What is a Referral Program and Why Your Business Needs One

Megan Mosley
Megan Mosley  |  September 5, 2018

A referral is a huge compliment and one of the most trusted ways to get your business in front of potential leads.

An employee referral program might seem like a new-age offering to some. But it's actually the most underutilized part of any compensation and benefits program. In fact, numerous studies prove that referrals are the most trusted form of advertisement. To add to the pros list, referrals are created by happy customers, who are usually willing to spread word-of-mouth about your business for free.

Referrals help drive profits up while keeping costs low. It’s pretty clear to see why referrals rock. But, how can you prime your business to be a referral machine? The easiest way is to encourage referrals to happen by implementing a referral program software.

Tip: Referral programs can also be leveraged internally for recruiting. Learn how your company can leverage employee referrals for new hires.

What’s a referral program?

In order to get referrals, you have to offer a product or service people want, as well as provide great customer service. You have to make your customers happy enough to want to refer you.

However, this can only do so much. Because even happy customers won't always use word-of-mouth to talk about you organically. This is where a referral program comes into play.

A referral program is simply a process in which you prime and reward customers for spreading the word about you.

For instance, a customer of an invoice management and billing software may refer some other businesses to you if they are incentivized. A good incentive in this instance would be a discount or money off of their monthly bill. To get their referrals even more interested, you may offer the new customer a similar discount.

Note: even with an incentive involved, a referral program will only work if your customers are happy!

Why referral programs are great for word-of-mouth marketing

In today’s age of social media, businesses know how important word-of-mouth marketing is. However, many do not know how to measure their word-of-mouth or prompt it to happen.

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When you add a referral program to a strong foundation, word-of-mouth has the potential to sky rocket and be tracked.

This is because a referral program not only encourages sharing, but makes it easy. In fact, many referral marketing platforms provide easy share buttons for customers, as well as allow businesses to set up messaging, thus, making it super easy and convenient to share.

Lastly, a referral program makes word-of-mouth trackable. Referral program systems track each of these encounters, meaning you have a convenient way to measure your referral analytics, leading to an easy way to figure out what works best for getting leads to your business.

 

Referral program ideas and tips

Running a referral program doesn’t have to be difficult. And there are no secret tricks to making it work. However, here are three referral program ideas you can use to make it run smoothly.

1. Use referral program software

Though not necessary, it does make your life a lot easier.

By using a software, you’re setting yourself up for repeatable processes and easy integration. Not to mention, automation will be a breeze. Software is going to be your best bet for creating a consistent look and feel for your program. Plus, with a plug and play option, you’ll be collecting referrals fairly quickly.

2. Pick the right reward

Your customers may not be motivated by everything.You may need to test out a few options before you find something that sticks, but that’s okay.

If you take the time to pin down the perfect reward, you have the potential to motivate a lot of referrals. Even if you have an awesome business, the reward you offer may be the driving factor in a referral occurring. 

3. Always promote the referral program

A referral program is a marketing campaign. So, just like any other marketing campaign, you need to promote it.

A referral is a great growth driver, but if you hide your referral program, you won’t be able to see that growth occur.

Referral program examples

Let’s take a look at a few referral programs in action. If you’re creating your own referral program, you’ll want to explore a variety of different programs to get ideas of your own.

Each program is great for a different reason. So, we’ll be highlighting specific points about each.

Dropbox's referral programs

Dropbox has one of the most well-known referral programs out there. When it comes to referral marketing, it’s actually one of the most talked about programs.

Why is this so? Well, once it implemented its program, Dropbox was able to double its users every three months, almost exclusively from its program.

Read Dropbox user reviews, FREE →

Its program was an integral part of its success, but it wasn’t the only player in the game. The brand also listened to its customers suggestions and continually worked at improving its product. Lastly, it has a large market and provides a service that most people both want and need.

Why this program works

Dropbox provides an incentive that people want. Plus, the brand makes it incredibly easy to get. Its offer compels people to share because, if they do, they will gain access to more storage space.

Plus, it offers a two-sided incentive, meaning both parties earn extra space. To top it off, Dropbox makes sharing incredibly easy by offering sharing options right from the user dashboard. 

Trendy Butler: A simple, but effective eCommerce referral program

The Trendy Butler Ambassador Program plays off of exclusivity. It is a subscription service, and this invite-only program seems to work well. The program doesn’t make users jump through hoops and is a fairly straightforward program. It also incentivizes both sides, making the program appealing to all.

Trendy Butler also uses excellent promotion strategy for its referral program. The brand simply reminds users to refer their friends through customer emails and newsletters.

Why the program works

Trendy Butler offers a reward amount that fits really well with the overall price point of its subscription, meaning it’s just enough to get people excited and refer. The brand's program also looks great.

Another reason it works well, is Trendy Butler has mastered its program imagery. Its landing pages look neat and professional, and it does a great job at showcasing what the e-commerce business is all about, making referrals even more intrigued to sign up. 

Spokes Marketing Charity Referral Program

Sometimes, referral programs work best when they step away from the typical incentives and offer something with a little spin.

Spoke Marketing has created a charity referral program that accomplishes just that. The brand wanted to create a program that would represent what its community is passionate about.

So, the brand wanted to start a program, but also wanted to make sure its incentive was something tits customers would resonate with, which is how it came up with the Charity Referral Program.

Instead of giving a cash incentive to its customers for referring, Spoke Marketing makes a donation on that customer's behalf to one of their favorite charities.

Why the program works

A charity donation is a great way to reward the community while making your customer feel good about their efforts.

Because referring someone is so easy, it’s a win for everyone. A charity gets a donation, the customer feels good for contributing to a charity, and the brand gets a referral.

Start your own referral program

A good referral program can help you produce notable return on investment (ROI). Plus, referral programs don’t only bring in new leads, they help create loyal customers.

Learn more about how social proof and referrals are a marketer's secret weapon with this go-to guide on customer reviews.

Megan Mosley
Author

Megan Mosley

This is a guest post written by Megan Mosley, marketing specialist at Referral Rock. At Referral Rock, they believe every business has the potential to increase their word-of-mouth. When she’s not working, she enjoys sipping on coffee and exploring new things.