One of the best ways to attract new customers is by having your current ones recommend your business. According to a Nielsen study, 92% of consumers trust recommendations from people they know over any other form of advertising.
Another case study, this time by Schmitt, Skiera, and Van den Bulte from the Wharton School of Business found that clients who have been referred by someone they know are 18% more likely to stay with a business for longer. To top it off, they generate 16% more in profits!
Pretty cool, right?
These stats highlight the potential of referral marketing to not only attract new customers but also to enhance customer loyalty and profitability. If we go by the numbers, everyone would be using referral marketing right now!
But not many do because not all businesses can make it work.
No matter how simple the process, if your strategy is as boring as a shell on the seashore, your customers might not be motivated to actually talk to others about you.
So how exactly do you make referral marketing work for you? What strategy can you use that would tempt your clients to refer someone else?
The answer is to use tactics that are not just proven, but also fit your line of business. That’s why we've compiled 13 referral marketing ideas to help you quickly get on board.
We won't merely list strategies. Instead, we will dive deep into each one, exploring its application, and real-life examples of businesses that have implemented these methods successfully.
Let’s jump right in!
The Altruistic Referral approach capitalizes on the natural human instinct to share good experiences with others. In this method, you're simply asking your customers to refer your products or services to their network out of the goodness of their hearts, without expecting a reward.
The emphasis here is on creating a product or service that is so good, customers can't help but share their experiences with their friends and family.
To implement this strategy, you can lean on platforms like Viral Loops, which offers an Altruistic Referral template.
The process is relatively straightforward. Begin by impressing your customers with an exceptional experience. Once customers are satisfied with your product or service, encourage them to spread the word to their network.
You must build a really, really good relationship with your customers for this to work.
A great example of a brand utilizing the Altruistic Referral strategy is Tesla.
Tesla owners often refer the brand to friends and family simply because they love their cars and the overall brand experience. Elon Musk, Tesla's CEO, has even mentioned in interviews that the company does not pay for advertising.
Instead, they rely heavily on word-of-mouth referrals from their satisfied and enthusiastic customers. Plus, the company built so good a reputation or brand that customers tell others about their experience just to brag.
The brand's commitment to producing high-quality, innovative electric cars spurs customers to spread the word, demonstrating how powerful the Altruistic Referral method can be when done right.
This is the most common referral marketing strategy where existing customers refer your products or services to their peers in exchange for something.
In Rewards-based Referral Programs, you incentivize your customers to advocate for your brand.
This strategy hinges on the concept of reciprocity. When you offer attractive rewards, customers feel motivated to tell people about you.
There is more than one way to use this strategy. Here are some reward options:
Offering a free or discounted upgrade as a reward for referral can be a compelling incentive for your customers. It not only provides them with added value but also gives them a chance to experience the premium features of your product or service.
Providing actual gifts as rewards is another approach to pique your customers' interest in your referral program. This method is straightforward: when your customer successfully refers someone who becomes a new customer, you send them a tangible gift.
Not just one that is part of your services or products but one that is something special. One good choice is branded merchandise. This way, your referrers get rewarded, and at the same time, they become walking advertisements.
A mystery gift injects an element of surprise and excitement into your rewards-based referral program. Customers who manage to successfully refer someone to your brand receive a gift, but the catch is, they won't know what the gift is until they get it.
The anticipation and intrigue created by this method can drive more referrals as customers become curious about what they might receive.
To employ this strategy effectively, businesses need to ensure the mystery gift is compelling and valuable. It doesn't have to be expensive, but it should be something your customers will appreciate. You can use customer data and preferences to select gifts that will resonate with your demographic.
Promote the mystery gift extensively on your marketing channels. Tease the possible gifts without revealing what they are to maintain the element of mystery.
You can also make it random so that once someone receives their mystery gift for referring someone and posts it on social media, you can tell them it is just one of the many possible gifts. Having referrers post on their socials is also a great way to promote your brand and your referral program!
The Milestone Referral or Tiered Referral strategy rewards customers by elevating the value of the rewards they get as they refer more people. This method fosters a sense of progression, encouraging customers to refer more to achieve the next level of rewards.
You can use Viral Loops for this purpose. Here are the steps to get this done:
And that’s it! It’s as easy as 1-2-3 when you have the right tool.
The Two-Way Incentive is a method in which both the referral and the referrer are rewarded for their participation. For this to work, first, decide on an attractive reward for both parties.
