What is a referral program? A referral program is growth marketing tactic that seeks to encourage existing customers to recommend a brand to their friends, family and colleagues. Often called word-of-mouth marketing, it seeks to supercharge natural or latent word of mouth with easy to use sharing tools and referral rewards.
Finding the right method to acquire new, valuable customers for your business is hard work. That’s where referral marketing companies come into their own.
Due to that fact that 9 out 10 customers trust peer recommendations, a figure much higher than that achieved by traditional advertising, more marketing leaders are turning to conversational, trust-based marketing, and continuing to adopt new marketing technology to reach new customers. However, the proven tactic that continues to bring in more loyal customers for titans like Dropbox, Slack, Uber and so many more is referral marketing.
Customer referral programs have helped each of these leading businesses grow by engaging and leveraging their brand’s biggest assets: their customers. What started as great ideas for growing their business became well-executed systems programs that supercharged customer acquisition and growth with the right referral program software and strategy.
Like all marketing programs, referral marketing is most effective when managed efficiently and optimized to attract the right customers. But building an attractive referral marketing program is only half the battle; ensuring that your marketing actively encourages the referrals — meaning that your loyal customers recommend your business to their friends and family — is the real challenge. Like other marketing programs, you can build it, but that doesn’t necessarily mean that they will come.
So, to inspire you, we have put together a list of six leading referral programs to highlight the ideas and tactics they have used to get their customers referring. You can think how these can fit into your own referral marketing template to generate more and more customer referrals.
Here’s Who Got it Right: Notable Referral Program Examples
These brands have tapped into the perfect blend of understanding their audience, offering rewards that their customers will value, and streamlined user experiences.
(Image source: Buyapowa
Though Koodo Mobile was voted three years in a row the wireless provider with the “Highest customer satisfaction rate” by JD Power & Associates, the telecommunications company’s decision to look at referral marketing was driven by the fact that it was facing ever increasing acquisition costs per new customer. Koodo needed a way to bring in new customers at less cost, all the while keeping their current member base satisfied and happy. So they decided to build a referral program which offered:
Referrer Rewards: $25 off your tab
Referee Rewards: $25 off your first bill
Result: Through their program, Koodo reduced their cost of customer acquisition (CPA) by 167% and a return on investment (ROI) of more than 10X in 2019 alone.
What they did right: Koodo was able to provide a seamless program experience for their customers through single sign-on and kept their fun, bright branding consistent throughout their program design. It worked so well, in fact, that Koodo made referral an integral part of their marketing mix; rolling out regional campaigns across Canada and making it available in different languages to maximize accessibility and engagement.
More about Koodo’s referral program and other telecoms referral schemes can be found here.
(Image source: Buyapowa)
To this day, Elon Musk and Tesla Motors are rarely out of the news. Tesla is a ubiquitous name in tech and energy circles. Like their namesake, Nikola Tesla, Tesla Motors is futurist, forward-thinking and divisive. Though critics have labeled their methods as aggressive and controversial, Tesla’s customer satisfaction rate is a staggering 89 out of 100, putting it ahead of all other car manufacturers around the globe. In 2016, Musk capitalized on his customers’ loyalty and launched a referral program which provides a great example of how to reward referrals with something other than pure product discounts. With its resounding success, Tesla closed out Phase 9 of their referral program and introduced a new referral program in March 2019; continuing to make referral a key part of their growth strategy.
Referrer Rewards: Ranked by amount of qualifying referrals (“QRs”), the car manufacturers early referral program ensured Tesla owners were able to obtain an invite to tour Tesla’s factory and attend the grand opening party (5 QRs), then the right to purchase a Founder Series Model X, which wasn’t available to the public (10 QRs). The first owner to achieve 10 orders in North America, Europe, and Asia received a free Model X SVU.
Referee Rewards: Each Tesla owner can give friends up to 10 US$1,000 discounts.
Result: By Tesla’s second referral program, they were making a return multiple in excess of 42x on every dollar spent towards their referral program, with 25% of their sales in Q4 2015 coming from their referral program. Since 2019, Tesla’s switched up their referral program to allow successful referrers to earn 1,000 miles (1,500 kilometres) of free Supercharging with the purchase of a new Tesla car by anyone using their referral code. But, if that wasn’t tantalizing enough, Tesla is also giving successful referrers a chance to win a Model Y every month or Roadster supercar every quarter based on the number of successful referrals.
What they did right: Tesla has generated a relentless spirit of evangelism around their vehicles. The referral program targeted Tesla owners – who are already ecstatic with the brand and their vehicle’s performance – with rewards that their clientele would find truly valuable. Their current program not only offers a meaningful reward for each successful referral in the form of free Supercharging, but they cleverly use tiered rewards that drive repeat referrals.
