How to Create Referral Programs

Where do potential customers get valuable information on businesses from? The answer is pretty straight forward, because, like your own customers and potential customers, you are a customer somewhere, so ask yourself the same thing. Where would I get information on a business from? Likely, you will first ask trusted friends and/or family members. It’s probable they will give you their honest opinion based on their experience with a particular brand you’re inquiring about.

The same applies to your own business. Your current (hopefully loyal) customers will refer their friends, family and colleagues to your company and tell them about your brand, if their experience with it has been positive and they feel – now this is the operative word – valued. One of the best ways to show your customers that you appreciate them and their patronage, is to reward them.

Everyone likes to be rewarded for things. Being rewarded for your efforts at work by way of praise and recognition (perhaps a raise or promotion even) or just acknowledgement of skills and talents generally in life. Feeling like your efforts or actions pay off in some way and reward you is a great feeling and as a business owner, this could be particularly successful.

A fantastic way to encourage your customers to refer your brand to others, is via a referral program. Referral programs are incredibly important for any kind and size of business and your aim should be to take up the forefront of your current customers minds when recommending the service or products you offer. You want to ensure that they immediately think of you and speak highly of you brand and this, to gain a steady stream of new potential customers.

Is word-of-mouth advertising effective?

Also known as ‘earned advertising’, word-of-mouth recommendations are said to be the most influential of all advertising types. According to a Nielsen global survey from 2013, spanning 58 countries, it was found that of the participants who responded to the survey, 84 per cent of them felt that word-of-mouth recommendations were the most trustworthy form of information on businesses. This absolutely echoes what we inherently know – ask a family member or friend about a product or service, you’ll more than likely try out the brand they recommend.

Is word-of-mouth advertising expensive?

While the aim of the article is to talk about the steps of developing and implementing a referral program, the first part of that is understanding that referrals are necessary in order to do this and in turn, incentivizing your customers to refer and continue to refer your brand is equally as important – it’s circular. Word-of-mouth advertising is probably the most inexpensive forms of marketing there is, as your customers do the leg work for you. They will drive your profits up, essentially. Your goal is to reward them for that.

What are referral programs and why are referral programs important?

A referral program is a system by which a customer is rewarded for spreading the word about your products and/or services. It’s a particularly effective way to draw in more customers and therefore expand a business – especially small and midsize entrepreneurships. By giving your customers a little ‘something-something’, you motivate them to share their positive feelings and exchanges with your brand, with other people. Additionally, they help make loyal customers out of regulars. It’s a really good potential ROI.

Three steps to starting referral programs


  • Figure out what your target market would most benefit from, based on your products or services and align your rewards with their lifestyle in this niche.
  • Reward both the current customer doing the referring, as well as the newcomer.


  • Make sure your product/service is total quality because if what you’re offering falls short of the bar, your customers aren’t going to be as likely to recommend you.
  • Make referring your brand super easy. If the process of referring a friend and reaping the benefits of that are going to be complex or tedious, your customers aren’t going to bother recommending your brand – it won’t be worth the effort for them.


  • Track referral program analytics. There are many referral program marketing services available and these offer great features to help you make the most of developing and implementing your program, as well as tracking data on referrals.
  • You can use Google analytics to see how people got to your company website and it should give you the basics. For a more comprehensive look into web customer traffic, use a referral program software company.

Attracting customers to your referral programs

You want to attract people to your referral program and the best way to do that is to literally, get their attention. Once you have their attention, you can give them all the information you want them to have on why your brand is amazing.

  • This is critical. As a reader, you already know that a headline can interest you and spur you on to read further if it’s created ‘just so’. Your headline, in order to be successful, needs to: tell people what the program is about, lay bare the benefits for customers, create a sense of value and appreciation within the customer/potential customer.
  • Once you’ve grabbed attention, you need to keep it short and sweet, impart your message and let people know why referring your brand is going to benefit them.
  • Done? Excellent! Now, give them options on how to share their experience and refer you. Options means that you cater to a wide demographic of people, which in turn increases their ability to spread the word about your business. This is where referral program marketing software can come in handy because of the many ways they offer to reach your customers.

What are the rewards you’re offering?

  • Get creative – because not all businesses products or services align with a cash incentive.
  • Think outside the box and utilize options such as: gift cards, freebies, coupons, charity donations and points rewards.
  • Decide if you’re using a stage system or tiered rewards.
  • Who are you rewarding? Are your rewards double-sided (where both customer and referral are rewarded) or one -sided (where only the person doing the referring ‘gets the prize’). The former tends to work a little better, the as engagement speaks to how much you value current and potential consumers.

The importance of collecting reviews

Allowing your customers to voice their opinions on your products/services and talk about their interaction with your brand, can help make them feel like the process of patronizing your business has a sort of holistic appeal. You are engaging them on a ‘human level’ and hopefully they feel like a valued customer, rather than a number or a wallet with legs. This too, really does help drive referrals, which is why it would be an excellent idea to have a referral program working in conjunction with a review section on your page or a review website such a Yelp. In fact, your reviews can also intersect with your rewards program – positive reviews and shares on social media = tangible incentives for them, from your business. Reach out to those who offer praise and support for your brand; be personable and make their experience a personal, POSITIVE one!

Remember, the goal of a referral program is to incentivize customers to continue to pledge their support to your business and to help direct more traffic to your brand, whether a brick and mortar store, or an online platform. Quality of products and services will always be the cornerstone of referrals, ease of use and positive engagement the backbone and rewards will motivate your customers to be loyal for years to come.

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