There are many ways to try and engage with customers, and one of the best tactics is with enticing referral rewards and incentives.
After all, if your customers love your brand, most likely than not they tell their friends and family all about it. So why not give them a gift to entice them even more to tell others about the products they love?
If you are looking to learn more about referral marketing or looking for ways to improve your current referral program, then this post is made with you in mind. Read on to learn how Friendbuy can help you.
A referral program relies on word-of-mouth to market a brand. It depends on a current customer who is a brand’s unofficial ambassador who will encourage others to try out products and become new customers.
In the Friendbuy system, the Advocate is the referrer who recommends the brand, and the Friend is the referred friend who is the potential new customer.
Advocate = referrer, existing customer
Friend = referred friend, new customer
If the Advocate is successful, they receive a reward, while the Friend receives an incentive.
Advocate = referral reward
Friend = incentive
An Advocate Reward type and Friend Incentive type can be a coupon code, account credit, or credit.
A merchant can decide what type of campaign works best for their business. One thing that sets Friendbuy apart is that we work with our customers to find the best way to move forward with a referral program. Our team walks our customers through the entire referral process, including setting up referral incentives and choosing the right referral rewards for the business. Ultimately, the type of referral program depends on the merchant's goals.
Learn more about Setting Up an Advocate Reward & Setting Up a Friend Incentive.
Take a look at a few of our shining referral program examples to see how this looks in real life. Now, let’s explore the different ways referral programs work.
There are many incentives to choose from but one of the main considerations is whether the referral incentives are good enough for an Advocate to refer to the brand and for the Friend to actually try the product. At the same time, the referral rewards and incentives shouldn’t be too expensive to give away. If it is, then the cost of running the referral program may be too high and affect a business's bottom line.
It's a delicate balance and luckily there are industry experts already leading the way in finding that balance. Let's review the different options (with examples) here.
Some referral programs offer a referral reward to only the Advocate when a Friend converts. This is a type of one-sided incentive where either the Advocate or Friend receives a gift. It is not an often-used method but some industries, like insurance, can only use this type of program because of regulations. It can be effective since the recommendation is coming from a trusted source and oftentimes that is enough for the Friend to try the brand.
The other type of one-sided incentive program is when the Friend receives a reward like a discount, coupon code, or free trial and the Advocate doesn’t receive anything. Usually, the Advocate is an existing customer and wants to send their Friend a gift.
A one-sided referral program isn’t as popular but it is used in certain circumstances.
One-sided incentive programs are best for companies that are trying to build brand awareness.
By and large, the two-sided incentive is the most popular type of referral program since both the Advocate and the Friend receive a gift. It is a win-win for both parties.
Advocates naturally talk about the products they love, but that usually isn’t enough for their Friends to take action and buy a product. With a Friend incentive, it is easier to convince the Friend to make a purchase while the Advocate Reward encourages the Advocate and makes them a repeat customer.
The most common type is a symmetrical two-sided incentive where both the Advocate and the Friend receive the same gift. You most likely have seen those on online stores and merchants, like clothing brand Joie and retailers like Walmart - “Give friends 20% off their first purchase and you’ll get 20% off your next purchase” or “Give $10, get $10!”
The asymmetrical two-sided incentive usually occurs when one party receives more than the other. Let’s say a program is “Give 15% and Get $15.” The Advocate gets $15 dollars off their next purchase, while the Friend gets 15% off. In asymmetrical two-sided incentives, it is better to give the Advocate a bigger reward so that they will refer their Friends.
Friendbuy customer example: UNTUCKit offers the Advocate $25 for every referred Friend who makes a purchase and 25% off the Friend’s first purchase.
There is no one-size-fits-all incentive program, it depends on the business too:
Even with the cost of running a referral program, the potential to increase the customer pool and have repeat customers is an important channel for driving sales.
The point of any referral program is to harness customer loyalty, gain new customers, and encourage repeat business. But the bottom line is that a referral program should make more money for a brand. So, it is important to figure out which referral rewards would work best to encourage customers to act so that the business can have a good return-on-investment (ROI).
Now that we have the lay of the land of referral marketing, let’s take a closer look at the different rewards that can be used in a referral program.
While discounts are always attractive, getting actual money back for making a purchase is always more alluring. The cash back reward is “king” for consumers but it is also one of the more expensive reward programs for businesses to run.
A cash back incentive is great for a business that sells products that are big ticket items that are infrequently bought, like beds and other furniture.
