How to Build a Customer Referral Program: The Ultimate 2023 Guide

Aws Alnabulsi
May 11, 2023
11 min to read
How to Build a Referral Program for More Customers

A customer referral program is a great strategy for boosting the acquisition and retention rates of ecommerce businesses. The key to creating a successful loyalty program is to understand your target market and offer incentives that align with their interests while outperforming what your competitors offer.

When implementing a referral bonus program, businesses need to balance the expense and profits with the offered referral rewards.

These rewards could take various forms, such as discounts, free gifts, or exclusive first-look access to brand-new goods or services. The ROI to the business includes increased consumer engagement, improved customer loyalty, and enhanced revenue generation.

Word of mouth advertising - the other name for referral program marketing - and leveraging existing customers' networks encourage clients to become brand ambassadors and expand the reach of the company at no extra cost of marketing. This approach helps to increase the number of clients and drive sales growth.

In this article, we will take a look at the best way in which you can launch a referral program for your ecommerce website to reap all the potential benefits. We’ll show you how Core Loyalty can become an indispensable part of the process by providing you with access to an AI-driven referral program software for boosting results.

Table of Contents

  • What Is a Referral Program?
  • What Are the Benefits of a Customer Referral Program?
  • 10 Best Referral Program Examples
  • How to Build a Referral Program in 8 Steps
  • Launching Your Customer Referral Program in 2023

What Is a Referral Program?

What Is a Referral Program?

A referral program is a kind of loyalty program that businesses use to incentivize their current clients to promote their goods or services to their networks. The referral program's meaning is that it turns devoted customers into brand ambassadors. They help in expanding the company's customer base through word of mouth marketing. Meanwhile, they get rewarded for referring new clients to the company. So, it’s a win-win situation for everyone involved in this ecommerce marketing strategy.

For each new customer they refer to the business, customers participate in referral programs and get incentives or rewards. This reward could be free goods or services, payback, a discount off of their subsequent purchase, or all of it.

Referral programs assists the company in the acquisition of new clients at a lesser cost than conventional advertising or marketing techniques. Customers who participate in this program develop close relationships with the company. They continuously feel appreciated and rewarded for their patronage.

Also, referral programs give companies the opportunity to reach out to their loyal customers to attract new clients who are more likely to be interested in their goods or services.

If you're searching for an innovative strategy to grow your customer base and foster consumer loyalty, you should consider launching a referral program for your company.

You can check out Core Loyalty to create a referral program that exactly matches your company's objectives and keeps customers interested and returning.

Get started today!

What Are the Benefits of a Customer Referral Program?

Customer Referral Program Benefits

A customer referral program can bring a wide range of benefits to ecommerce businesses. According to LHA, 92% of consumers trust referrals from people they know, making referral programs a highly effective marketing strategy.

The most important advantages of this approach include:

1. Additional Clients

Referral programs are a very efficient method to bring in new clients. SEMrush reports that 90% of people are considerably more likely to believe a brand that comes highly recommended, even from complete strangers.

At the same time, 88% of consumers rate recommendations from friends and family as having the highest level of trust in a product or service.

2. Lower Acquisition Costs

Referral programs are significantly more affordable than conventional forms of marketing and advertising. Meanwhile, referred customers have a 16% higher lifetime value than ordinary consumers, as reported by SproutSocial.

This implies that over time clients who find you through a recommendation will generate more money for your company than clients you find otherwise.

3. Maintained Customer Loyalty

Referral programs can also increase the percentage of repeat customers. Referred clients have a 37% better likelihood of retention and are 4 times more likely to recommend your business to others, based on Invesp data.

4. Higher Customer Lifetime Value

The total amount of revenue a client brings in for a company over the length of their partnership is their lifetime value (LTV). Referral programs can boost customer lifetime value when they reward current customers for introducing new clients to the company.

In addition, referred customers are more likely to be devoted and enthusiastic, which increases the likelihood that they will make subsequent purchases and sustain the company's revenue over time.

5. Increased Brand Awareness

Referral programs help increase brand awareness. Incentivizing customers to refer their friends and family helps businesses tap into new customer networks and increase their brand's reach. Brand loyalty is enhanced as well.

6. Better Quality Customers

Referral programs tend to attract better quality customers, as they are more likely to be interested in the business's products or services. According to a University of Pennsylvania study, referred customers are 18% more likely to stay with a business than non-referred customers.

Overall, a customer referral program can be a highly effective marketing strategy for businesses looking to grow their customer base, improve customer retention rates, and increase customer lifetime value.

10 Best Referral Program Examples

10 Best Referral Program Examples

Companies have been using referral programs for decades. With the advent of digital technology, it has become easier to gamify these programs and distribute incentives and rewards to both the referrer and the referred, leading to even more successful referral campaigns.

Here are ten examples of real-life referral program ideas that have been highly effective for the businesses involved:

1. Tesla Referral Program

Tesla offers incentives to existing customers for referring new customers, including free Supercharging miles, privileged access to items, and even the chance to win a new Tesla vehicle.

2. Airbnb Referral Program

Airbnb provides travel credits that can be applied to subsequent bookings to both the referrer and the referral.

3. Toast Referral Program

Toast rewards existing customers with cash for each new customer they refer who signs up for their restaurant POS system.

4. Realtor Referral Program offers its users a $350 gift card in exchange for suggesting friends and family members who are looking for a new property.

5. T-Mobile Referral Program

The T-Mobile referral program provides a $50 credit towards the T-Mobile bill for both the referrer and the person they have referred.

