This article is a part of our encyclopedia, and is editable by you. Edit ➜
What Is A Referral Program?
A referral program is the type of marketing where you state an offer to your existing customers for the act of creating a word-of-mouth referral that converts.
According to SEMrush, word-of-mouth is considered to be one of the top traffic sources for small businesses that practice affiliate marketing.
Launching a referral program is a great marketing strategy for growing a small business. An effective referral program enables startups to increase lead generation and an active audience.
Referral Program Key Takeaways
- Referral programs are one the most valuable forms of marketing for small businesses
- Startups leverage referral programs to build customer relationships and get the word out
- Social media can be used to get the word out quickly
- Launching a referral program involves little financial investment
- Referral programs, like most word-of-mouth marketing, have the potential to create a viral network effect.
Understanding How Referral Programs Work
Customers typically refer your business to friends and family if they have a good experience with your product or service.
However, it's important to remind your customers to spread the word about your business.
Therefore, a referral program standardizes how you invite and reward customers that share your business.
A strategic referral program will help any business get new customers at a very low price. Ideally, an army of happy customers can do a lot of legwork for your startup.
In that regard, launching a referral program increases the likelihood that customers will spread the word to their friends, relatives, and colleagues.
Real-World Examples of Referral Program
Airbnb launched one of the most successful referral programs.
Not only do you get incentivized to refer friends to travel but you also get incentivized if you refer friends to host.
Here are the results from their referral campaign:
- 300% increase in referral bookings
- Referrals booked more reservations than non-referrals
- Referrals were more likely to become hosts
- Referrals even sent more referral invites to their friends and family
Trello has built one of the best referral marketing programs.
Through the Trello referral program, a user just needs to get friends to sign up for Trello. In return, the customer gets a month of gold Trello plan, which means you can enjoy the features of Trello.
The benefits of the Trello Gold plan are what make the referral program convincing and worthwhile to the customer.
To encourage Trello users to refer more friends, Trello provides a customized referral link on their home page.
Therefore, the user can copy and share via social media and other platforms.
How to Build an Effective Referral Marketing Program
- Providing exceptional products or services is the first step to building an effective referral program
- Take the time to listen to your customers and respond to their concerns sincerely
- Identify clear referral marketing goals so you can measure how the program is doing
- To attract customers attention, come up with catchy headlines and clear call-to-action
- Make it easier for customers to share the referrals and increase the likelihood of them sharing
- Consider providing the customers a referral message so that the experience is seamless
- Offer valuable and cost-effective incentives that tie customers to your business
- Implement analytics and tracking
Plain and simple: referral programs get customers to spread the word about your business.
There are many tools and systems that can help you build an effective referral marketing program:
Referral marketing programs for online stores of all shapes and sizes.
Businesses using ReferralCandy:
A powerful referral marketing platform that focuses on generating genuine word of mouth.
Businesses using ReferralHero:
Automates the referral tracking and rewards process for your business and turns your customers into your best marketers.
Businesses using iRefer:
Contributors to this article:
- Pat Walls, Founder @ Starter Story
- Samantha Walls, Head Of Content @ Starter Story
- David Gitonga, Writer @ Starter Story
Discover the best strategies of successful business owners
Join our newsletter and receive our handcrafted recap with the best insights shared by founders in Starter Story each week.
Useful, convenient, and free:
Did you know that brands using Klaviyo average a 95x ROI?
Email, SMS, and more — Klaviyo brings your marketing all together, fueling growth without burning through time and resources.
Deliver more relevant email and text messages — powered by your data. Klaviyo helps you turn one-time buyers into repeat customers with all the power of an enterprise solution and none of the complexity.