Important points to remember
- Referral programs can help you get more leads and customers while spending less
- With referral incentives, social gifting, or tiered rewards programs, you don’t have to spend a dime until you make a sale
- Referral contests are effective tools for building brand awareness, although purchases aren’t guaranteed
Referral marketing is crucial for business growth as new customers are often reluctant to try unfamiliar brands. By receiving recommendations from trusted sources, individuals are four times more inclined to make a purchase. By implementing effective referral program strategies, you can transform your current customer base into influential advocates and greatly enhance your sales numbers.
Customer referral programs are widely agreed upon by marketers to have a lower cost per lead compared to other channels, as they only require payment after a sale has been made. Moreover, these programs offer the opportunity to quickly increase the number of referrals obtained. Additionally, referral programs provide a chance to reconnect with loyal customers by offering rewarding incentives that cater to their satisfaction.
Discover four referral program examples that will teach you how to develop an effective referral rewards program. Gain insights into their functioning and the key metrics that enable you to monitor their effectiveness.
1. Referral incentives
You can provide your client with rewards when the referred friend completes a purchase, using a simple, incentive-based program, which is the most traditional referral marketing strategy.
- A gift card
- Store credit
- Cash reward
- Free products
- Company swag
- A free month subscription
The higher the price of your product, the greater the value of your referral incentive should be. It is more challenging to persuade friends or family to purchase expensive products compared to a simple cup of coffee, hence your reward should serve as motivation for your clients to make the extra effort. For instance, when a real estate agent successfully closes a deal that results in thousands of dollars in commission, offering a $5 gift card as a reward would not be sufficient.
To guarantee that your program is generating profits, some metrics you can monitor include:
- Average initial purchase value: How much referred customers are spending on their first purchase. If you want to ensure you never lose money from your program, you can adjust the value of your reward as needed.
- Cost per acquisition (CPA): The average amount you’re spending to achieve each sale. A successful referral program should decrease your CPA, helping you drive up your profit margin over time.
2. Social gifting
Social gifting elevates the referral incentives concept by offering benefits to both the referrer and the friend. When a friend makes their initial purchase using a current customer’s code, they receive a discount on their first Uber Eats order, such as a $10 deduction. Furthermore, after the friend’s first purchase, the referrer also receives a discount.
To enhance the outcomes of social gifting, monitor the following metrics: This referral marketing concept is perfect for amplifying customer acquisitions, as referrers can exert less effort in persuading their friends to try your brand.
- Conversion rate: The percentage of referred leads who make a purchase. You can consider adjusting your offers if you’re not gaining as many customers as you’d like.
- Repeat purchase rate: The percentage of clients who buy more than once within a set time frame. This should increase or stay steady. Otherwise, new and existing clients may be dropping off after they claim their reward, which means your active customer base isn’t growing.
3. Referral contest
Existing clients are enticed to recommend your business through referral contests, which offer a single substantial reward like a $100 gift card or tickets to Hawaii. These contests effectively engage your customer base without necessitating any purchases. Typically observed on social media, referral contests by brands involve tagging friends for a chance to win raffle entries. After the deadline, a winner is randomly chosen by the brand.
For instance, a yoga studio could organize frequent competitions on Facebook, offering its followers a chance to win complimentary three-month memberships or workout merchandise.
To expand the reach of your brand, you can monitor your referrals by organizing monthly contests, which not only increases brand recognition but also sustains a favorable brand image as potential clients become acquainted with your business through trusted sources.
- Participation rate: The percentage of clients who participate in your contest after seeing it on one of your marketing channels, such as social media. A low participation rate is a sign that you need to improve or increase your marketing for the referral campaign or offer a better prize.
- Average number of referrals per contest: Spotting trends in this metric can help you identify what prizes are most enticing for current clients.
- Daily website, landing page, or profile visits: While running a contest, you should see a spike in visits to the channel where you’re directing referred customers. If there isn’t an increase in visits, there likely isn’t more brand awareness.
4. Tiered rewards
Offering tiered rewards in your referral program can generate a domino effect for word-of-mouth marketing, enabling your small business to maximize its impact. This approach increases the likelihood of referrers continuously making new referrals, while also encouraging the referred individuals to participate in your program.
There are two possible variations for a tiered rewards program. First, you can enhance the rewards given for each successful referral made by your customers. For instance, customers can receive a $10 reward for their initial referral and $15 for the subsequent ones. Alternatively, you can provide one-time prizes or continuous benefits such as priority customer support once clients reach a specific number of referrals within a year.
Tesla combines social gifting and tiered rewards within its brand. When a friend who was referred activates their Tesla solar energy system, both the referrer and the friend receive cash rewards. Additionally, the referrer can earn a complimentary Powerwall product after reaching 10 referrals.
