THE REFERRAL PLAYBOOK
[Link]’s Definitive
Referral Program Playbook
Use referrals more effectively to benefit your
customers and grow your business
hello@[Link] [Link] GmbH [Link]
Increase the performance of your referral programs
with expert insights and best practices
Understand the theory behind referral marketing, find
out how referral programs work, and see how new
techniques can help you achieve better results.
2
What’s inside?
Referral Marketing Explained 04
How Referral Programs Work 05
Why Are Referrals So Effective? 06
Why Referrals Give Quality Leads 07
How Referrals Benefit Businesses 08
Setting Up Your Referral Program 09
Choosing the Right Referral Rewards 11
Evaluating Your Program’s Success 13
An Advanced Referral Framework 14
Setup Checklist 15
Getting Started with [Link] 16
About [Link] 17
Referral Marketing
Explained
The main objective of referral
marketing is to attract new
customers with high brand affinity.
Brands in practically every industry employ Referral programs are different to other
referral marketing techniques to expand marketing initiatives because they rely on
their customer base. Referral programs are existing customers to source potential new
the primary referral marketing tool. Like customers.
most modern promotions, referral programs
are now primarily digitally operated. This gives referral programs some unique
characteristics and selling points that make
Typical referral programs offer an advocate them particularly useful in certain
(existing customer) and friend (potential circumstances.
new customer) a simple reward, like
cashback or a coupon, when the friend signs In this playbook we’ll explain the theory
up and becomes a paying customer. As behind referral programs with the help of
referral programs have gone digital, they’ve research, stats, and best practices. We’ll
become increasingly advanced, with many then explain how you can set up your very
fully automated processes and features. own digital referral program.
The Referral Playbook 4
How Referral
Programs Work
It’s existing customers that do the
legwork in any successful referral
program.
All referral programs follow the same basic More complex referral programs contain
format. Each referral program requires two additional elements, but a standard referral
different personas: program can’t function without the four
elements mentioned above.
● An advocate (the existing customer)
● A friend (the person they refer) To spread awareness about their referral
programs, brands advertise them through a
To incentivize action from both these range of online and offline channels. This is
personas, the referral program also needs where the majority of referral
to offer rewards. program-related costs go, besides the
rewards that are given out to
participants/customers.
78% of B2B marketers The rest of the work is done by brands’
say referrals generate existing customers when they search for
good to excellent appropriate friends and acquaintances to
refer. All in all, this makes referral programs
leads. - Social Media Today one of the most cost effective mechanisms
for customer acquisition around.
The Referral Playbook 5
Why Are Referrals
So Effective?
Like all marketing techniques,
referrals exploit some basic tenets of
human psychology to achieve results.
Referrals are effective because they’re driven Referral programs are also highly effective
by standard human interactions, rather than for recruitment. Employee referral programs
business to customer or business to business follow the same principle as customer
interactions. referral programs, using current employees
to source candidates for open positions. This
Consumers are inherently skeptical about offers big savings over standard recruitment
most interactions with brands. That’s processes because the main associated cost
because nine times out of ten these is the employee reward paid out after a
interactions are nothing more than brands successful referral.
trying to sell their products.
On the other hand, interactions with friends, 84% of people trust
acquaintances and other consumers, even
when discussing brands and products, are
recommendations from
much more likely to be seen as genuine people they know, the
human interactions.
highest of any form of
Referrals are the most trusted form of advertising. - Nielsen
marketing/advertising, outperforming TV
ads, sponsorships and consumer opinions.
The Referral Playbook 6
Why Referrals Give
Quality Leads
Not only are referral programs cost
effective, they also give higher quality
leads.
What the research says
Another big advantage of referrals is their
high lead quality in comparison to most
Existing customers are good at sourcing
other lead generation techniques. Studies
relevant new customers for two main
confirm that referred customers are much
reasons:
more valuable for brands than customers
acquired via other means. Again, this stems
● People tend to spend time around
from the fact that it’s existing customers
individuals with similar habits and
that do the legwork in customer referral
interests
programs.
● Customers feel obliged to find high
On average, referred customers have: quality referrals if they’re receiving a
reward from a brand in return
25% higher
lifetime value
These factors mean that new customers
sourced via referral programs tend to be a
good fit for brands, both in terms of buying
habits and product preferences. Not only
37%
does this equate to higher sales, it also
higher means greater brand loyalty, which is a huge
retention rate long term benefit for any business.
The Referral Playbook 7
How Referrals
Benefit Businesses
Referral programs help businesses
work towards a diverse range of
business objectives.
