Referral marketing strategies are the backbone of offline and online businesses. They are a powerful tool for generating high-converting leads, without which most businesses would collapse.
These strategies can deepen your customer base, revive your marketing, and skyrocket revenue for your business.
Additionally, referral marketing strategies can reduce customer acquisition costs, increase brand awareness, and build trust between your brand and customers.
Today, we’ll discuss referral marketing strategies and why they are essential for the success of your business. Keep reading to discover more.
Referral marketing strategies are business promotional tactics that involve encouraging your loyal customers to recommend your products and services to their networks.
One of the biggest beneficiaries of referral marketing strategies are ecommerce sites, and there are numbers to back that up. According to a recent survey by Impact, 86% of consumers prefer product and service recommendations over ads for their purchase decisions.
Image via Impact.com
But why are people choosing recommendations over ads? This is because the recommendations are personal.
A suggestion from a friend to try out a product or a service feels more authentic than an ad. This is because the person making the referrals has probably used the product or service, unlike an ad that only comes across as solely focused on making a sale.
Leveraging referral marketing strategies is a win-win situation for both you and the customer. You get free marketing for your brand and the referring customer gets a reward such as gift cards, free tools or products, etc.
Generally, there are six different types of referral marketing strategies, and we’ll explore each type of referral marketing in more detail:
According to the study mentioned above, people trust recommendations, especially from familiar faces. This makes direct referrals a great tool for launching a cost-effective referral marketing strategy.
Direct referrals, or word-of-mouth marketing, have been in existence for many years now and are still powerful for advertising your business to grow your customer base.
This is one of the referral marketing strategies, where a business asks customers to refer their friends and families and offers a reward to the customers when their friends make a purchase.
When a happy customer tells someone about a product, it feels real. This builds trust fast and makes new customers more likely to buy. Many businesses use these kinds of referral marketing strategies to increase sales without spending too much on ads.
There are over 4.5 billion email users in the world right now, and these numbers are expected to grow, so leveraging emails is one of the most resourceful referral marketing strategies.
Image via Statista
With these types of referral marketing strategies, businesses send referral emails to existing customers with a unique link, the customer can share to refer the business to friends and family.
When someone clicks the link and makes a purchase, both the sender and receiver can get rewards. This makes email referrals one of the best referral marketing strategies that can turn customers into brand advocates.
To make the best out of your referral marketing strategy, ensure recipients can easily share the email in one click. You should also offer people exactly what they want without too many complications.
Finally, ensure you keep your emails short and use a user-friendly tone.
Here is an email template you can use to ask your customers for referrals.
Image via HubSpot
There are over 5.22 billion people already using social media sites for their everyday activities, including shopping. So, social media referrals should be one of your referral marketing strategies.
Image via Bazaarvoice
If you are not using social media referrals, then you’re missing out on a huge business opportunity. The good thing about this type of referral program is that your target customers are already on social media.
You can get your content in front of your potential customers by just asking your social media customers to spread the love by sharing what you post or products you offer.
Take a look at how Ledger uses X to ask their followers to refer a friend via Ledger Live and get $10 in BTC for each successful referral:
Image via X
Incentive-based referrals are one of the referral marketing strategies, where brands encourage their satisfied customers to refer other customers in exchange for a referral incentive.
This referral marketing strategy is simple.
You give rewards when customers bring in new buyers. The reward could be discounts, cash, store credit, or even freebies. People are more likely to refer friends when they get something in return.
For these types of referral marketing strategies to succeed, you need to make the reward worth the effort. No one will bother sharing a referral if it isn't exciting. You also need to offer a double-sided reward where both the referrer and the prospective customer receive incentives.
According to Referral Factory, cash rewards provide the highest conversions when it comes to incentive-based referrals. Other incentives include gift cards, discounts, charity donations, and more, as illustrated below.
Image via Referral Factory
When customers buy something, they often leave a review. These reviews show up on Google, Yelp, Trustpilot, or even a brand’s website. Potential buyers check these reviews before making a decision. If they see positive feedback, they feel more confident.
According to a study by BrightLocal, 50% of people in 2024 trusted consumer reviews as much as personal recommendations from friends and family:
Image via BrightLocal
Online reviews are one of the most effective referral marketing strategies that can expand your brand’s reach. They can influence purchasing decisions, and improve your brand’s online visibility.
However, for people to leave a review about your brand, you need to ask them. You can offer customers discounts, free services, or loyalty points to encourage them to leave reviews.
Additionally, ensure you make it easy for people to leave reviews. Use simple forms that don’t require prospective customers to give too many personal details. If you can respond to the reviews directly, the better it is for your referral marketing strategies.
