What is a Referral Link and How Does It Work?

Have you ever been in a conversation about referral marketing, and someone mentions a 'referral link,' making you nod in agreement while being entirely clueless about what it means or how to use it? Well, you're not alone.

In this guide, we're going to demystify the concept of referral links. We'll explain what it is, how it works, and how you can generate your own unique referral links. By the end, you'll be well-equipped to use such links effectively, wherever and whenever needed.

Let's dispel the cloud of confusion and make referral links your new superpower!

What is a Referral Link?

A referral link is the key in referral marketing campaigns.

Referral links are unique URLs that businesses provide to their customers or partners for sharing within their networks, aimed at attracting new customers or partners.

This link is custom-tailored to the individual who is sharing it, allowing the company to track back who brings in new customers.

Think of it as a digital baton in a relay race. You give it to your friends, they pass it on, and every time someone crosses the finish line (i.e., makes a purchase or signs up), your friend gets credit. And the beauty of it? 

This digital baton can be passed around endlessly, acquiring new customers with a personal touch, all while keeping tabs on who initiated the chain.

It sits at the core of referral marketing and referral programs allowing businesses to attribute successful referrals to the right people and create a simple invite process.

Importance and Benefits of Using Referral Links

There are a bunch of different ways to refer new customers to your business, such as networking events, business cards, and word of mouth. But since we're in the digital age now where everyone, including their grandma, knows all about the internet, utilizing easy-to-click links to share your business with others is essential.

In short, referral links make your referral marketing strategy so much simpler.

Other advantages of using referral links are as follows:

  1. Trackable Metrics: With referral links, it's easy to track who is sharing your product or service and who is joining because of it. You can monitor the effectiveness of your referral program and make necessary adjustments based on metrics.
  2. Increased Reach: A referral link can be shared across various platforms like social media, email, websites and personal messages. This broad distribution can increase your brand's visibility and reach exponentially.
  3. Efficient Customer Acquisition: Through referral links, potential customers come directly to your site. This streamlines the customer acquisition process and reduces the usual effort and cost associated with traditional marketing methods.
  4. Enhances Customer Loyalty: By offering incentives tied to referral links, such as discounts or bonus features, you can increase customer loyalty. Customers who benefit from sharing the links are likely to continue using and promoting your brand.
  5. Trust-Building: As the referral link comes from a trusted source (a friend, family member, or colleague), the potential customer is more likely to trust your brand, facilitating a smoother conversion process.

In essence, referral links empower you to grow your business efficiently, economically, and exponentially. There are very little downsides to using it.

How Referral Links Work

Referral links work through a system of tracking and rewarding. Here's a simplified breakdown of the process:

1. Creation of the Referral Link: The business creates a unique referral link for their customer or affiliate. This link contains identifying information (like a code or ID) that corresponds to the referrer in the company's database. You can code this yourself, or do it with Viral Loops with no code.

2. Promote the Referral Program: The company informs current customers about the referral program and what they stand to benefit from referring others.

3. Sharing of the Referral Link: The customer or affiliate shares this link with their network — this could be friends, family, colleagues, or their broader social media audience.

4. Clicking the Link: When someone in their network clicks on the referral link, they are taken to the business's website or specific product page. A unique referral code lets the business know who referred them.

5. Tracking the Link: The company's marketing system tracks the activities of the visitor. If they make a purchase, sign up for a service, or perform another desired action, the referrer is credited for that conversion.

6. Rewarding: The referrer is then rewarded based on the company's referral program rules. This could be a discount, bonus, cash back, or other incentives. Some companies offer rewards for referred friends too — what we call a 2-way referral program.

This process repeats each time the referral link is shared and clicked on, leading to new conversions.

An example referral flow made with Viral Loops Universal Template

The Mechanics of Referral Links

By now, we should have a rough understanding of what referral links are and how pivotal they are in referral marketing. But we need to delve deeper into the mechanics behind them.

Let's unearth the technical details of how referral links operate, exploring their behind-the-scenes functionality.

Understanding the Structure of a Referral Link

Referral links might look like a jumble of characters to the naked eye, but let's decode them and see what they contain. When you create a referral link, you will notice that it consists of three main parts:

A single referral link takes two forms.

First people share it’s shortened state, designed to appear minimal on the internet and in private chats. 

Then, when the link is clicked, the browser “unwraps” to reveal the full referral link that contains all the information.

Here’s a breakdown of each part of a referral link.

1. The Base URL

The base URL is the main website address that the referral link directs to. It could be the homepage or a specific landing page within the website. The base URL tells your browser where to go when you click the link. Shortened URL’s point the browser to their expanded versions.

