10 Ideas of Referral Program Incentives

May 31, 2022

The success of your referral program rests on the kind of incentives you offer your brand advocates. These incentives will push them to keep spreading the word about your business and convince new customers to stay loyal to your brand. As you may already know, referral programs are incredibly beneficial to every modern business. At least 84% of people perceive referrals as the most trusted form of advertising, and customers are four times more likely to buy when referred by someone they know.

Why choosing referral program incentives is important

Referral incentives provide the direction for a referral program. Once you get them right, the program will run successfully. Its awareness gives customers the confidence to bring you new business daily. Below are a few struggles businesses fail when it comes to selecting referral incentives.

Trying to ‘perfect’ it: Many retailers spend too much time trying to choose the ‘perfect’ incentive offer for their program. Usually, they are intimidated by the fact that referral incentives directly impact your sharing rate and conversion rate. Thus, if your offer is set too low, customers will lose interest, and if your offer is set too high, it will cost your business a lot to maintain it. The key is not to search for the ‘perfect’ incentive but to find the right fit for your business goals and provide value to the customer.

Incurring Costs: Once you decide to implement a referral program in your business, there will be costs to incur. Whether in terms of forgoing some profits or paying out cash. However, the good news is that you only need to pay them out when they make successful referrals. You’re acquiring new quality leads for a fraction of the costs you could have been spending on advertising. Managing a referral program also comes with its costs, but you can curb this by utilizing affordable referral program software such as Beans, which will save you stress and time.

Feeling Overwhelmed: One more reason retailers struggle to pick referral incentives is because there is a wide range of options. Discounts or Cash? Free products or Points? The list can be so long that retailers remain stuck. This article has narrowed the list down to 10 of the best ideas for referral incentives so that you can find it easier to select which offers will work best for your business. After reading, you should figure out which offers are best suited for the type of industry you find yourself in.

10 referral program incentive ideas

Referral programs do not have to take a one-size-fits-all approach. For example, the ideas that might work for a small e-commerce store may not be practical for a Saas brand. The list below explains some of the best referral program ideas and cites examples of the types of businesses it has worked for.

Fixed amount discount

Fixed amount discounts are by far one of the best ways to encourage customers to bring in new leads to your business. Both referring customers and their referrals can see the value of patronizing your product or service because of the fixed discount they are receiving. For instance, a referral program offering $10 off for both parties will give more people a reason to join your brand. In addition, an existing customer will appreciate receiving $10 off their next purchase while allowing their friend to earn $10 off their first purchase.

Vegetable and Butcher's referral program

An excellent example of a company known for using this concept is Vegetable and Butcher’s, which runs a “Give $15, Get $15 referral program for new customers to try out their meal subscription service. Since new customers already have a $15 discount in hand, they feel more comfortable trying their meals for the first time. This pushes them to make their very first purchase. Existing customers also make repeated purchases due to this $15 discount they can earn on each referral.

Percentage discount

Percentage discounts are highly beneficial for gaining quality referrals. Businesses can make the best use of them to build customer loyalty and increase the number of repeated purchases in their store. Like the fixed amount discount, customers can also see the value they are receiving to make a referral to your business. The most significant advantage of setting up percentage discounts is that since it is attached to your store, customers and referrals would have to visit and make a purchase to redeem them. It will then give them a reason to stick with your brand so they can enjoy more discounts in the long run. An example of a percentage discount is when a company offers 10% off an existing customer’s next purchase and 15% off the referral’s first purchase.

Wish offers its advocates and newly referred customers percentage discounts for purchasing from their store.

Wish referral program

Rewards points

Another compelling referral program idea is to reward referrals with points. It is an excellent choice if you are running a reward points program for your business as well. Giving free points to customers for successful referrals is one of the most excellent strategies because you are killing two birds with one stone. The result is high engagement on both your rewards program and referral program. Again, your customers enjoy the freedom of choosing from a wide range of rewards available in your store when they want to redeem their point rewards. In addition, customers will feel more motivated to refer their family and friends because of the ‘reward customization’ attached to this method. In essence, a customer who realizes that they can earn a particular attractive reward with those points will be compelled to refer more people to reach that goal.

Topps rewards its existing customers with 250 points for sending referrals and gives a 10% discount to the newly-referred customer. With their rewards program, which uses both the points-based system and VIP tier, 250 points carry a lot of value as it helps members reach the “All-Star” tier. In addition, customers can then enjoy more exciting perks, such as a free “Topps Now” baseball card of the month.

Topps Referral Program

Offering customers reward points is an excellent concept because customers place more value on the variety of reward options. It ultimately increases their urge to engage and refer more people to your brand. They want to redeem all those points for exciting rewards, after all.

Free product

This is one of the simplest yet most effective incentive ideas to implement in a referral program. Since everybody loves getting free stuff, why not reward customers with certain free products or services every time they send a referral to your business. This idea works perfectly for all types of companies, irrespective of their size. You only need to choose which products you will be giving out carefully. The products you choose should not be so expensive that they run your company’s budget. However, they should be products that your customers will love and appreciate. For example, if you run a grocery store, offering a complimentary snack to customers who refer others might not cost you that much, yet they will genuinely appreciate it.

The free product concept is a good choice if you will reward customers who refer a certain number of customers. Please don’t put the bar too high, as it might scare off-brand advocates who might find trouble getting started. You can set a rule that offers a free product for every two people your customers refer. The free product can also come in the form of information, especially if your brand is tech-related. People enjoy having access to valuable information. So you can offer them free information, which may come in helpful workshops, courses, or e-books for referring your company to their network.

