A referral program involves a brand identifying individuals who have an affinity for or are fond of the brand, and contacting them to request that they inform their friends and family about the brand.
The program generally offers a convenient and secure way to share a message, effectively monitors the success of the referral, and provides a reward for each verified transaction.
Are you considering implementing a referral program for your business? Our comprehensive guide will provide you with an overview of what referral programs are, the various types available, helpful tips to ensure success, and real-life examples from the most successful referral programs.
What is a referral program?
A referral program serves as a marketing tactic where current clients are incentivized to promote your brand to their acquaintances. When a referred individual becomes a customer by making a purchase, the original client is rewarded by the company. By utilizing referral programs, you can effectively obtain fresh customers and foster loyalty among your current customer base.
If you lack a referral program, your brand will depend solely on organic word of mouth for customers to recommend it to their friends, family, and colleagues. However, this approach will likely only reach a limited portion of its utmost potential. Although word of mouth is a typical social behavior, it is more prevalent in certain products and services, particularly those related to passion industries like music, film, fashion, beauty, and interior design.
What is referral marketing?
Referral marketing is a strategy in growth marketing that aims to prompt current and previous customers to suggest a brand to their acquaintances, relatives, and coworkers. Commonly referred to as word-of-mouth marketing, it aims to enhance organic or existing positive word of mouth by offering user-friendly sharing methods like referral links or codes, referral rewards, and gamification.
Why use referral programs & referral marketing
Modern marketing is becoming increasingly difficult and costly. This is because of factors such as the rising expenses and diminished efficiency of digital marketing, the challenges in reaching customers due to obstacles like ad blockers, spam filters, banner blindness, the need to adhere to regulations like GDPR and the CCPA, and the declining viewership of traditional television. Additionally, consumers now have growing skepticism towards advertisements, celebrity endorsements, and influencers. Furthermore, customer loyalty is generally lower than it was in the past.
Best Referral Program Examples
1. Koodo Mobile Refer a Friend
Koodo Mobile, which JD Power & Associates voted as the wireless provider with the “Highest customer satisfaction rate” for three consecutive years, decided to explore referral marketing due to the rising costs of acquiring new customers. Koodo aimed to attract new customers at a lower expense while also ensuring the contentment and happiness of their existing member base.
Koodo achieved a seamless program experience for their customers by implementing single sign-on and maintaining their fun and bright branding throughout their program design. This approach was so successful that Koodo integrated referral into their marketing mix, launching regional campaigns across Canada and offering it in various languages to ensure maximum accessibility and engagement.
2. Tesla Referral Program
Even now, Elon Musk and Tesla Motors continue to be frequently discussed in the media. Tesla is a well-known company in the fields of technology and energy. Much like the person it was named after, Nikola Tesla, Tesla Motors is forward-looking, innovative, and polarizing. Despite facing criticism for their bold and contentious approaches, Tesla has achieved an astonishing customer satisfaction rate of 89 out of 100, surpassing all other automobile manufacturers worldwide.
Tesla has successfully created a fervent culture of promoting their vehicles. By directing their referral program towards their already enthusiastic customer base, Tesla ensures that the rewards offered are truly valuable to their clientele. In addition to providing significant rewards, such as Loot Box Credits that can be used for free Supercharging and more, Tesla strategically employs tiered rewards and gamification to encourage repeat referrals.
3. Airbnb Refer-a-Friend Program
It is challenging to come across someone who is unfamiliar with Airbnb or has not utilized their services. Airbnb, which is now a prominent player in the online accommodation industry, began with the founders renting out an air mattress in their living room. It has since become a well-known startup success story, often cited as an example of a unicorn company. Although Airbnb’s referral program is currently not accepting new referrals, we have provided a summary of the program’s details prior to its closure.
Their approach achieved success for two main reasons: the first being that they made the sharing and shopping experience more efficient, and the second being that they capitalized on their users’ inclination to assist, as evidenced by A/B testing which showed that positioning the reward as a gift to a friend yielded superior outcomes compared to emphasizing receiving a reward for oneself.
4. Harry’s Refer a Friend
Harry’s is not a typical shaving brand, as it has a billion-dollar subscription service and a barbershop in Manhattan. Their referral program greatly contributes to their impressive financial success.
To generate excitement about their brand’s debut, Harry’s implemented a referral program before the launch. The purpose was to gather the email addresses of numerous potential customers. As part of their digital marketing strategy, Harry’s provided tangible rewards to individuals who referred their friends via email, Facebook, or Twitter.
5. Revolut Uses Limited-Time Offers to Boost FOMO
Revolut, a fintech company based in London, aims to become the first comprehensive financial super-app in the world. With a customer base of 15 million individuals and 500K businesses globally, their platform, available in over 35 countries, supports more than 28 currencies and offers a range of services from bank accounts and debit cards to stock trading and cryptocurrency exchange. By introducing innovative and customer-focused solutions, Revolut is now part of a group of forward-thinking fintechs seeking to disrupt the financial services industry.
Revolut’s referral program success depends on triggering a Fear of Missing Out (FOMO) response and instilling a sense of urgency in their customers. They achieve this by offering limited-time and sporadic opportunities, as well as by sending frequent email and in-app reminders that there is a specific time limit to earn the rewards.
Referral Program Tips
1. Offer A Free Surprise Gift
Most customers tend to have a preference for knowing the precise reward they will receive when they refer someone.
However, in some cases, it may not be necessary to think step by step. In fact, on the other hand, certain customer bases have a strong liking for unexpected rewards.
If you think step by step, you may consider that your product line is based on trends, which implies that items go in and out of demand frequently. As a result, you may end up with excess stock that is not as easy to sell as it used to be when the trend peaked.
2. Upgrade Product or Service
One effective method of strengthening customer loyalty to your business is by offering loyal customers upgrades to your products or services as a reward.
For instance, if your business provides SaaS services (software as a service), you can reward a successful referral through your refer-a-friend program by offering an upgrade to a premium package or granting them free limited access to premium features.
These rewards are highly effective in acquiring new customers and keeping existing and referring customers happy, and they won’t incur any cost for your business.
3. Run a Contest or Sweepstakes
Contest or sweepstakes-based referral programs tap into your customer base’s desire for competition, encouraging them to refer numerous new customers to your business by offering rewards to the winners.
The most effective approach in this situation is to utilize rewards that are highly sought after, something that will sufficiently incentivize them to compete.
Offering prizes for those who do not attend is a good suggestion. This will encourage more referrals as participants will believe they have additional opportunities to win a prize. These secondary prizes do not have to be significant; a small discount will often be sufficient.
Final Thoughts
It can be tough at times to come up with ideas for referral programs.
Finding a program that aligns with your business model and effectively promotes or represents your products and services can be even more challenging.
I am confident that the referral marketing ideas I have mentioned in this post will serve as inspiration for you to start your own referral program. Additionally, the examples mentioned will definitely give you the necessary confidence to ensure the success of your referral program.