2. The Referral Code

Next comes the referral code, which usually follows a "?" or "#." This is a special URL parameter that tells the website's system that this is a referral link. When you run referral campaigns, the website is prepared to check if the url contains such a parameter. If it does, the referral system is triggered and attributes that visitor to their referrer.

3. Tracking Parameters

Some platforms, like Viral Loops, allow you to track additional information to the link, such as the source of the click, the user's location, device, and more.  These parameters come after the referral identifier and are separated by an "&."

Not everyone uses this, but if you want to capture more information about the referrals you get, this is worthwhile. This could be “cp” to indicate that is was simply copied, “fb” for facebook and so on.

This parameters are added automatically by the referral marketing software or custom solution.

Tracking and Analytics: Behind the Scenes of Referral Links

So, how does a referral link capture data? Every time someone clicks your referral link, the system logs their activity based on the parameters attached to the links and other system data. Here's how it works:

1. Click Tracking

When a user clicks your referral link, the system records the action when they arrive to the website. The click/pageview is tracked back to the specific referrer code embedded in the link shared. This lets the company know that who the referrer without exposing their personal detail.

2. Conversion Tracking

After the click, if the visitor proceeds to make a purchase, sign up for a newsletter, or perform any other desired action, the system tracks this as a successful conversion. It ties this conversion back to your unique referrer code.

3. Reward Attribution

Based on the conversion, the system then attributes rewards to the referrer. Depending on the company's referral program, the rewards can vary.

The more your referral link is shared and clicked on, the more data it generates. This data can provide insight into the effectiveness of your referral program, helping you tweak it to better serve your customers and your business.

How To Generate and Use Unique Referral Links

Generating unique referral links may sound complex, but it's actually a straightforward process and easy as a pie to do. This section will guide you through the procedure — transforming what might seem like a demanding task into an effortless endeavor.

(We explain how to do it with no code using referral marketing software. However, it not uncommon for tech companies to create their own referral program system — it just takes a lot of time and dev resources.)

Step 1: Choose a Referral Software

There are plenty of them out there — think Viral Loops, ReferralCandy, or UpViral. These platforms are designed to make creating referral links a breeze. Have a look at this list of the top referral marketing software and select one that aligns best with your needs and budget.

Step 2: Set up your referral campaign

Once you've selected the appropriate software for your referral campaign, the next step is to set up the campaign in detail. This process typically involves determining the incentives you'll offer, establishing the rules of your program, and ensuring the overall “look and feel” aligns with your brand.

In Viral Loops, you can initiate this process by clicking on 'Create New Campaign' and following the prompts provided. 

To streamline the setup, we have developed a variety of templates for you to choose from, each designed to cater to different needs and objectives. These templates can serve as a starting point, allowing you to customize the campaign to best suit your brand and audience.

By carefully considering the incentives, program rules, and visual presentation, you can create a compelling referral marketing program that resonates with your customers and drives meaningful engagement.

Step 3: Generate and Share the Referral Link

You can rnrol your customers on your referral campaign automatically behind the scenes though API’s, CRM integrations or .csv upload.

Alternatively your can let people join through a referral program participation form. 

Then, create an experience tailored to your audience. Create a page where people get their referral link & check their progress. Host it on your website or a Viral Loops age and use pre-made Viral Loops widgets to display their link, the rewards, progress, and more.

Should you decide to send an email about your referral program to your existing customers, you must link your email marketing service to Viral Loops, and the referral link per customer will automatically generated. The exact steps to do this depend on the email service.

If you're using HubSpot or other CRMs, you can integrate and transfer data between the two easily.

Of course, if you'd rather generate a referral link manually and distribute it one by one, like by using physical referral cards, you can do that as well.

Step 4: Let Your Referrers Know What They Will Gain

Referral programs are an impactful marketing strategy, but to increase participation, the rewards for referrers should be well-defined and communicated. It's crucial to let your potential referrers know exactly what they stand to gain by promoting your product or service.

This could be in the form of discounts, cash back, points, or even unique gifts. Make sure the rewards are exciting and valuable enough to motivate your customers to engage in referring.

If you need help with picking rewards, you can read more here.