A successful example of a brand implementing this strategy is Dropbox. Dropbox introduced a Two-Way Incentive program that provided additional storage space to both the referrer and the referral once the referred person signed up for an account.
This strategy proved incredibly successful for Dropbox, leading to a 60% increase in their signup rate. It encouraged customers to refer multiple people, which led to exponential growth for the company.
The Pre-Launch Referral strategy is a clever approach to building buzz about your product or service before it's even launched.
In a nutshell, this strategy involves encouraging potential customers to refer others to your upcoming product or service in exchange for early access, exclusive features, or other enticing rewards.
To implement this strategy, you can use Viral Loops' Startup Pre-Launch Template. This template allows you to create a dynamic, interactive waitlist for your upcoming product or service.
Here's how it works: invite visitors on your website or fans on your social media pages to sign up to join your waitlist.
Then, ask them to refer their friends to join the waitlist as well — the more friends they invite, the higher they move up on the list. This means they might have first (or even beta) access to your offerings.
This not only creates a sense of competition but also spreads the word about your upcoming launch. The participants can look forward to early access and exclusive pre-launch offers, adding more value to their sign-up and gaining more referrals.
This strategy is incredibly effective in scaling your audience and attracting more audiences for your launch.
A notable example of a company that utilized the Pre-Launch Referral strategy with great success is Robinhood. Before launching, Robinhood set up a waitlist where people could move up in line by referring others.
This strategy helped Robinhood generate significant buzz and gather a large user base of one million users before it even launched! They effectively turned their waiting list into a marketing tool, demonstrating the power of the Pre-Launch Referral strategy.
Affiliate Programs form a powerful referral marketing strategy that involves collaboration with affiliate marketers, influencers, or bloggers. These affiliates promote your brand, products, or services, expecting monetary compensation for each successful referral they send your way.
To implement this strategy, simply follow these steps:
Actively look for influencers or bloggers whose audience aligns with your target demographic. They should have a strong online presence and a reputation for endorsing the products or services that correlate to your brand identity.
You can also create an affiliate program on your website and just encourage customers or anyone interested to sign up (passively receiving applications).
Set up an affiliate program with clear terms and conditions. Decide on the commission rates, the payment method and schedule, and the expectations from the affiliates. You can use affiliate marketing management tools such as Affiliatly, Everflow, Refersion, Tapfiliate, and Post Affiliate Pro.
If you’re too busy, you can always work with an affiliate network. Such networks or agencies take care of searching for affiliates for you, oversee the quality of the referrals, help you create banners and links, and even manage cash flow (eg. how to pay and when to pay affiliates).
Once the affiliates agree to partner with you, provide them with distinctive affiliate links that they can use to share the word about your products or services. This will allow you to track the source of your referrals.
This may also involve working hand in hand with affiliates and creating marketing materials to help make it easier for them to promote you (unless you’re working with an affiliate network).
Keep track of which affiliates are bringing in the most referrals and adjust your program accordingly. This could mean focusing more on profitable partnerships, revising commission structures, or changing your affiliate recruitment strategies.
This is one of the most rewarding referral programs since affiliates can actually earn from spreading the word about you. It makes people more inspired and encouraged to promote your product or service, without additional prodding from you.
The downside here is that not all affiliates actually understand you and your products/business, as they are only promoting you for the compensation that they’ll receive. The quality of referrals also varies.
There are tons of businesses that have affiliate programs to further promote their business. Among the most successful ones is Lazada, a popular e-commerce platform in Southeast Asia (it’s like Amazon in this part of the world).
When the e-commerce platform was still starting out, they encouraged regular shoppers and bloggers to become affiliates and promote any product listed on the platform. This strategy caused audiences to shop from the platform in droves, making it the second most popular e-commerce app in the region by 2022.
B2B Partner Referral Programs offer an effective means to mutually boost business growth among complementary companies. It works best for businesses that are complementary to each other. At the very least, the industry should be related but don’t offer the same products or services.
Follow these steps if you want to try this strategy:
An example of the successful implementation of this strategy is the strategic partnership between Spotify and Uber.
Uber riders could connect their Spotify accounts to control their ride's music, which not only made Uber rides more enjoyable but also introduced Spotify to a wider audience.
Such partnerships create a win-win situation for both businesses, enhancing customer experience while increasing brand visibility.