Customers with a greater affinity for a A study by Texas Tech University showed
particular brand’s product or philosophy that, while 83% of satisfied law firm
have significantly higher value for that brand customers were willing to refer a brand, only
across their customer lifecycle. Ultimately 29% actually did. This is precisely where
this value is measured in revenue. referral programs can help.
But brands also use customer referral Referral incentives help convert the majority
programs to achieve other business of satisfied customers who don’t actively
objectives which are less tangible and refer brands into ones who do. With
harder to quantify. This includes most of the relatively little investment, brands can take
usual promotion marketing metrics: advantage of this untapped resource.
● Customer loyalty Referral programs are even more effective
● Brand awareness when integrated with other promotional
● Customer engagement mechanisms, like loyalty programs. A diverse
● Customer retention range of incentives behind a wide range of
customer actions can increase a brand’s
Generally these factors will increase in average customer lifetime value significantly
tandem with each other as customers over the long term. That being said,
participate in the referral program and businesses cannot rely on referral programs
spread word among their friends and to increase customer loyalty if their products
acquaintances. and customer service aren’t up to scratch.
The Referral Playbook 8
Setting Up Your
Referral Program
Referral programs can be set up
quickly and easily using the right
platform.
Creating referral codes
Considering the various different Referral codes are the core mechanism
mechanisms at play, customer referral behind all referral programs. Not only do
programs need to be fine tuned in order to referral codes determine who gets rewards,
achieve the best results. they also allow the referral program
manager to track all sorts of campaign
According to the American Marketing metrics. Referral codes can be set up for
Association, all successful referral programs single-use or with custom limits to give
share some key characteristics. They are: advocates more opportunities to refer
friends.
● Deliberately initiated
● Actively managed In an automated system, referral code
● Continuously controlled creation needs to be linked to various
conditions to ensure that only eligible
While most of the work required to find new customers can participate in the referral
customers is done by existing customers, program. Conditions also reduce the
control over the referral program in the three chances of misuse or exploitation. Common
ways mentioned above ensures they work as conditions for code generation include:
effectively as possible.
● Advocate account must be >1 year old
In other words, businesses must be prepared ● Advocate account must have delivery
to monitor their referral programs closely address in X location
and make changes when necessary if they ● Code generation only between date A
want the best results. and date B
The Referral Playbook 9
Redeeming referral codes Setting up referral rewards
Just like referral code creation, referral code There are many ways you can set up creative
redemption needs conditions to ensure referral reward mechanisms. These will make
everything runs smoothly. your referral program more appealing to
advocates and potential new customers.
Without conditions to restrict variables like
who can use referral codes and when they One of the most effective mechanisms is
can use them, a referral program can easily reactive rewards, i.e. rewards which change
begin to cause problems for a business. depending on some other variable. This
could be any variable you like, but usually it's
With the right platform at your disposal, the linked to the new customer’s activity.
conditions for referral code redemption are
practically limitless. They can be tailored to For example, you can link the advocate's
help with specific business objectives. reward directly to the new customer’s
actions or purchasing behavior to add
For example: another dimension to the incentive.
● New customer’s billing address Offering advocates cashback equal to 10% of
must fall within X region/location. their friend’s first spend could even
This condition can help validate encourage them to refer individuals they
customer location if you want to know will spend more money. They may also
make your referral program discuss the incentive with the friend
location-specific. beforehand to ensure they both benefit from
● Referral code cannot be used if it together. This is one of the many reasons
basket contains X item. referral programs give such high quality
This condition can be used to leads - the human dynamic is something
exclude certain popular items from other promotions can’t replicate.
the referral program offer.
The Referral Playbook 10
Choosing the Right
Referral Rewards
Rewards provide the incentive for
advocates and their friends to
participate in referral programs.
The rewards you offer as part of your referral To offer the most attractive rewards, you first
program are one of the most important need to understand your target audience/s.
parts of the entire operation. It’s these If you know what kind of products or
rewards that encourage existing customers rewards they’re interested in, you stand a
to search for people to refer, and it’s rewards much better chance of getting them to
that encourage potential new customers to participate in your referral program.
spend their money.
Before you set up your referral rewards,
Luckily, there are ways you can make your make sure you’ve conducted thorough
referral rewards more exciting and attractive audience research to find out which referral
for advocates and potential new customers rewards your audience will respond to best.
alike. This applies to:
Knowing your target audience ● Advocate rewards, i.e. the rewards
existing customers receive when
successfully referring new customers.
