8 Steps to Building a Powerful Referral Program – A Comprehensive Step By Step Guide

Referral programs are the most influential form of advertising that attracts the best kind of customers – the type of customers that spend more, stay longer, and refer other friends. Using a well-timed nudge and an easy way to get people to refer their friends, referral programs get a marketing message from person to person in the best way we know how – through word of mouth. 

We know that referred customers are 18% more loyal,  generate 16% more revenue, and spend up to 13% more just because they were referred by a friend. We also know that one happy customer to spread the word about your business can result in nine new customer referrals. That’s nuts! 

So whether you plan on building your referral program with the help of in-house developers or opting to use off-the-shelf referral software – this comprehensive guide will teach you everything you need to know about getting more referrals flowing into your business. It’s been compiled by me, with the generous help of my team at Referral Factory, after building and launching over 1000 referral programs in 2021. I hope it can be helpful for you and your business  🚀

Right. Let’s get started! 

FOLLOW THESE EIGHT STEPS TO BUILD A POWERFUL REFERRAL PROGRAM

Step 1:  Plan Your Referral Program

The key to building a successful referral campaign starts with a clear plan. From setting goals and outlining the way it will work to the message that will get users to join the campaign and share it with their friends.

Setting goals

Setting your goals and campaign objectives gives you a finish line to work towards. Whether you aim to grow your customer base, encourage newsletter subscriptions, boost entries into a competition, or even promote a new product launch. Setting clear goals will help determine a great referral campaign journey.  

Plan How The Campaign Will Work

There are two ways a referral program can be structured, a single-sided or double-sided referral campaign. In a single-sided campaign, one participant in the referral process will get rewarded. In a double-sided campaign,  both the referrer and the person invited will get a reward. Clearly defined campaign goals will help determine how best your campaign should work and which of these two options will be best. 

Think About The Message

How do you plan to position your referral program? What message will you use to motivate customers to refer their friends and what call to action will get referrals to convert into new customers? A strong message plays a major role in hooking customers into the campaign. One, to get existing customers to invite their friends, and two, to convince invited friends to join. 

Step 2:  Decide on The Reward and Incentive

Choose a Single or Double-sided Reward

Briefly touched on above, referral campaigns can be single-sided offering one user a reward, or double-sided, where both the referrer and the person referred will get a reward or incentive. There is no right or wrong referral campaign type to choose from, only the one that makes the most sense in helping you achieve your campaign goals. 

The Difference Between a Reward and Incentive 

Rewards are given as a “gift” to thank users for completing the desired action.  Incentives motivate users to act in the desired way. Rewards and incentives can be almost anything you can think of including free products, gift cards, or even cash in the bank. But keep in mind your campaign goals set out in step one and try to align to these. 

What Should Your Reward or Incentive Be?

Aim to issue a reward or incentive that makes commercial sense by benefiting your business. Think about things like coupons, account credits, and discounts. It’s always best to choose the type of rewards and incentives that drive customer behavior back into your business. It’s also a good time to consider how these will be issued? 

Step 3: Building Your Campaign

Building a Referral Campaign in-house

If you are using your own developer, brief them on exactly how you want the campaign to work. Include how you want the campaign to work, who will be getting rewarded, and when. Your developer and designer will also need to have a clear brief on what the campaign must look like and at what point during the referral process should users be communicated with. 

Using a Referral Software

If you plan to use off-the-shelf referral software things get a bit easier, you might not be able to do everything your heart desires but these no-code referral tools can help you build an awesome referral campaign, without having to hire a developer or learn any code. Sometimes this is the simplest, and fastest way to just get started!

Step 4: Make it Easy for People to Share Your Campaign

Talk to Your Customers on the Same Channels They Talk to You

Make it easy for your customer to refer their friends on the channels on which they are already engaged. No one knows your customers better than you do.  You already know where they are talking to you, so it only makes sense to get your customers referring their friends on those same channels. 

Offer a Variety of Sharing  Options 

The easier it is for people to refer their friends, the more friends they will invite. Make your referral campaign easy to share on preferred social media channels, email, instant messaging, or even in person. Also, think about offering different ways of sharing for example using referral links (these are most common) clickable buttons, or even QR codes.

Step 5: Integrate Your Referral Campaign with Your Business

Reduce your workload and eliminate the manual admin of managing your referral campaign by connecting it to your internal business systems. There are many one-click no-code integration apps to connect your referral campaign to your CRM (like this referral app that connects to Hubspot), or your eCommerce store (like this referral app that connects to Shopify).

If you can’t find an integration that works with your business tools, then find a referral software that has a great API – and you can build your own connectors! 

Step 6: Launch Your Referral Program

Get Your Referral Program Live! 

After reviewing your campaign and testing it, now it’s time to publish your referral program and get it live. Remember that the best referral programs are ones that go to market quickly, then evolve based on customer feedback – so if you don’t get it 100% right the first time, don’t worry, it’s all part of the journey to building a powerful referral program that works for you while you sleep. 

Share Your Referral Campaign with Customers

Encourage your customers to sign up for your referral campaign and start referring. Make it top of mind and easy for them to join and start referring their friends. 

Step 7: Market Your Referral Campaign

Tell Existing Customers about Your Referral Program 

Market your referral campaign to active customers by promoting it in your newsletters, or by sending out announcement mailers. Create your customer’s referral links using your existing database and send these out via instant messaging, texts, or add them to electronic statements and invoices. 

Target Inactive Customers 

Use your referral campaign as a nudge encouraging inactive customers to return. Add a visitable button to your website, market on your social media channels, and send targeted messaging to historic customer databases.

Step 8: Track Your Referrals

Monitor the Performance of Your Campaign

Keep an eye on how your referral campaign is performing. See who was referred by who. Where are most of your referrals coming from? If you have multiple campaigns running at the same time, see which are performing better and find out why? 

Track and Reward Successful Referrals 

Monitor successful referrals and consolidate referrals that have been converted. Don’t forget you will need to keep on top of issuing rewards and incentives (depending on the type of campaign) to users that have successfully referred their friends and users that have converted. 

In Summary

Successful referral campaigns are born from a great service or product offering and a community of happy customers. But asking your customers to refer their friends and making it easy for them to do so is really what gets referral marketing going. No matter how great your product or how well-loved your brand is, referral marketing campaigns are the only way to accelerate word of mouth referrals,  see real customer growth, and a steady increase in revenue.