(Image source: Buyapowa)
It’s difficult to find someone who hasn’t heard of Airbnb or even used them themselves. The internet lodging titan that we know today as Airbnb started out when the founders rented out an air mattress in their living room and the rest is history. Now, Airbnb is one of the defacto examples people cite when they think about a startup unicorn.
Referrer Rewards: US$18 per qualifying stay and US$10 per qualifying experience
Referee Rewards: Up to US$46 account credit
Results: In some cases, Airbnb’s referral program increased bookings by over 25%, and their latest version came in even stronger than before, boosting referrals by more than 300%.
What they did right: Their approach was successful for two key reasons: they streamlined the sharing and shopping experience, and leaned into their users’ desire to help, using A/B testing to prove that positioning the reward as a gift to a friend produced better results than a message emphasizing receiving a reward for yourself.
If you want to know more about how using prosocial or friend benefiting rewards can improve the performance of your referral program, then this recent research from Harvard Business School, Olin Business School and the University of California should interest you.
Harry’s Refer a Friend
(Image source: Buyapowa)
Harry’s isn’t your average shaving brand. The shave accessory giant boasts a billion-dollar subscription service through their e-commerce store and a barbershop in Manhattan. A large part of that 10-figure success has their referral program to thank.
To accumulate buzz about their brand’s launch, Harry’s executed a week-long pre-launch referral program designed to collect the email addresses of as many potential qualified customers as possible. In this great example of a referral program that incorporates other elements of a digital marketing strategy, they offered incremental tangible rewards to those who were willing to refer their friends through email, Facebook or Twitter.
Referrer Rewards: Accumulating rewards: Refer five friends, earn free shave cream. Refer 10 friends, earn a free razor. Refer 25 friends, earn a free premium razor. Refer 50 friends, earn free shaving for a year.
Referee Rewards: 10% off their first purchase.
Results: As the week-long campaign wrapped up, the results surpassed all expectations. They generated 100,000 leads within the first week. Supported by a stellar referral program, Harry’s grew into a billion-dollar unicorn and became a household name. More recently, though, they’ve dialed back their referral program to a simple $5 credit each way, abandoning their more high reward program of old for a more stripped version.
(Image source: Buyapowa)
What they did right: Harry’s being the only non-purchase based reward referral program on the list, it wasn’t difficult to find internet cruisers who were willing to share the brand with their friends in exchange for free products. There’s also something to be said about tangible rewards; in Sujan Patel’s post he notes that “physical product rewards can provide an opportunity to create a concrete connection to your online experience”. While their latest referral program lacks the aggressiveness of that initial scheme; their venture into the world of referral was undoubtedly a fruitful one.
(Image source: Buyapowa)
Evernote has come a long way since their launch in 2008. The note-taking app has collected over 100 million users worldwide and a $1 billion valuation with a modest $0 budget for user acquisition. Evernote’s focus has been on creating a great product that their customers love, knowing that word-of-mouth would be their greatest marketing asset. Without spending on SEO or advertising, Evernote’s referral program is primarily responsible for the company’s sizeable growth and financial success.
Referrer Rewards: Earn 10 points for your first three referrals – enough for three months of Premium or 3 GB of additional monthly upload, then whenever a referred friend buys Premium, earn 5 points.
Referee Rewards: A free month of Premium.
What they did right: The freemium model, which we’ve talked about before, has been a big success factor for referral programs like Dropbox’s, Uber’s, and now Evernote’s. Their simply designed program also encourages customers to keep making referrals to sustain their free trial of Premium.
T-Mobile “Stock” Rewards (now T-Mobile Referral Program)
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Wireless carrier T-Mobile decided to break the referral program mold and offer actual shares in the company in return for referrals. While the program has been quietly discontinued since then, and T-Mobile has returned to offering a more standard $50 MasterCard, the stock reward program generated massive amounts of press for T-Mobile and presented an opportunity for their CEO to promote their referral program example as something truly differentiated and groundbreaking across the wireless industry. Referrers could earn up to 100 shares in T-Mobile. And customers who had been with T-Mobile for more than five years were offered two T-Mobile Shares for every successful referral.
Referrer Rewards: Earn one T-Mobile share for every successful newly activated T-Mobile Line.
Referee Rewards: One T-Mobile stock after being referred and staying with T-Mobile for at least 15 days.
Results: T-Mobile hasn’t shared the results, but the share price rose from US$40 range to over US$60 in early 2018, resulting in an added bonus for successful recipients of share rewards, making the program a win-win for T-Mobile and their referral program’s participants.
What they did right: The highly-differentiated program generated millions of dollars worth in free marketing as a result of the extensive press coverage. And, by diversifying the rewards offered to include actual company stock, rather than a financial incentive, credit or discount; T-Mobile was able to offer something with more unique and special for their referrers and their friends.
The Strategies you can Steal: Our referral marketing template
So you have a great product or service and you’re ready to get started with referral marketing. Learning from the success stories above, here are five ways to ensure that your referral marketing program will be effective in both the short and long term.