When it comes to customer acquisition, word-of-mouth marketing is a gold mine in any type of business. Eighty-eight percent of people trust recommendations from a trusted in-person source more so than traditional marketing campaigns.

However, when it comes to eCommerce, this marketing strategy becomes even more powerful. While one neighbor might send another to a nearby restaurant, the referral process for online business models isn’t bound by physical location. With the advent of social media, email marketing, and similar, friends can recommend products halfway across the globe from each other.

What Are Referral Incentives?

Referral incentives are little gifts or rewards that you give active customers for referring a friend or family member to also start taking part in what your business has to offer. Sometimes these incentives are physical objects, like freebies or swag, or other times they might be something less tangible, such as a discount.

Often, the same incentive or a similar incentive is given to the new client as well to give them more of a reason to make a qualifying purchase or sign up for a subscription membership. It’s one of the quintessential ways to enhance customer retention while also bringing in new, loyal customers.

Referrals are one of the most valuable forms of marketing, with 78% of B2B marketers saying that referral programs generate good or excellent leads. There are a few reasons for this. For one, prospects from existing clients are in the same field, meaning that they are likely in the same industry and are probably looking for the same things.

While you might get a number of referrals from friends texting each other, “Check out this site,” this is hardly the best way to get the most successful referrals possible.

Referrals drive some of the highest conversion rates among all marketing channels — keep reading for how to perfect your program.

Choosing the Right Incentive Rewards

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Plenty of different incentive rewards exist for potential new clients and referred customers to enjoy. One of the first things to consider before implementing a referral program is deciding what type of reward or perk would appeal best to your target audience (and that works with your budget).

Digital Gift Cards

eGift cards are one of the best incentive rewards to give to customers because it is very customizable, allowing you to choose an appropriate business that reflects your customer base.

Consider this scenario: An existing customer sends a friend a unique referral link to use with their first order. After that purchase goes through, you can send both shoppers a digital gift card over text or email.

Popular eGift cards include Target or DoorDash, giving your recipients a chance to spend some extra dough on whatever they want. And while giving a digital gift card can sometimes be a little bit underwhelming, Prezzee makes it a lot more fun and exciting.

With Prezzee, you can send a digital gift card for any one of our hundreds of brands and retailers, and you can customize every single one with its own thoughtful message, photo, and video.

Since it can be tricky to know what kind of eGift card to send out to people you don’t know, send over a Prezzee Smart eGift Card that your recipient can use for any brand or retailer in our catalog.

Cash Rewards

Offering cash rewards as a means of driving in new referrals is not as popular now as it once was, but it can be a very effective way of generating buzz for your business. This is usually a great move if your business doesn’t get a lot of repeat customers, especially since cash rewards are one of the most compelling influencers for new clients.

You also don’t need to necessarily give out straight cash: These cash options can be something similar to a discount, where you give them a $10 store credit towards their next purchase or something along those lines. This also makes it a lot easier to balance your checkbooks since you don’t need to worry about processing refunds or anything like that.

Discounts

Speaking of discounts, this is a heavily favored referral program idea because it increases loyal customers and drives more sales for your business. A discounted item could still help you drive in profits while allowing new customers to see how awesome your product is at a lower price.

These are great when repeat purchases are common, such as supplement brands or skincare lines. However, you might not need to use a discount if repeat purchases are uncommon, like when buying a car, mattress, or large electronics.

Redeemable Points

If you already have a loyalty program, take advantage of this by offering redeemable points to drive new leads and potential clients. Depending on how your loyalty program is crafted, these points can often be used to get discounts on products or get freebies on certain items.

A points program also gives customers a bit more freedom in terms of how they want to spend their rewards. Plus, it can even motivate customers to refer more people or spend more money to accumulate more points and get a reward that they’ve been trying to save up for.

Charitable Donations

Charitable donations are not just a great way to drive new referrals to your business, but it’s also a way for your company to give back to the community. You can incentivize people to sign up for programs or purchase products by saying that a portion of the proceeds will go to a specific charity or a charity of their choosing.

