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10 Best Practices For Launching
A Successful Referral Program

How do you choose a restaurant or hotel?

Many of us rely on recommendations from family and friends to make purchase decisions. After all, they're the ones that we trust the most.

In return, we make it a habit to recommend brands that we love so our friends and family can have a good experience.

Naturally, referrals have become an inevitable topic of our daily conversations.

This brings us to the power of referral marketing.

What is referral marketing?

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. Plus, 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.

Now, how can your business get more referrals?

The answer is simple: launching referral programs.

What is 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!

Now, how can you launch a referral program? In this guide, we'll share the tips that you need to succeed.

1. Put customers first

The first step to launching a successful referral program is to have a great product.

Remember: people will only recommend businesses that they like. If a product and service is superb, people will naturally persuade their network to try it out too.

Without a great product, a referral program will be ineffective. No one wants their friends and family to experience hassles and inconveniences so they will only recommend the best of the best.

For instance, All Plants delivers nutritious and delicious plant-based meals from sustainable ingredients in the UK. In their referral program, they promised to plant a tree for every successful referral. This encouraged brand advocates to promote their delicious vegan meals and to keep eating vegan too.
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 brands passion for sustainability and veganism. This makes it easy for brand advocates to convince their friends and family to sell your product.

2. Choose an incentive

Rewards are the secret sauce to successful referral programs.

Usually, brand advocates receive rewards in the form of discounts, freebies, cash and exclusive products—for successfully referring their friends. The value of a reward determines whether customers will make the time and effort to promote your brand.

Referral program rewards don't necessarily need to be grandiose. Brand advocates love the opportunity to receive rewards in exchange for their recommendations—big or small.

Most referral programs offer double-sided incentives, where both brand advocates and referred friends receive a reward.

UberEats referral program gives $20 to the brand advocate and their friends.

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.

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.

3. Consider referral reward cost

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.

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

The Vera Bradley referral program gives advocates and friends 20% off. However, the full-priced purchase of the referred friend must be at least $100 or more to qualify.

4. Design your referral program

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 keep them satisfied, the ideal referral program should be able to clearly communicate the incentives.
Here are some tips to help you get started:
Write a great slogan

Here are some tips to help you get started:

A catchy slogan is the key to attracting the attention of consumers.

Ideally, the headline should be able to convey the main perk of participating in your referral program with just a few words. It should also summarize the process for participating and its rewards.

Here are some samples of catchy headlines:
  • Give $5, Get $5
  • Refer a friend, get free socks
  • Get $50 of credit for each friend you refer
  • Share your love of travel, score free trips
We are Wild skincare brand uses the slogan "$25 for you. $25 for friends". The simple headline seamlessly conveys the incentives that participants can get.

Use eye-catching graphics

An eye-catching design can pique the interest of your consumers.So, consider spicing up your referral landing pages with compelling photos, interactive graphics or GIFs.

Again, the landing page or referral email design can have a big impact on your brand perception, especially for referred friends encountering your brand for the first-time.

For example, ColourPop's refer-a-friend program has an eye-catching image of racially diverse women. The simple image conveys the brand's inclusivity and shows that you'll look beautiful by using their products, regardless of your race or skin color.

5. Invite existing customers to join your referral program

Once you've set up your referral program, the next step is to invite current customers to join. Your customers already have prior experience with your brand, so their referrals will be invaluable to their network.

Next, encourage them to invite their friends and family by sending a referral invite email.

Doordash - food delivery service - clearly highlights the rewards customers can earn for a successful referral. Plus, brand advocates can instantly get their network onboard by sharing through text or email.

Besides current customers, you can also invite past customers to join your referral program. They may not have shopped for months, but the perks of earning a referral reward may encourage them to return to your online store and spread the word to their network.

6. Have a default sharing message

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.

7. Send a follow-up email

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 contain the basic gist of your referral program, incentives you'll offer and the call-to-action (CTA).

For 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.
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 after a follow-up, some of your loyal customers may not be interested in joining the referral program—and that's alright!

8. Collaborate with influencers

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 that 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 enable brands to promote their latest products and deals.

For 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.

9. Thank customers for successful referrals

For brand advocates, convincing family and friends to try a new product takes effort. That's exactly why you need to thank customers for making a successful referral. Not only did you gain a new customer, but you also skipped the hassle of converting a new customer in your sales funnel.

A thank you email also informs the brand advocates that they successfully received the referral reward.

For instance, Allset's thank you email lets customers learn that they earned $10 because their friends made a purchase.

The email also encourages brand advocates to invite their friends and family by clicking the social media buttons of their referral program.

At the bottom of the email, there are links to their social media accounts and their Medium blog so they can stay connected with the brand.

10. Analyze the results for your referral program

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 uncompelling 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 – refers 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 cost simultaneously.

Launching a successful referral program

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.

Now, how can you build a referral program? The good news is that it doesn't take rocket science.

Genius Referrals enables you to launch your own referral program with a quick 6-step process. As soon as you pick a referral reward, you can set-up automatic payouts. Plus, you can personalize the default sharing message and monitor and optimize your results.

As brand advocates have a huge influence on their friends' purchasing decisions, referrals are one of the best options for getting new customers to your business.

How to get started? Sign-up for their 30-day trial and launch your own referral program today.
Team Genius Referrals