In fact, the cash rewards can be less than a discount and it will still encourage customers to make the purchase just to get some cold hard cash.
Nowadays, cash back is usually in the form of gift cards or, in the case of credit card referral programs, credit in the account statement. The gift cards typically do not have an expiration date.
Friendbuy customer example: Businesses that do not sell retail products but instead offer services often use a cash back reward. Insurance and financial institutions often give gift cards for referrals. Metromile has a “$25 Gift Card for Every Referred Friend Who Signs Up” referral program.
While QuickBooks offers a “Give 50%, Get $30” reward for their referral program.
Store discounts are commonly coupons which customers redeem to purchase products. They usually come as a percentage off or a dollar amount off a one-time purchase. Coupons have been around since the late 1800’s and it can be an effective tool for customer retention since the customer comes back to buy the product again. Though it’s double-edged, it also attracts customers who are just looking for a deal!
The goal of coupons shouldn’t make a product cheaper, but should be used to improve the customer experience. When it is used in a referral reward program, the Advocate comes back for a repeat purchase, rather than a person that is just looking for a deal.
This type of discount is often used by retailers like grocery stores, pet supply shops, or department stores.
They have a lot of products customers buy on repeat, so the coupon from a referral program will encourage them to buy with the retailer again.
Friendbuy customer example: For digital retailers or companies who sell online, referral coupons come in the form of promo codes. Hill House is a lifestyle brand that offers a “Give $20, Get 20% off” reward for their referral program. The 20% off promo code can be used by the Advocate on their next purchase.
Think of store credit as a combination of coupons and cash back rewards. Store credit comes in a dollar amount but the customer doesn’t receive a gift card they can use anywhere, instead they receive credit to use to buy from the same brand. So, in the case of a referral program, the brand retains the Advocate’s business and gains a new customer (the Friend).
The great thing about store credits is that they are easy for customers to earn and use so it builds customer loyalty. Plus, customers can earn more rewards the more they buy with a specific company. Customers can use store credits on anything and they are often cumulative and can be used together. Unlike coupons that usually have a limit of one per transaction.
Friendbuy customer example: Store credit reward programs are used by direct-to-consumer brands. Thinx, a feminine hygiene company, offers store credits for successful referrals. They present the data in an easy-to-understand table so that customers can quickly see how much they have earned. Their “Give $10, Get $10” referral program allows Advocates to refer as many Friends and stack credits to get products for free.
The subscription market grew 300% between 2012 to 2018 bolstered by internet-savvy consumers. Subscriptions are a type of business model where the consumer pays a monthly (or yearly) fee to have access to a product or service. Popular subscriptions are beauty boxes, meal kits, and pay TV.
The key to a subscription model is to have a “good value for the price” and to have a variety of products. This keeps customers happy and engaged and more likely to recommend the brand once a referral program is established.
Sometimes subscription services have a referral program that uses a one-sided incentive where the Advocate sends a free box or free month to a Friend. Others use a two-sided incentive structure, which is more likely to keep an Advocate a repeat customer while gaining new customers.
Friendbuy customer example: Subscription-based companies give away all kinds of rewards for their referral programs. Nuuly’s two-sided reward program gives Friends $10 off once they sign up. The Advocate receives up to $60 off future subscriptions.
Gift cards are always a good referral offer since the gift card can be customizable. Gift cards usually have an expiration date so customers have to use them by a certain date.
Most consumers say that they are willing to spend more than the worth of a gift card, especially for gift cards worth $100 or less, making this a great opportunity to encourage repeat purchases with your customers.
The reward can be used at a number of third-party stores, and not just at the retailer that is having the rewards program. Customers can choose a gift card that suits their needs or they can even give it away if they want.
Friendbuy customer example: Casper ran a limited time offer for a $200 Amazon Gift Card but wanted their Advocates to still be able to receive the evergreen $75 gift card for additional referrals, so they used Advanced rewards to set up 2 separate tiers.
Nowadays, gift cards come in a digital form which makes them even easier for customers to use. The ease of receiving and using digital gift cards engages customers, even more, to participate in a referral program.
Friendbuy customer example: Gift card rewards are a great option for any business. It is fast becoming popular (with both businesses and customers) to be used as a reward in a referral program. Smile Direct Club gives an Advocate a $100 digital Amazon gift card when their Friend uses their referral code.
Most referral programs use percentage discounts like “10% Off For You and 10% Off For Friend”, with percentages ranging from 5% - 30%. This is one of the most valued discounts for consumers and encourages them to engage in a loyalty program.