Contest-based referral strategies tap into the excitement of winning and the spirit of competition to encourage customers to refer more.
In the Tempting Giveaway style of Viral Loops, customers are entered into a draw for a tantalizing prize with every referral they make. This strategy leverages the thrill of potentially winning a big prize, incentivizing customers to make as many referrals as possible to get more chances at winning.
To make this work, the prize must be big enough to encourage a wide range of customers to participate.
This style cannot be done regularly, since offering a very big prize can be quite costly. Also, if you have a pretty expensive prize, it would do you well to promote the actual referral program so that the raffle draw can be worth it.
Gamified Referral Strategies transform the process of referring into a fun and engaging game. This strategy encourages customers to make more referrals by incorporating elements of competition, achievement, and rewards.
The Basic Tactic
Imagine a coffee shop that offers a points system. Every referral a customer makes earns them points, and reaching certain point thresholds earns them rewards, like a free coffee or a discount. The more referrals they make, the more points they earn.
A notable brand that implemented this strategy is Evernote, a note-taking, productivity app. Its system is based on a points scheme, where users can earn Evernote Points by referring friends and family. These points can be redeemed for monthly or annual subscriptions to Evernote Personal, even if the user already subscribes to a paid service plan.
A leveled-up style of the gamified strategy is the Leaderboard Referral, which fosters a sense of competition among customers.
In this scenario, customers' referrals are tracked and ranked, and the top referrers are rewarded. Their names are even posted at the top list to boost ego. This encourages customers to refer more people to climb up the leaderboard.
Verafin, a leading provider of fraud detection and anti-money laundering software, is a prime example of a company that effectively utilized gamified referral marketing techniques.
They implemented a scheme known as the "Referral Rally." In this program, advocates for the product were required to get certified so that they could learn how to properly promote the product. Once they get certified, they can start promoting Verafin.
Referrers again receive points that they can exchange for rewards, but this one’s made more thrilling. The higher the rank in the leaderboard, the higher the number of points a referrer gets. The company publishes the leaderboard to encourage and excite referrers to invite more people.
This brings out people’s competitive streak, especially if the rewards are better for top referrers.
You might think that it is time-consuming and requires too much effort. In reality, you don’t have to do it manually. Getting started with this referral strategy is pretty easy with Viral Loops' Leaderboard Giveaway template.
Aside from providing each referrer a unique link to track referrals, it also automatically creates a leaderboard that shows the top referrers and their ranking. All you need is a page dedicated to showing the leaderboard to inspire more invites.
In the realm of referral marketing strategies, incorporating a charity donation or a community-based referral program can prove to be a powerful tool. The essence of this concept lies in making a charitable donation for every customer referred to the business.
For example, a company could pledge to donate a certain amount to a selected charity for each new customer referred, instead of giving the incentive to the referrer. This not only motivates existing customers to make referrals, but also casts the company in a positive light by showcasing its commitment to social responsibility.
First, you must select a charity or cause that aligns with its mission and values. You can have several of these to give your current customers a choice of which to support.
Then, promote the new referral initiative to your customer base, outlining how each referral leads to a donation. Talk about how this aligns with your company values or mission.
It's also crucial to ensure transparency in the process by regularly updating customers on the total donations made and the impact they're facilitating.
One company that does this is Pomodo, a software that allows businesses to manage workflows, inventory, sales funnels, and more in one program. Its referral program works this way:
This is like the altruistic approach, but made better. It not only drives customer engagement but also empowers them to make a positive impact in society. This fosters stronger customer relationships and enhances brand reputation.
Social gifting introduces a unique twist to referral marketing. The central concept is that when a customer makes a referral, they receive a gift or incentive that they can then choose to gift to another person, creating a cycle of generosity and goodwill.
This strategy works effectively because it fosters a sense of community and connection among customers, while also aligning with the popular culture of 'paying it forward.'
One company that successfully implemented this strategy is Starbucks with its "Tweet-a-Coffee" campaign. The campaign allowed a Starbucks customer to gift a $5 Starbucks card to a friend by simply tweeting @Tweetacoffee and the friend's Twitter handle.
This promotion ignited a wave of social gifting that further boosted Starbucks' brand reputation while also encouraging more customers to make referrals.
By creating a strategy that not only rewards customers but also allows them to reward others, companies can generate a positive brand image and encourage deeper customer engagement. With the added element of social media sharing, businesses can potentially magnify their reach and exposure, leading to further customer growth.