Want more people to talk about your brand? Then try influencer advertising. This is one of the best referral marketing strategies that gets your business in front of an engaged audience.
The global influencer marketing market is estimated to be worth $20.24 billion as of the end of 2024, and that makes this a viable referral marketing strategy. Influencer marketing has been on the rise over the last several years thanks to the rise of social media stars.
Many referral programs focus on encouraging existing customers to promote their products or services to their friends and family.
However, you can partner with influencers too who can share unique referral links or codes with their audience. This can help increase brand awareness and influence the purchasing decisions of your target audience.
Other tips you can use to ensure the success of your referral marketing strategies include picking the right influencers who are aligned with your brand. Don’t just focus on the number of their followers. You should also give them the freedom to present your products and services. They understand their audiences better.
Lastly, you need to track performance to see what’s working so you can improve your referral marketing strategies.
It takes some time to build relationships and trust with your existing customers before you can start asking them to refer their networks to your products.
However, the benefits of launching a referral marketing strategy are incredible.
Here are reasons why referral marketing strategies are the most cost-effective:
Customer acquisition is not only a challenge for most brands but is also expensive. You can see the average cost of customer acquisition for various industries below.
Image via FirstPageSage
Some industries, like education, go as high as $1,100+ while ecommerce is the least expensive at $86.
Fortunately, with a successful referral program, you can use your existing customers to acquire new ones, which lowers the acquisition cost.
When someone recommends your brand to a friend or family member, it means they have found it a great fit for them.
Referral marketing strategies help businesses attract high-intent customers because these customers already know what they want. This strategy also works because it creates a warm introduction, ensuring the customer comes furnished with enough information about your brand.
Trust is everything in business. If people don’t trust a brand, they won’t buy. That’s where referral marketing strategies help.
When your trusted customers refer your brand to their friends and family, the referred person sees your brand as being trustworthy. This is because it feels real and not like a sales pitch. It’s a genuine suggestion from someone they already believe in.
Referrals who purchase your products often end up becoming loyal customers.
Besides, if you offer dual-sided rewards, that is, if you reward the referrals and referrers, you increase the odds of them becoming more loyal to your brand.
When you enhance customer loyalty through referral marketing strategies, you also increase your brand’s overall customer retention rate and customer lifetime value.
Referral marketing strategies are a great way to boost brand awareness. You get free advertising anytime someone recommends your business to an acquaintance.
Referral marketing gets your brand in front of people you might not have reached without spending a significant amount of money.
Word-of-mouth can spread faster than any other form of marketing, thus increasing your brand recognition. This further underlines why having a good reputation is crucial for the long-term survival of your business.
Fortunately, referral marketing strategies enable you to monitor consumer behavior so that you can deliver a personalized and seamless customer experience.
The digital marketing strategy enables you to track engagement and referrals from existing customers to help you better understand what your customers love and how to meet their expectations adequately.
Automated referral programs have made it easier to launch successful referral strategies.
All you need to do is to choose your preferred rewards for your customers and referrals. Product discounts are usually the most popular choice when it comes to referral marketing strategies.
Launch your referral program and encourage customers to refer others to earn their rewards.
Don’t forget to promote your referral program on your social media platforms or website.
That said, here is how to get your existing customers to bring in new customers via a referral system.
Here are some practical referral marketing strategies that work.
Choosing a suitable referral software is a great idea when launching an effective referral marketing strategy.
Why?
It will help you track every potential customer that comes in as a referral and offer a reward to the referrer.
You can choose a referral marketing software like ReferralCandy or similar ones available in the market.
Image via ReferralCandy
The referral marketing software will also inform the person referring others to your brand about every successful referral that converts.
Here are tips to help you choose a good referral marketing platform for robust referral marketing strategies:
Here are tips to help you choose a good referral marketing platform for a robust referral marketing strategy:
Pro Tip: Many referral marketing software available in the market offer a free trial. Try out a few solutions for free to figure out which one works the best for your business. Investing in a good referral marketing solution is key for an effective referral marketing strategies.
Referral marketing strategies go beyond just creating a referral program. You also have to promote it to let more and more people know about it.
Promoting your referral program across multiple platforms is one of the powerful referral marketing strategies to make it known to many people.
That’s how you increase your referral rate. After all, people will only participate in your referral program if they know about it and the rewards you’re offering.
There are many ways to spread the word about your referral program.
For instance, you can advertise it on your landing pages, checkout pages, and homepage.
Take a look at how Greats, a sneakers company includes a “Refer a Friend” call to action on their homepage:
Image via Greats
Alternatively, you can promote your referral program in the following ways:
Marketing via email is by far the most cost-efficient and effective channel for keeping in touch with your customers. This is because email is direct, personal, and can easily deliver tailored messages. You can, therefore, use it to promote your referral programs.