Using discounts in a referral program is a no-brainer for companies, especially for those that sell numerous products or products that customers have to constantly buy. Bonus points if the discount is only for the referral program, it will make the Advocate and the Friend feel special! The discount encourages customer loyalty, attracts new customers, and the repeat purchase from Advocates is good for the business.
Friendbuy customer example: A discount percentage can be used by most retailers in their referral programs. Joie, a luxury women’s fashion brand, has a “Give 20% off, Get 20% off” referral reward.
One of the best rewards for a referral program is a personalized reward that shows the business knows its customer’s needs. These rewards could come in the form of special content like white papers, how-to guides, tips, upgrades, or event experiences that are only available through the rewards program.
Rewards like access to exclusive blog posts or videos are entry-level incentives that can boost enrollment in a referral program. The more expensive and pricey rewards can be used as a higher ranking reward for VIP customers.
To create a personalized rewards program, the business will have to look at all the data they have collected about its customers. Third-party data can be purchased and can give a peek into what customers are thinking. From there, businesses can create segments and figure out what these customers value and what would be the right reward for them that will spur them to join a referral program.
Friendbuy works with Segment to easily collect and make sense of all the data that is collected about customers. Which allows businesses to make informed and personalized decisions for their customers.
Rewards that customers can exchange for a donation to charitable institutions are perfect for companies that are socially responsible. It not only aligns with the business’ brand image but shows its customers that they are also in line with its customer’s values. It is a win-win situation for both the company and the customer but in a feel-good way!
Donations can be in the form of products or cash, depending on the type of business and if they have products that charitable institutions need. The donation can be given as a reward for a referral. Or the donation can be given in addition to an award to the customer, something like “Make a referral, donate $10 and get $10 too.” A good time to run a referral program like this is during the holiday season since 30% of donations occur in December.
Friendbuy customer example: Nuuly, a women's clothing subscription brand, ran a “Gift $20, Get $20, Give $20” referral program. For every successful referral, an Advocate received $20 off a month’s subscription, their Friend also got $20 off, plus $20 was donated to their chosen charity.
Gathering and experiencing an event is a prime reward for customers. Many people like to go to in-person events, see products up close, and have a personal experience. An event can be anything from a store opening, a product launch, or an event with a panel of tastemakers. It can also be done virtually in the form of webinars, conferences, and trade shows, among others.
Putting up an event is expensive so a reward like this should be thought out really well - does it fall in line with a brand’s image and budget.
Pens, notepads, calendars, and other swag are the usual gifts that customers receive. But, if used in a referral program these giveaways need to level up! It is more likely for Advocates and Friends to join a referral program if the gift is glitzy and something that they want.
Many brands also like to give Advocates an unexpected gift once in a while, especially for those who are very active in a referral program, as a token of appreciation.
Friendbuy customer example: Aside from their year-round referral program, Flaviar, launched another referral program based around holidays. For National Friend Day, advocates and Friends who join the club both got a bottle of whiskey. They did a similar promo during Father’s Day so Advocates could enjoy whiskey with their dads. It was popular - referrals increased by 75 percent for Advocate and Flaviar’s referral program revenue has grown by 256% year-over-year.
Merchants can decide what kind of premium referral offer is best for the brand. Check out these five metrics to know about how to improve referral marketing ROI.
In a post-COVID world, marketers have found that 50% of customers will switch brands if faced with supply shortages. Customer loyalty is at an all-time low and even though many retailers have existing loyalty programs, the engagement of customers with those programs can be improved.
Loyalty programs offer a points-based system where customers earn rewards for purchases they have made. The goal is to motivate customers to redeem the points for discounts, freebies, or unique offers. Programs like this engage customers, build trust with customers, and make repeat purchases occur more often.
Friendbuy customer example: Most retailers and consumer-based products - like fashion and beauty, food, education, and travel - need repeat customers since it is easier to work with current customers than try to convert new customers. With a loyalty platform like Friendbuy's, you can make a personalized points redemption experience. Here's an example of a member dashboard that shows which points a customer has, and how they earned them.