GetResponse, for instance, uses this idea by giving a free digital marketing course worth about 200 dollars to its referrers. Referring customers receive this bonus after they have referred three friends.

GetResponse Referral Program


Free subscription month

This idea is perfect for businesses running a subscription model. Since these subscriptions are paid monthly, customers will appreciate a free month where they can still enjoy their subscription boxes. This offer will be extremely attractive and valuable to referrers and referrals and urge them to continue recommending your brand to their friends.

Some excellent examples of companies that use this kind of incentive are the razor subscription brand, Goodshave. They offered a free month of subscription per successful referral to their existing customers while offering 10% off to their new customers or referrals.

Australian fresh meal delivery company, YouFoodz, also rewards its customers with a free meal, up to a week’s worth of free lunches for referring friends to the business.

YouFoodz Referral Program

Amazon gift card

If your product doesn’t have enough recurrence for customers interested in a discount, then an amazon gift card is a perfect choice. It is just like cash but easier to manage. With this option, you don’t need to bother about adjusting invoices or rewards meddling with your billing system. Amazon gift cards give customers a feel of immediate gratification since they can redeem them right after referring their friends. While it provides an illusion of getting free money to the customer, it lowers your risk of fraud as a business. Amazon gift cards are perfect for rewarding customers for referring others to companies that commonly have lower purchase frequencies. Examples of these businesses include Online mortgage and insurance brokers, travel booking sites, telecom providers, mattress retailers, online medical appointment booking services, among others. With the kind of products and services these businesses offer, it doesn’t make much sense to motivate referrers with discounts that they may never use immediately. To incentivize them to invite more friends, you need to reward their efforts with gift cards that they can enjoy for each person they refer.

Vodafone UK offers both its referrers and referrals a £25 Amazon gift card.

Vodafone Referral Program

Cash

Of course, everyone loves cash. You can take advantage of this by giving free money to customers for referring people to your brand. Since it is such a great motivator and its value is clearly defined, customers will be more likely to continue referring their friends. Cash rewards don’t even need to be huge; $5, $10, or $15 rewards are more than enough. In using this idea, you need to ensure that the referral program software you use is secure. It should be good enough to protect you from being hacked. Again, since this idea involves spending money outright, you may not want to carry it out for too long. The bottom line is to ensure that you are reaping good profits for the amount of money spent. Business owners also need to pay attention to not making the referral program an affiliate program when using this idea.

An excellent example of a company that used this idea for its referral program is Paypal. Following its implementation, the company enjoyed a 7-10% growth daily, resulting in an increased customer base to more than 100 million users. Unfortunately, although the Refer-A-friend cash bonus idea worked exceptionally well for Paypal, there was a timeline, and it ended once they achieved their target.


Special rewards/prizes

Businesses can give some extra rewards to customers who refer the most friends. This can create a contest and boost customers to refer more friends. One of the most effective ways to reward these special prizes and rewards is to take advantage of certain seasons or create some form of contest in your referral program. The contest can either be a standalone one or one that augments your already existing referral program. Utilize the power of social media in spreading the word about the contest to your client base. Predetermine the number of referrals you want customers to make to win the prize, then offer the winners special prizes and rewards when it ends. Usually, the highest award should go to the customer who referred the most people.

Another way to intensify customer engagement and increase retention while promoting your referral program is to offer special rewards in certain seasons.

Rocket Mortgage

For example, Rocket Mortgage ran a square contest during the Super Bowl season. Registrants were given one square to start, after which they could earn an extra square for each friend they referred. The limit was ten referrals per person.

Papa John’s is also noted for using this idea by offering discounts on its pizzas during game days. They also offer special bonuses when customers refer a friend who purchases pizza during football season.

Exclusive access

This is a technique that was used by membership-only flash sales websites. Customers can only get access after being referred. This helps maintain the sense of exclusivity and therefore boosting sales and interest in products. You can also give certain exclusive perks, particularly those that can’t be bought, in exchange for referrals.

You can draw a lesson from Tesla’s referral program in this regard. Customers who referred quality leads gained an exclusive invitation to the next VIP unveiling event as well as an early access token to be counted among the first Tesla owners to have a Solar Roof installed.

Tesla Referral Program


Whether you are a small, medium, or large business, you can use this idea of exclusivity to earn more referrals. You can organize exclusive events to appreciate VIP customers who have referred a specific number of high-quality referrals to your business. You can make it even better by offering valuable giveaways, bring guest speakers, and incorporating exciting activities into these exclusive events. The experience will motivate your customers to keep referring their friends and family to your brand.

Upgraded Services

The ideas listed so far may have you thinking that referral incentives have to be a new or additional benefit, but sometimes you can use what you already have and modify it to bring as much value as a ‘new’ reward. For instance, you can offer to give your customers who refer their friends and family an upgraded version of the services and products you sell. This works perfectly if your business is a Saas, B2B, or even B2C company that offers Premium versions of your products and services for a higher price. You can give customers who refer a specific number of people access to the Premium version for free. For example, if a customer refers five people, you can gift them access to the Upgraded or Premium offer as an incentive.

Dropbox utilizes this idea excellently in their referral program, which happened to be one of the best in 2018. The company awarded customers additional storage space for each referral they brought into their business. As a result, customers could earn as much as 500 MB on a successful referral.

Dropbox Referral Program

Conclusion

Ensuring you have the right referral program incentives will increase the number of new leads and sales you generate in your store. Now is the best time to implement these ideas to acquire loyal customers through your referral program. Beans can help you build the highest converting referral program for your store. Get started today.


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