Take a look at how Casper, an ecommerce company that sells sleep products, promotes their referral program a few days after purchase:
Image via Casper Really Good Emails
You can also promote your referral program by creating a unique landing page on your website.
Here is a good example of a landing page for promoting a referral program by T-Mobile. Very brief and to the point.
Image via T-Mobile
When a customer refers the cellular carrier to their friends, the customer earns up to $50 if the friend purchases a plan up to $500 per year.
An effective landing page is one of the best referral marketing strategies you can use. It can boost awareness of your referral program and inform your customers how it works, how they can join, and the rewards they can get.
With billions accessing different social media platforms every day, chances are, your target audience is on social media, preferably on Facebook, Instagram, LinkedIn, and YouTube, the commonly used social media networks according to statistics:
Image via DooFinder
Take advantage of social media marketing to promote your program and ask your target audience to spread the word about it as well.
You can also promote your program in the following ways:
Pro Tip: Provide a direct link to your referral program landing page on social media for easy sharing. Get creative with the messaging and imagery on social media to increase chances of your referral marketing strategies working.
If your products are good and your customer service is exceptional, you will undoubtedly get referrals even if you don’t have an active referral marketing strategy.
To exceed your customer’s expectations with your products and customer service, follow these simple principles:
When launching a referral marketing strategy, many marketers think of all other methods but forget that you can ask for referrals directly from your customers.
This is one of the most cost-efficient and effective referral marketing strategies.
The reality is that your satisfied customers are willing to recommend you to their friends. They are probably waiting for a nudge from you so that they can keep the conversation going.
The good thing is that asking for referrals will never hurt your business. On the contrary, your business could be losing opportunities for not asking at all.
Take a look at how Andrew Christian use the Get $30 | Give $30 on X to ask customers to refer their friend and save on the hottest undies:
Image via X
Here is how to ask for referrals:
No matter how effective your referral marketing strategies are, if you don’t give out attractive incentives, you will not get valuable referrals.
Incentives can nudge your customers to recommend your brand to their friends and family but not just any incentive. They must be enticing enough, otherwise, customers won’t participate in your program.
Your referral marketing strategies should include rewards that motivate your audience to recommend you to their friends and family. For instance, tiered incentives or prizes are likely to perform better than standard rewards.
You can give your customers valuable rewards such as:
You can also offer exclusive content and experiences.
A good rule of thumb for referral marketing strategies is to offer rewards based on demographics or purchase history. As a rule, you should conduct thorough research to uncover the ideal incentive for your shoppers.
Next up in our list of referral marketing strategies is UGC.
User-generated content is when people share snapshots and videos of your products and how they use, interact, and enjoy your products on social media.
Here is how Starbucks uses the famous #RedCupContest every December on Instagram to get customers to promote their coffees:
Image via Instagram
You can create branded hashtags using free hashtag generator tools and encourage users to include them in their posts on social media, especially Instagram and X.
Using UGC as part of your referral marketing strategies comes with the following benefits.
This makes it useful for generating referrals for your business.
When people see their friends interacting or enjoying your products, it increases their trust in your brand thus encouraging them to try your products and services.
Last on our list of the best referral marketing strategies is sharing testimonials. This is a top referral marketing strategy businesses can’t afford to ignore. Why? Because people are likely to trust other people’s stories.
Customer testimonials are good referral marketing strategies that help build that trust. When happy customers share their experiences, it works as a powerful social proof.
Their positive feedback can convince others to try your business. This creates an authentic connection with potential customers.
Q1. What’s the purpose of a referral marketing strategy?
A. A referral marketing strategy is a plan you create to encourage your happy customers to recommend your products and services to their friends and family.
The purpose of a referral marketing strategy is to acquire more customers cost-effectively and increase sales.
Q2. What is a referral marketing strategy?
A. A referral marketing strategy outlines all the tactics used to encourage current customers to refer new customers. It’s like word-of-mouth but on purpose. You give them an incentive—like a discount or reward—for bringing in new customers.
Q3. What are the 6 types of referrals?
A. The five types of referrals are:
Q4. How do you attract referrals?
A. Use these seven referral marketing strategies to attract high-intent referrals:
Q5. What are the benefits of a referral marketing strategy?
A. A referral marketing strategy can be beneficial for your business in the following ways:
Even though referral marketing strategies take advantage of your current customers to expand your reach, acquire leads, and generate more sales, running an effective referral marketing campaign is not child’s play.
Follow these 7 referral marketing strategies to launch a killer referral marketing program that explodes your sales. If you’re still unsure on what to do, we can help you figure the way forward through our email marketing services and help you reach the right audience with your referral programs.
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