Friendbuy has mastered the art of referral marketing and we’ve helped guide many customers through how to run successful referral programs. Our platform makes it easy to create a campaign, run, optimize, and maintain referral programs. All kinds of industries can benefit from a referral program:
|
Industry |
Company |
Referral Reward and Incentive |
Promotion Type |
CTA |
|
Pet |
$10 reward $10 incentive |
Web page |
“Refer-a-friend and you each get $10” |
|
|
Health and Wellness |
$10 reward $10 incentive |
Web page |
“Give $10, Get $10” |
|
|
Accessories |
50% off reward 50% off a $40+ purchase incentive |
Web page |
“Get 50% off” |
|
|
Teledentistry |
$100 gift card reward 85% off impression kit and $100 off aligners incentive |
Web page |
“Get $100 for every friend you refer” |
|
|
Apparel |
$10 reward $10 incentive |
Web page |
“Refer-a-Friend Program” |
|
|
Wellness |
$50 reward $100 incentive |
Mobile app |
“Refer-a-Friend. Get $50” |
|
|
Food and beverage |
Either a free Tasting Box or bottle of their choice |
Web page |
“Join the Club. Invite Friends. Get Rewards.” |
|
|
Apparel |
15% incentive $20 reward |
Web page |
“Get $20 for every friend you refer” |
|
|
SaaS |
Intuit Quickbooks |
$100 reward 50% off for 6 months incentive |
Web page |
“Share the gift of organized finances.” |
|
Technology |
Mint Mobile |
Up to $240 reward |
Web page |
“Refer-a-friend, earn a free year of Mint” |
Referral program ideas can also be defined by the industry (like in the table above), by business type (like small businesses, a subscription business, or Shopify ecommerce store), and by opportunity (seasonal/holiday, social media, programs that pay cash, influencer/ambassador programs).
Basic referral programs are good and dandy but with Friendbuy you can supercharge your referral program by choosing reward triggers that increase ROI as much as possible.
A referral program process begins with an Advocate sending out invitations to Friends and ends with the Advocate receiving a reward. Each act in the process triggers the next stage. Let’s explore the referral process and see which triggers need to occur.
On the Friendbuy website, the brand (you!) has to set up the Advocate Reward. Go to a Campaign and under the Advocate Reward tab choose the Rewards Settings section.
There you can decide the Advocate’s reward and the trigger for the Reward distribution.
In the “How will you reward your Advocates?” dropdown menu are options to distribute an Advocate Reward:
Next, you have to decide which event will trigger the Advocate Reward. It is in the “How should the reward be triggered?” dropdown menu:
Learn more about Setting Up an Advocate Reward & Setting Up a Friend Incentive.
One of the advanced features of the Friendbuy platform is being able to configure the Referral & Sharing widget to build reward tiers. These dynamic and customizable rewards can be formatted to reward Advocates based on their number of conversions or their Friend’s purchase behavior. This type of reward taps into the loyalty of Advocates engages them and is a good way to incentivize your best customers with advanced rewards.
Nuuly’s “Give $10, Get up to $60” is an example of a tiered referral program. The Advocate has the chance to earn a lot more - $10 off their subscription when their first Friend subscribes, $20 for the second, and $30 for a third successful referral.
Interior Define, a custom furniture brand, uses tiers but in a dual rewards configuration. Both Advocates and Friends receive rewards, but the more the Friend spends the bigger the reward. When the amount spent is $2,000 or more, the Friend receives a $300 discount and the advocate receives $150. If the purchase is less than $2,000, both of them receive a $100 reward. This type of reward structure motivates the Friend to spend more to get a bigger discount.
Each Advocate has a unique referral code, making it easy to track any data connected to that account. These referral codes are made on the platform and then shared by the Advocate. Once the Friend converts, either by giving their email, making a purchase, subscribing to a service, etc., then it triggers the Advocate reward.
Referral codes can be tracked on the platform, you can find the Analytics page on the Friendbuy dashboard. This is where you can also see how a referral program is performing. If ever a referral code needs to be blocked, it can easily be done by going to the “Blocked List” under Settings. Then, you will have to choose if the Friend will be sent to a Friendbuy-hosted landing page that says "Offer Not Valid," or a specified URL of your choosing.
As a precaution, it is a good idea to limit the number of rewards an Advocate receives. This protects you from fraud and makes sure the referral program isn’t being taken advantage of by dishonest activity. A campaign can be configured to set the number of rewards an Advocate can receive - monthly, yearly, lifetime, or custom basis - or to exclude a campaign entirely.
Limiting the number of rewards can also create a sense of exclusivity and boost the value of the reward. Limits can come in the form of:
It is a bit of a balancing act! But if you figure out the best way to use limits in a referral program by looking at customer data and testing campaigns, then you are one step closer to making customers happy and your campaign a success!