While the company has already discontinued this promotion, Starbucks still understands the power of gifting for referral marketing. Now they offer gift cards so that their customers can still refer new customers back to the company, even without receiving anything in return.
Social Media Referrals harness the power of social platforms to spread the word about your products or services. This strategy is likely the simplest to implement, making it a popular choice for many businesses.
By taking advantage of platforms such as Facebook, Twitter, or Instagram, you enable your customers to share their positive experiences and recommend your offerings to their followers.
Here's a snapshot of how it works: Your customers, who are satisfied with your products or services, share their experience on their favored social media platform.
Their followers, who trust their recommendations, are then more likely to check out your offerings. In this way, your customers serve as your brand ambassadors and referral sources.
Moreover, you can also partner with influencers whose values align with your brand. They can use their significant reach to recommend your products or services to their followers, further amplifying your brand exposure. This part works just like the affiliate marketing technique, but this time, actively partnering with an influencer may or may not mean monetary compensation.
VIP Referral Programs are also an effective way of leveraging the potential of high-value customers to become potent advocates for your business.
Customers who frequently refer your business to others receive exclusive benefits, special events or experiences, and early access to new products or services. This strategy encourages them to continue spreading the word about your business, strengthening your customer base, and boosting your brand reputation.
Referrers in VIP programs are often rewarded with an array of exclusive, luxury benefits that are not accessible to the general public. For instance, they could be offered stays in opulent accommodation at exotic locations around the globe.
Luxury rewards may also include exclusive access to high-profile events, private concerts, or fashion shows. Imagine, as a referrer, being given VIP tickets to a Broadway show, or an invitation to an after-hours private viewing at an art gallery.
These unique experiences further enhance the allure of the referral program, motivating customers to continue advocating for the brand.
Companies, particularly those in industries like luxury goods, hospitality, or technology, can greatly benefit from this approach.
One brand that has successfully implemented this strategy is American Express, with its Platinum Referral Program. Under this program, American Express rewards its Platinum cardholders with huge bonus reward points for every successful referral. These cardholders also receive exclusive benefits such as access to private events, airport lounge access, and luxury hotel upgrades.
By rewarding its high-value customers with lavish perks, American Express not only encourages them to continue referring but also strengthens their loyalty towards the brand.
Seasonal Referral Campaigns with seasonal rewards tap into the festive spirit, offering time-bound incentives that align with a particular season or festival. This strategy encourages customers to recommend your products or services to their connections while they are in the buoyant mood of the season.
Retail businesses and e-commerce platforms can benefit greatly from this approach. These businesses can align their referral rewards with popular shopping seasons such as Christmas, Black Friday, or summer sales, using heightened consumer activity to drive referrals.
To make a successful seasonal referral campaign work, businesses must first identify the most relevant season or festival for their target audience.
For instance, if you are a flower shop, Mother's Day would be a great time to get customers excited not just for buying flowers for their moms but referring friends to do the same. As a reward, you can provide free flower delivery, free product upgrade, or even a free bouquet.
Referral Cards are a traditional, yet still highly effective, approach to referral marketing. They work by allowing businesses to distribute physical cards to their customers, who can then pass them on to others.
It’s simple: the cards or flyers typically include appealing incentives, such as discounts or special offers for new customers, given out by your current clients.
The company can track whoever made the referral by asking the new customer who referred them in order to receive a discount. This is a must if you want to make sure you properly reward the referrer.
This strategy is particularly useful for businesses that have a physical presence, such as retail stores or restaurants. This also works great for service-based businesses such as cleaning and laundry services.
Customers can easily pick up cards while they are in-store and hand them to friends or family who may be interested in trying out the business's offerings. You can add a space for the referrer to add their name before giving the card to people they know so you know who to reward.
Referral marketing serves as a powerful strategy for amplifying brand exposure, encouraging customer loyalty, and driving business growth.
Whatever strategy you choose, it's crucial to ensure that your program is:
Regularly evaluating and optimizing your referral program based on feedback and performance metrics can also help you maintain its effectiveness over time.
We encourage you to kickstart your referral marketing campaigns or elevate existing ones using the innovative tools provided by ViralLoops.
Remember, a successful referral program not only brings in new customers but also turns your existing customers into passionate advocates for your brand. So invest time and resources into designing a referral program that truly resonates with your audience.