12 Tips for Creating a Winning Customer Referral Program

Ezra Cabrera | June 26, 2024


    It’s a simple fact: if you create a product or service that people love and connect with, they’ll more than likely tell their friends. And when your customers tell their friends, not only do those friends often listen, but they may also spend money. Creating a winning customer referral program helps develop brand loyalty and capitalizes on your customers' relationships with their friends and families. Here are 12 tips to help you design a successful one.

    What is a Customer Referral Program?

    Customer referral programs reward current buyers or users with bonuses or incentives for sending their friends and family your way. Many programs come with caveats, like rewards that only accrue when the referred customer makes a purchase. Others give rewards just for the referral.

    Why Customer Referral Programs Are Important

    There are so many competing products online and in real life, and honest reviews are hard to come by. Customers referred by friends are more likely to trust that suggestion.

    For example, real estate customer referral programs can help you ensure a steady stream of new clients, regardless of how the market turns. Referrals from current and past clients demonstrate your trustworthiness and ability in a way that other types of advertising just can’t. The same goes for other services, from the physical trades to accounting, marketing, and other “soft” skills.

    Building a Customer Referral Program

    In the words of P.T. Barnum, nothing draws a crowd like a crowd. And because customers who come to you from referrals can end up as valuable long-term sources of profits, it’s time to start building your crowd. Here’s how.

    • 1. Know Your Customers

      If your customer base consists of millennials, you’ll need to offer them different incentives for customer referrals than if you usually work with boomers. While there’s certainly some overlap between rewards that would appeal to both groups, it’s essential to keep your core group in mind when designing your program. But don’t just think about the bonuses themselves; think about how different types of customers might prefer to accrue points differently or interact with the program in varying ways.

    • 2. Offer Compelling Incentives

      Without offering sufficiently attractive incentives, you may be hard-pressed to find customers willing to participate. Rewards for referring friends and family must be exciting and valuable enough that members are happy to jump on board. Consider offering discounts, exclusive access to certain features or products, or even cash back.

    • 3. Keep it Simple

      Don’t bog down your rewards program with complex rules and complicated qualifications. Keep everything simple and straightforward to make it easy to participate.  Clearly explain how the referral program works, what rewards are available, and how they are earned and redeemed.

    • 4. Get Your Timing Right

      Both startups and seasoned businesses know that timing is everything when implementing new programs. You may want a customer to know you have a rewards program, but asking too soon can be a turn-off for many. The key is to take the time to develop a relationship. New customers should be comfortable and confident in your company and your product before you promote a referral program.

    • 5. Utilize Multiple Channels

      One of the best ways to pick up new members for referral programs is to cast a wide net. Don’t just include a page on your website. Instead, reach out via email, post on social media, and even display in-app messages or notifications if you have one. Reaching people where they are is critical to ensuring robust participation.

    • 6. Make it Personal

      No one wants to feel like a generic customer or a line in a spreadsheet somewhere. Personalize messages with the customer’s name or other information and provide a unique code they can share. This personal touch increases the chances they’ll engage with your program and send people your way.

    • 7. Track Results

      Remember the old saying about insanity? If you’re doing the same thing repeatedly, like sending emails or text messages and getting little response, it’s unrealistic to expect different results in the future. But it’s challenging to make these calls without a detailed plan to track how the program is going. Use automated tracking mechanisms through email services, your website, and social media to measure which parts of your referral program are working and which need help.

    • 8. Make it Easy

      If you ask for a review or a referral, make it easy to complete. Include a direct link with just a few boxes to fill in. Don’t forget to add social sharing buttons that can help autocomplete a post with just a few clicks.

    • 9. Automate, Acknowledge, and Reward Quickly

      Customers should immediately receive acknowledgment and thanks when they complete a referral. Additionally, if the referral is part of a points system for rewards, their total should be updated promptly. Speedy rewards encourage continued participation.

    • 10. Urgency Works

      Limited-time offers, double bonuses, and special perks can create a sense of urgency that increases referrals. Use this strategy judiciously, as constantly offering these kinds of perks can make them feel less urgent.

    • 11. Offer Tech Support

      Nothing stops a referral in its tracks like a technical glitch. If your online form or app keeps crashing or your posted links fail, having handy customer support through a chatbot or quick email makes it more likely your customer will complete the referral instead of navigating away.

    • 12. Ask for Feedback

      If you’ve tracked your referral program and noticed it’s not getting much participation, ask customers why. Options like an online survey make it easier than ever. Continuously seeking feedback from both customers who refer and those who do not can help you refine your program. Maybe you need better rewards, or maybe the process takes too long. Ask for opinions and stay open to making changes.

    Good Referrals Mean Good Business

    While there can be a lot to consider, it’s vital to remember that the core of the most successful customer referral programs is rewarding the loyalty of existing customers while attracting new ones. Keep these tips in mind to help you build a referral program with people who truly believe in your missions and brand.

    About the Author

    Ezra Neiel Cabrera has a bachelor’s degree in Business Administration with a major in Entrepreneurial Marketing. Over the last 3 years, she has been writing business-centric articles to help small business owners grow and expand. Ezra mainly writes for SMB Compass, but you can find some of her work in All Business, Small Biz Daily, LaunchHouse, Marketing2Business, and Clutch, among others. When she’s not writing, you’ll find her in bed eating cookies and binge-watching Netflix.