In case your service-oriented small business aims to emphasize tiered rewards, you have the option to grant a $10 gift card for the initial referral. Subsequently, upon receiving five referrals, you have the capability to render any service without charge.
By implementing this referral program concept, you have the potential to transform your loyal customers into dedicated brand advocates. Additionally, it provides the distinct advantage of ensuring continued engagement from existing clients, thereby fostering satisfaction and simultaneously attracting new customers.
5 Best Referral Program Software for Small Business (2023)
1. AffiliateWP
AffiliateWP is a comprehensive WordPress plugin designed for newcomers, allowing you to establish a functional referral program within minutes.
All of your affiliates will have access to features such as affiliate coupon tracking, an automatic referral link generator, and real-time reporting data.
This feature assists in precise tracking of your referral programs and analyzing comprehensive reports within the WordPress dashboard.
You can access a dashboard which allows you to assess your affiliate applications, oversee affiliate accounts, and analyze referral and affiliate performance metrics.
In the dashboard, the plugin provides you with complete control over the management of your referral partners. It displays information regarding referral sales, affiliates, amounts, and various other details.
2. Easy Affiliate
Easy Affiliate is a user-friendly and robust referral program plugin designed for WordPress and WooCommerce. It encompasses all the necessary features to construct, monitor, and administer your affiliate program effectively.
Within a short period of time, you will be able to establish and operate your own referral program. Through the user-friendly dashboard statistics widget, you can easily monitor the performance of your affiliates and identify the top-ranked participants. Additionally, the system includes automatic fraud detection, instant affiliate payments with just one click, personalized commission options, and no charges for transactions.
3. ShareASale
ShareASale, which has been in operation for a significant period of time, is recognized as a reputable affiliate network on a global scale. In addition to granting individuals access to an extensive range of affiliate products to endorse, they also present a highly beneficial referral marketing solution designed specifically for entrepreneurs.
Major publishers such as Business Insider, Forbes, Buzzfeed, and others utilize ShareASale.
It is important to note that our software solutions, such as WPForms, OptinMonster, MonsterInsights, and SeedProd, are also utilized through the ShareASale referral program.
You have the ability to effortlessly establish a referral program for your own products and immediately tap into a pool of more than 225,000 affiliates who are prepared to endorse them.
You will find a comprehensive affiliate dashboard and tracking tools to effectively monitor performance. Additionally, there is a built-in email marketing automation feature that enables constant communication with your affiliates, offering updates on sales and promotions.
4. Tapfiliate
Tapfiliate is a user-friendly referral tracking software that simplifies the process of designing your own referral marketing program, eliminating any difficulties.
You can easily bring new affiliates on board and customize the dashboard to align with the design of your WordPress website and products.
There is the ability to manage payouts, which consists of one-time or monthly recurring commissions, commissions based on a percentage, performance bonuses, and other types of compensation.
Tapfiliate provides a range of tools for generating concise and stylish links for your referrers and affiliates, distinct coupon codes, and shareable social media content.
Popular tools such as WooCommerce, WordPress, Zapier, Shopify, and others are also integrated. Those with advanced skills can make use of the REST API integration to design personalized automated workflows.
Additionally, there is support available for multiple currencies and languages to enable the operation of a global referral and affiliate campaign.
Tapfiliate offers a pricing plan that begins at $89 per month and does not charge any transaction fees. With this plan, users can enjoy real-time reporting, third-party integrations and automation, as well as support for a maximum of 1000 affiliates.
5. PartnerStack
PartnerStack is an effective referral marketing platform designed to assist you in creating and overseeing your complete referral procedure.
PartnerStack is utilized by companies such as Drip, Asana, Quickbooks, and Evernote to manage their affiliate programs.
The software is designed to assist in the growth of SaaS companies and newly established online startups. One of its most valuable features is the capability to onboard new partners and affiliates directly within the software.
The software offers a high level of flexibility, enabling you to establish various objectives for your referral campaigns. For instance, you have the option to prioritize traffic generation, acquiring new leads, or achieving total sales.
In addition, you have the ability to integrate customer loyalty programs directly into your products. For instance, once a person becomes a customer, an automated sequence can be initiated to onboard them as a referral partner.
Similar to a CRM, the dashboard provides a user-friendly experience and offers a comprehensive analysis of your partners’ performance. By creating partner groups and implementing tiered rewards, you can incentivize their efforts.
Additionally, a range of payment options such as credit card, ACH, Stripe, and PayPal are available.
PartnerStack tailors pricing plans for each individual customer, determining the specific amount you will be charged.