Gifts With First Purchase

This is a solid incentive for referrals because not only does it incentivize people to refer friends, but it also forces them to make a qualifying purchase to receive their referral promotion. This is often a popular choice in luxury retail.

Sometimes, this can be an exclusive gift that you can only receive through a referral to persuade people to send over as many people as possible.

Upgrades

For certain businesses where upgrades are an option, like better hotel rooms or better airline seats, you can offer them as referral rewards. If you own a coffee shop (for instance) and someone refers a friend, you can offer a free upgrade to a larger coffee or tea the next time they come into your shop and order a small one. This inclines them to make another purchase and rewards them for bringing in new clients.

How To Ask for Referrals the Right Way

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Remember that referral programs only have the power to work when implemented properly. Many salespeople fall into the trap of going about it completely wrong.

Bring It Up Promptly

One mistake is waiting too long to ask for referrals late in the game. It is wise to wait until the relationship with a customer has been established for a while and then make a call or send a text. But if you wait too long, your existing customers may no longer be excited about the product.

People are excited about your company when they first find out about it, which is the prime time for referrals. Especially for places like gyms or restaurants that are often more fun when friends are involved, persuading people to bring others along early on.

Be Persistent but Not Pushy

The second mistake is that people ask for referrals in a way where people can easily say “no.” For example, a message about referrals might say something like, “Do you know of anyone who would want to use our services? Let us know!” and then you never hear from them again.

Ask twice. This might feel weird, especially after a customer has already told you no, but you’d be surprised at how often a second question can help seal the deal. You can do this without sounding too pushy.

If someone pushes back and says that they can’t think of anyone to refer, politely ask them to try to think of one person who they think would be able to use the product or service. A surprising number of people will give you a referral name and number on the spot. This approach is geared toward in-person sales, not so much for apparel or consumables.

Make It Easy

Customers are doing you a massive favor by referring friends, family, and colleagues to check out your new business. Make it easy for them to claim their referral bonus by making a template that your happy customers can use and share with their friends or family.

This way, all they have to do is copy and paste the message with a discount code, and they don’t need to spend any time trying to get anyone to convert to a lead.

Here is how you can set up a super effective referral program:

Close the Communication Loop

After a referral makes a purchase or subscribes to your product, it’s customary to send a thank you to them for hopping on board. Remember to include a thank-you message to the person who made the reference in the first place.

If the purchase wasn’t linked to a unique code, you might want to reach out to the referral and ask them to send a thank you message on your behalf, which can be helpful if you don’t know exactly who referred them in the first place. Either way, it’s an excellent courtesy that can go a long way toward enhancing customer loyalty.

Make Sure Your Entire Staff Knows the Drill

Asking for referrals might be a one-person job at a smaller company, but when you’ve got tons of salespeople interacting with clients on a daily basis, you want to make sure they are all working on getting as many referrals in the door as possible.

Educate your staff on how to incentivize clients on referrals and counter common objections that a new lead might have (when appropriate). Plus, you can incentivize your staff to make sales by offering commission on referrals to give them even more of a reason to try to get more people in the door.

In Conclusion: Referral Programs Work
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Word of mouth continues to be one of the most popular reasons why a new client might come to your business or start using a new product, likely because of the trust that one feels in regard to their friend’s opinions. But you can make referrals even more enticing by offering incentive reward programs to increase brand awareness and increase subscribers.

Customer referral programs usually reward both the reference as well as the person who referred them by offering things like cash rewards, discounts, free products, or loyalty points. But one of the best options is to give a digital gift card that lets the recipient get whatever they want.

You don’t need a physical address to send a prepaid eGift Card through Prezzee — home to hundreds and hundreds of brands and retailers to choose from. Sign up for Prezee Business and send each eGift card with a customized message, photo, or video and make a lasting impression on new clients and existing customers alike.

Sources:

Why Referrals Are The Most Valuable Form Of Marketing (And How To Get More) | Forbes

Cash vs. Non-Cash Rewards | SHRM

Word-of-Mouth Marketing: Meaning and Uses in Business | Investopedia

The Comparative Performance of Online Referral Channels in E-Commerce | SSRN