There are so many factors to consider when setting up a referral rewards program but even with all the preparation it’s a big guessing game if a referral program will be successful. This is where A/B testing comes in and helps optimize the program by allowing users to test different images, messaging, offers, and a lot more. You will be able to see how changing an image, discount reward, or referral offers can affect engagement and choose the right direction for a campaign.
Each element that is changed may have a direct impact so it is recommended to change one at a time and compare it with the default version, the one that is currently being used.
Friendbuy customer example: Get Back Necklaces, an accessories brand, had a successful referral reward program where they offered a “Give $10, Get $10” referral program and saw a 320% revenue increase due to the referral program. After about eight months, they switched things up and offered a percentage discount instead.
Based on the results they got with A/B testing, they decided to try a new “Give 50% off, Get 50% off” referral program. The effect: referrals increased even more and the average order from referrals was 25% more too. Overall, Get Back’s revenue increased by 700% when they started working with Friendbuy.
Now, this is where rubber meets the road. Let’s see a few different examples from a few top-performing Friendbuy customers.
Advocate shares via SMS and the referred Friend clicks and is presented with an email capture widget to redeem $100 off a Tonal machine.
Once the referred Friend purchases a Tonal machine, Advocate receives a reward email to redeem Tonal swag.
Advocate clicks primary call to action on desktop or mobile web. Friends discover Walmart products & services through Advocate sharing, either through an email or social media.
Once business rules and reward validation checks are passed (i.e. Friend purchases $50 or more), Advocates Receive Rewards and make more frequent repeat purchases.
Advocate shares via email or PURL. Friend clicks and submits their email address and starts the application process.
Once a customer has been verified, Advocate receives a $100 Amazon Gift Card.
Advocate clicks referral CTA, which triggers the referral widget. Advocate can share via Email, SMS, Facebook, personal Link, or any custom channel,
Referred Friend submits a quote. Once the quote has been verified, Advocate receives a $10 Amazon Gift Card.
Advocates share via PURL, email, or social media. Friend receives referral email invitation and after Friend makes purchase, Advocate receives reward email with coupon code.
The more you get used to using Friendbuy's easy-to-use program the more things will be easier. But, in the meantime, Friendbuy's experts can answer any and all your questions. Below are some of the most common questions we get about referral rewards.
Anyone considering a referral program really needs to take a good look at their customers - what they value, what they purchase, how often they purchase, what they like about your product, etc. The next thing to think about is what will motivate your customers to purchase products on a repeat basis. Then it comes down to figuring out the optimal referral program and testing these ideas to figure out what will work best. Luckily, you can run experiments and see what works best for your customers and brand.
The goal is to encourage repeat purchases and referrals from Advocates and Friends. And it doesn’t hurt to identify customers who refer a lot and incentivize them to keep on doing it - cash back, account credit for future purchases, and a third-party gift card are just some of the rewards that Advocates would really appreciate. Swag like a t-shirt with a company logo is nice, but how many people would really find that valuable and worth exerting effort over?
The whole point of starting a referral marketing program is to make money, right? Friendbuy has best practices that customers can follow but for a further understanding of referral marketing ROI, check out this guide.
To access program data on the Friendbuy dashboard, click on Analytics and then the Performance Overview to access the program data by month or by year. Under Program Data you can view revenue, purchases, AOV, etc. While Funnel Metrics let you see more granular data such as views, clicks, and shares. Email Metrics report what was clicked, opened, shared, and other revenue metrics.
You can also access Reports according to these topics:
Unfortunately, fraud in a referral program is something to be concerned about. After all, free stuff is great, but some customers want a lot more than others. It can come in customers creating multiple accounts, voucher abuse, or creating fake Friends. No matter the type, it is costly to a company’s bottom line.
Friendbuy makes it easy to prevent fraud. On the dashboard go to Settings then Program Integrity then Fraud Settings. You can choose to enable these settings connected to email, cookies, IP addresses, etc.
The merchant has to decide if it is worth seeking out and prosecuting those who commit fraud. Most often than not, merchants avoid this and, instead, use ways to mitigate the action instead.
A referral program is an exciting opportunity to learn more about customers, what they value, and what will encourage their loyalty. Not only that, you can tap into your creativity and figure out a winning strategy to increase sales and revenue. Hopefully, you have some questions about starting a referral program and referral awards that our Friendbuy referral experts can answer and help you jump-start a program.