The ultimate guide to referrals: Benefits, best practices and how to build a referral program

For companies looking for new ways to scale, referral programs are a great method to help you reach your revenue and acquisition goals - all while rewarding your loyal customers who help get you there. What makes referrals truly exceptional is their capability to turn a company’s social capital - customer trust - into economic capital, i.e. revenue.

A referral program isn’t just a cost-effective way to attract new customers to your business it also secures longer-lasting customer relationships. Research on the value of referred customers indicates that, in comparison to leads from other marketing channels, they have:

Looking to kick off or improve your own referral program? In this blog post, we’ll explore the different types and benefits of referrals and guide you through the process of creating a winning referral program. We’ll cover:

A referral program is a word of mouth marketing strategy that motivates existing customers to endorse your brand. In return for their recommendations, these customers, often referred to as advocates, receive rewards, discounts, or other benefits from the business. Encouraging customers to spread the word about your products or services helps you reach a wider audience, inspires community building, and generates leads that are more likely to convert. 

Referrals are generally split into two main camps: :

Referral programs help businesses identify and reward their top brand enthusiasts and use their influence to attract new customers. The benefits of referral programs include:

The following best practices highlight how brands are effectively using the power of referrals:

Leading file hosting service Dropbox’s referral program is one of the best examples of creating value for the business while giving back to the customers. Once a referred customer creates a new account, both the advocate and the referred friend get extra storage: 500 MB for Basic users and 1 GB for Plus. 

Tesla has extended its innovative approach to referral programs as well. Using a referral link, Tesla customers can benefit from “Buyer Benefits” when ordering a product. Once they complete their first purchase, they can collect “Referral Credits” by referring new customers to Tesla. 

The delivery service company, Wolt, uses a double-sided referral approach, providing a 5€ credit to both the advocate and the referred friend upon the friend's first order Wolt has no set limit on the potential number of referrals, allowing customers to invite as many friends as they wish.

German accounting startup, Taxfix, has an incentivized referral program. Advocates can conveniently share personal invitation links with friends directly through the app. Anyone who downloads the Taxfix app (or uses it in a web browser) and completes registration becomes eligible for a 50% discount on their initial tax return. After a friend redeems their discount and submits their tax return, Taxfix rewards the advocate with a €10 voucher applicable to their next tax return.

Referral programs have also gained popularity in B2B companies. Given the longer and more complicated sales cycles in the B2B market, a referral program can be highly effective for customer acquisition. Lumen Technologies, an American telecommunications company, enables advocates to earn cash rewards of up to $25k for themselves or a preferred nonprofit when a referred business makes a purchase of a Lumen service or product.

With Talon.One’s referrals features, it’s never been easier for brands to design, test, and run effective referral programs.  Before setting up your referral campaign in Talon.One, you need to know:

With this knowledge, follow these simple steps to create your referrals:

1. Create a referral campaign: Go to the Application you want to run your referral campaign in, then click the ‘New Campaign’ button. Name your new campaign, select the ‘Referrals’ checkbox, and then click ‘Create Campaign’. 

2. Define your Rule: Using the Rule Builder, click ‘Add Rule’ and you’ll be taken to the rule menu where you can add conditions and effects.

3. Add Conditions: click ‘Add Condition’ and select the criteria to create a new referral code from the drop-down menu.

4. Create code generation Effect: Now you need an effect to create a referral code. Select ‘Create a referral code’ from the drop-down menu.

5. Create code redemption Effect: If you want to create a referral code that’s valid for one use only, add ‘Redeem a referral code’ as an effect. You can set any effects you wish for your referrals. For example, to reward the referred friend with a 10% discount on their first order, add ‘Set a discount’ as another effect. Set the discount value by multiplying the session total (the total value of the cart items) by 10%. 

6. Reward the advocate: You also want to give your advocate a reward. Select your current campaign, set the recipient as the Advocate, and then enter a monetary value in the ‘Discount Amount’ box under ‘Coupon Attributes’.

Once you've set up your referral program, there are countless ways to iterate and improve it to help you establish a community of frequent customers and reach your revenue goals. The scalability and flexibility of Talon.One’s referrals enable you to: