase amount to ensure that you're still profiting in spite of the referral process.

Example:
Vera Bradley offers a 20% discount to both advocates and their referred friends. But the referred friend’s purchase must be at least $100 to qualify for the reward. This ensures the company still profits despite offering generous discounts.

Referred friends are encountering your brand for the first time.
As a result, the look and feel of your referral program can have a lasting impact on their overall impression of your brand.

To help you get started quickly with an effective design, check out our Referral Program Templates by Industry. These customizable templates make it easy to create a professional and engaging referral program tailored to your specific business needs.

To keep them satisfied, the ideal referral program should clearly communicate the incentives.

Here are some tips to help you get started:

Social media buttons enable customers to easily share your referral program online.

But how do brand advocates convince their friends to use their referral code?

Just like most of your marketing content, you'll need a compelling referral message to ensure that your brand advocate's friends will opt in.

For some brand advocates, brainstorming a referral message doesn't come naturally. Having a default sharing message enables them to share vital information with the click of a button.
For example, Peloton's default sharing message conveys the rewards that customers can get by using their referral code.

It's not uncommon for customers to receive dozens of promotional emails per day. So, if they didn't respond to your initial invite email, then follow up.
A follow-up email should convey the key details of your referral program.

• What it is
• The incentive you’re offering
• A clear call-to-action (CTA).

While the goal is to get brand advocates to join your referral program, you don't want to seem like a spammer either. If your brand advocates don't join, send a follow-up email in two weeks or after a month.
Even with a follow-up, not every customer will join the referral program—and that’s okay!

Example
Outdoorsy - an RV rental marketplace - gives $100 in credit for successful referrals. Earned credits can be used for their future trips using their vehicles.

There's no denying that brand advocates have a huge influence on their friends and family. But if you want to boost the results of your referral program, you should also encourage influencers and micro influencers to join.

Most influencers have thousands of followers who trust their word-of-mouth recommendations.

In fact, businesses make around $5.20 for every dollar spent on influencers, according to Influencer Marketing Hub. Plus, micro influencers recommend products around 22.2 times more per week as compared to the average consumer.

Collaborating with influencers through affiliate marketing or referral marketing schemes enables brands to promote their latest products and deals.

Example
Zalora - a fashion e-retailer - taps influencers who can share their promo code to promote their biggest sales. Followers can earn an additional 20% to 25% discount for using the code. In return, influencers can earn a commission from every purchase.

Just like most marketing campaigns, you have to analyze the results. You must be able to monitor metrics and track your progress to gauge the success of your referral program.

Once you have your code ready, you'll need to click on the "Save & Close" button and load the "Refer and Earn" article, then you'll see your Genius Referral template.

That said, here are the metrics that you must monitor:

Participation rate refers to the number of participants in your referral program.

A low participation rate indicates that you need to ramp up your efforts to promote your referral program. Take a look at the channels people use to promote your program and A/B test your landing pages and emails.

You can also launch a survey for brand advocates to identify your brand's strengths and weaknesses.

Share rate - refers to the number of referral links brand advocates shared upon joining your referral program.

This metric lets you uncover reasons why people ignore your referral program, such as unappealing rewards.

According to Cloudsponge, here are the average share rate benchmarks:

• 7% or lower share rate – very poor performance
• 15% – good performance
• 30% – optimal performance

Referral link click throughs – the % of referral links that were acted upon and led to clicks to your online store or more people to your website.

According to Cloudsponge, here are the benchmarks for referral program response rate:

• Less than 4% – poor result
• 10% – good result
• 15% or more – optimal result

To improve your CTR, take a look at how you can improve your CTAs, headline, and default sharing message. Experiment with different types of content to understand the most effective means to connect with your consumers.

Referral conversions refer to the value from referral sales, which will help gauge Cost Per Acquisition (CPA) for your referral program. This will determine whether your business profits from the money you're investing in your referral program.

If the incentives are too costly to distribute en masse, then brainstorm alternative rewards. Perhaps you can offer limited-edition products to keep your brand advocates motivated and to reduce costs simultaneously.

There are many considerations that must be taken into account when launching a successful referral program. Nevertheless, if you can offer a compelling incentive, while also marketing your referral program and analyzing your results, you'll be able to see more customers signing up and making their first purchase.

With Genius Referrals, you can build a fully customized referral program using our guided 6-step process. Choose your reward, automate payouts, personalize your messaging, and track performance—all in one platform.
Referral marketing works because trust drives action. Turn your customers into brand advocates and grow your business through the power of word-of-mouth.

Start your free 30-day trial and build a referral program designed to scale.