6. Frontier Referral Program

Each successful introduction to Frontier Communications' internet or TV services earns the referring parties a $50 Visa Reward Card.

7. Verizon Referral Program

Customers of Verizon receive a $50 Visa prepaid card for referring a new subscriber, and the new customer receives a $50 Visa prepaid card as well.

8. Costco Referral Program

Costco's referral program offers existing members a $10 Costco Shop Card for referring a new member who signs up for a membership.

9. Partner Referral Program

Partner's referral program rewards both the referrer and the referred with a $50 Amazon gift card for each new customer referral.

10. Uber referral program

Uber gives both the referrer and the referred with ride credits that can be used in future rides.

How to Build a Referral Program in 8 Steps

How to Build a Referral Program

Building a successful referral program requires careful planning and execution.

Here are eight steps to help you create a referral program template that drives growth for your business:

1. Set goals and define success metrics.

Setting clear goals and defining success metrics is an essential first step in building a successful referral program. This includes knowing what you want to achieve with your program like increasing customer acquisition or boosting customer loyalty.

Define specific, measurable, and realistic goals that align with your overall business objectives.

When you set clear goals and success metrics, you can track the progress of your referral program and make data-driven decisions to optimize its performance. This will help you create a more effective program that delivers the results you want.

2. Identify your target audience.

A good referral campaign starts with identifying your target demographic. Know who your ideal clients are and what drives them to recommend your company to others.

To create a clear image of your target audience, you can leverage information from your existing customer base, such as demographics, purchasing behavior, and comments.

You can make your referral program more appealing and pertinent to them when you determine your target audience and then tailor it to their particular requirements and preferences. This boosts the overall effectiveness of your program and helps you draw in more qualified referrals.

3. Choose an incentive structure.

A successful customer or employee referral program’s incentive structure selection is an essential element. The rewards you provide should be compelling enough to encourage your consumers to recommend your company to their friends and family.

A variety of incentive systems are available, including monetary awards, price cuts, cost-free goods and services, and exclusive access to activities or materials. The secret is to provide a reward that meets your clients' wants and preferences while also benefiting your company. Take into consideration that your competition is offering and try to offer more.

Design a more successful referral program, promote growth, and foster client loyalty when picking the appropriate reward structure.

4. Determine the referral process.

Building an effective referral program requires making decisions about the referral procedure. Outline the precise actions your clients must perform in order to recommend your company to others. Make sure you include instructions on how to claim rewards too.

To improve the possibility that customers would participate, you should make the recommendation procedure as simple and intuitive as you can. Establish a seamless recommendation form on your ecommerce website or mobile app to give clients a special referral link or code that they can share with their friends and family.

Improve your program's overall efficacy and make it simpler for customers to engage in your program with a clear referral method.

5. Create a landing page for your program.

Developing a landing page for your referral program is an important step towards increasing awareness and engagement. The landing page should make it clear what your referral program's advantages are and offer customers an easy way to sign up.

You can include specifics about the referral program, the incentive scheme, and any other pertinent information that clients should be aware of. Make sure the landing page is aesthetically pleasing and simple to use.

You can use an AI content generator like ChatGPT to create some of the content for your landing page.

Boost the amount of traffic to your program. Take advantage of the possibility that clients will take part in developing a special landing page.

6. Promote your program to customers.

You can use a variety of platforms, such as email marketing, social media, your website, and in-store signage, to promote your referral program to customers and drive awareness and participation.

Be careful to underline the advantages of your program and the worth of the incentives you're providing.

Design targeted marketing that is geared to particular client categories. You may boost the overall effectiveness of your campaign and increase visitors to your landing page with strategic marketing tactics.

7. Track and measure your results.

Building a successful referral program requires taking the time to track and evaluate your progress. Focus on important metrics like the volume of referrals, the rate of conversion, and the customer lifetime value of referred customers.

You can spot opportunities for improvement and tailor your program for optimum impact when you monitor these metrics. Surveys and client feedback are other tools you may use to learn more about the efficacy of your program and make necessary improvements.

Make sure that your referral program is producing the required effects and promoting business growth with constantly monitoring and measuring your performance.

8. Use a tool like Core Loyalty to manage and optimize your program.

Use Core Loyalty to Build a Referral Program

The Core Loyalty AI-based software offers a comprehensive platform for creating, managing, and tracking your referral program, including customizable referral links, automated reward fulfillment, and detailed reporting and analytics.

Core Loyalty can help you create a custom referral program that fits the unique needs of your business. With features like automatic reward fulfillment and real-time performance tracking, Core Loyalty makes it easy to manage and optimize your program for maximum results.

Schedule a demo to learn more about how Core Loyalty can help you build the best customer referral program.

Launching Your Customer Referral Program in 2023

One of the most effective ways to grow your business and cultivate customer loyalty is to introduce a customer referral program.

You need to design a program that offers genuine value to both your consumers and your company through establishing clear goals, identifying your target demographic, selecting the appropriate incentive structure, and promoting your program skillfully.

Meanwhile, you can improve your program and achieve maximum impact with monitoring and assessing your outcomes and using a technology like Core Loyalty. With its comprehensive platform, customizable referral links, and detailed reporting and analytics, Core Loyalty makes it easy to launch and optimize your program for maximum impact.

Start building your customer referral program with Core Loyalty today.


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Daniela Andreevska

Daniela has 6 years of experience in digital marketing for ecommerce businesses.

Aws Alnabulsi

Aws is the Co-Founder of Coretava, a complete retail ecommerce growth platform. He has 6+ years of experience in managing and growing ecommerce businesses.

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