In any case, here are some ideas that might help:

  • Discounts on Future Purchases "Refer a friend and get 20% off your next purchase!"
  • Cash Reward "Earn $10 for each friend who makes their first purchase."
  • Gift Cards "Invite friends and receive a $15 Amazon gift card for every successful referral."
  • Service or Subscription Upgrades "Get a free month of Premium Service for every new member you bring to our community."
  • Free Products "Introduce a friend to our brand and snag our exclusive Referral Kit as a thank-you!"
  • Points System "Accumulate points with every referral that can be redeemed for exclusive merchandise!"
  • Donation to Charity "For each friend you refer, we'll donate $5 to a charity of your choice."
  • Exclusive Access "Refer three friends and gain early access to our upcoming product launch."
  • Custom Deals or Bundles "Recommend us to a friend, and both of you will receive an exclusive bundle offer tailored just for you."
  • Swag and Merchandise "Share the love and earn cool branded merchandise with every referral!"

It's important to tailor these incentives to align with your target audience’s preferences and your company’s capabilities to ensure a win-win scenario for both you and your customers.

Explaining the Rewards

When explaining the rewards, be transparent and upfront. Clearly state how and when the referrers will receive their referral rewards.

Will the rewards be credited instantly, or will there be a waiting period? Is there a limit to the number of referrals one can make or the amount of rewards one can earn? How will they see the status of their referrals?

By answering these questions, you can remove any potential doubts or confusion. Referral programs with clear, compelling rewards are more likely to be successful. So, take the time to craft your reward scheme carefully and communicate it effectively to your referrers.

So there you have it — four simple steps to generate and share your unique referral link. Remember, the key to a successful referral program is not just the links themselves but how you encourage and incentivize users to share them.

Best Practices for Using Referral Links

When it comes to simplicity and versatility, referral links are second to none. They are user-friendly, directing referrals straight to your chosen landing page and allowing potential customers to reach your offer with just a single click.

Additionally, they offer the ability to track and monitor the success of your referral efforts easily. Moreover, their flexibility allows for sharing across various platforms, including emails, social media, apps, and more.

However, they may not be suitable for use in text messaging due to telecom regulations regarding spam.  To avoid any issues, make sure to familiarize yourself with the regulations in your region. But despite this limitation, referral links are still a valuable tool for any business.

To get the most out of them, here are some best practices to keep in mind:

1. Keep It Simple

Ensure that your referral link is simple and easy to understand. A convoluted link can discourage potential customers or referrers from taking action. Remember, clarity is key when it comes to driving successful referrals.

Avoid lengthy and confusing links:


Opt for a more straightforward referral links, and preferably provide shortened versions of them:


It’s cleaner.

2. Be Strategic in Your Placement

Think carefully about where you place your referral link. The goal is to make it easy for potential customers to see and click on it. You don't want it to get lost in a sea of other links or information on your website or marketing materials.

Some ideal places to put your referral link include:

  • In a pop-up on your website
  • On a dedicated landing page
  • Thank you pages after a purchase or signup
  • Email signatures or email marketing campaigns
  • Social media profiles and posts

3. Use Clear Call-to-Action (CTA)

Include a clear and engaging CTA alongside the referral link to encourage click-throughs.  Some examples of CTA phrases include:

  • "Join Our Referral Program Now!"
  • "Invite Your Friends and Earn Rewards!"
  • "Refer a Friend for Exclusive Benefits!"

4. Be Creative with your Incentives

As mentioned earlier, one of the best ways to encourage referrals is to offer incentives.  But don't just stick to the traditional discounts or cashback rewards. Get creative and think of unique incentives that align with your brand and will encourage customers.

For example, if you're a beauty company, you could offer a free makeup kit for every five successful referrals. Or, if you're a subscription-based service, you could give a month of free service for every referral.

For real-life examples of companies that used creative incentives to excite customers to refer others, have a look at these case studies:

Remember, the more exciting and valuable your incentives are, the more likely people will be to share your referral link.

5. Choose Your Platforms Wisely

While referral links can be shared on various platforms, it's important to consider where your target audience is most active. Tailor your approach to fit the platform's user behavior and norms.

For example, on LinkedIn, a professional platform, you may want to use a more formal and informative tone when promoting your referral link. On Instagram, a visual-based platform, you may want to use eye-catching images or videos to capture attention.

6. Track and Monitor Your Referral Performance

This is where referral marketing platforms come in handy. They provide analytics and insights into how well your referral programs are performing.

Make sure to regularly check these metrics and adjust your strategy accordingly. If a certain platform or incentive is not yielding the desired results, change it up and see what works best for your business.

In addition to tracking conversions, referral marketing platforms can also help you keep track of rewards and ensure proper distribution to referrers. This will save you time and effort in manually managing the process.

Written by:

Nikitas Filosofof

Nikitas is responsible for growth at Viral Loops and also helps customers on 1-on-1 basis to reach success with their referral campaigns. Let's connect on LinkedIn