Tailoring rewards for specific customer
● New customer rewards, i.e. the
segments and even individual customers
rewards new customer receive when
increases the likelihood of successful
completing their first purchase with
referrals. The more granular customization
your brand.
options you have at your disposal, the better.
The Referral Playbook 11
Acquisition costs
You should always assess any rewards you do One of the core attributes of referral
give out as part of your referral program programs is their cost effectiveness. They
against the program’s overall financial allow brands to attract high quality new
contribution to your business. customers using a smaller budget. That’s
because referral programs spread awareness
There’s no point giving out high value primarily by word-of-mouth.
rewards to entice new customers if:
But this word-of-mouth activity usually isn’t
a) The value of these rewards outweighs completely unprompted. There are still costs
the added value the new customers associated with advertising, marketing and
will bring to your business. outreach campaigns.
b) The rewards for new and existing
customers are too easy to access. For example, most brands will advertise their
c) The new customers brought in by referral program in marketing emails and
your referral program only buy from other outbound communications. In store or
your brand to take advantage of the on-site banners are another commonly used
referral reward. advertising format. These little expenses all
add up and should be accounted for when
evaluating your referral program’s ROI.
The Referral Playbook 12
Evaluating Your
Program’s Success
You should assess your referral
program to work out how much value
it’s adding to your business.
Each business will have its own criteria for ● Participation rate
referral program success. This is directly The percentage of customers
linked to the specific business objectives the participating in your program (e.g.
referral program was set to work towards. sending a referral code, clicking links
Many are set up to promote things like in relevant emails etc.)
customer loyalty or brand awareness. But
these metrics can be tricky to nail down.
Either way, the bottom line objective is
almost always to increase revenue, which is ● Growth rate (K-Factor)
much easier to measure. K-Factor is used to determine your
referral program’s ‘virality’ / rate of
There are a few key metrics that will help you growth over a certain period of time. A
assess the health of your referral program K-Factor greater than 1 equals virality.
and ultimately the value new customers are
bringing to your business:
● Referral rate
The percentage of total purchases Again, the most appropriate metrics will vary
being made through your referral by referral program and business. But, as
program. long as you have KPIs to work towards, you’ll
be able to steer your referral program in the
right direction with campaign adjustments
and alterations.
The Referral Playbook 13
An Advanced
Referral
Framework
The most successful referral
programs improve upon the standard
referral program model in key areas.
BASIC ADVANCED
Outlook
Referral program is set up Thorough assessment of referred customers’ value.
specifically to hit KPIs and growth New customers’ buying behavior with brand is
targets, whether that’s increased tracked in detail and used to make fine adjustments
revenue or brand loyalty, etc. to the referral program going forward.
Rewards
Rewards for both advocates and the Reactive rewards for both advocates and new
new customers they refer once customers (e.g. both tied to new customer's first
conversion action is complete spend). Thorough customer research conducted to
(sign-up, first sale, etc.). customize rewards for individual customer segments.
Marketing/awareness
Referral program advertised on Referral program advertised through targeted
website and pushed through outreach campaigns which publicize customized
generic communications like rewards to customers. Re-engagement of churned
newsletters etc. customers/participants with new offers.
Campaign conditions
Simple conditions for referral code Fully customized campaign conditions to give
creation and redemption to funnel customized outcomes under specific circumstances
as many participants through the and different rewards for different customer
program as possible. segments.
The Referral Playbook 14
Setup Checklist
In just a few simple steps you can set
up a working referral program using
the Promotion Engine.
You can create any promotional campaign CAMPAIGN MANAGER SETUP
you need in [Link]’s Campaign Manager.
Create a referral campaign
Once you’ve planned your strategy and
approach, it’s a simple 15-minute process to Choose conditions for code
get your referral program up and running. creation (at a specific time, after
collecting a certain amount of
After choosing how you want to reward your loyalty points, etc.)
new and existing customers for their
Choose conditions for code
participation, all that’s left to do is monitor
redemption (who can redeem
the campaign once it’s live to make sure it’s
referral codes and when)
giving you the best results.
Set customized rewards for
advocates and new customers
The Referral Playbook 15
Getting Started
with [Link]
The Promotion Engine can support a
referral program with practically
unlimited campaign customization.
[Link]’s Promotion Engine uses simple
logic rules to process inputs and power
promotions.
Using conditions and effects, you can set up
specific promotions for individual customer
segments. These segments can be fully
customized to ensure your promotions hit as
many different existing and would-be
customers as possible.
THE BENEFITS OF [Link]
1 You can set up any referral 5 You can personalize based on
reward you like any business & profile data
2 You only have to deal with the 6 Alter your referral program on
design: The backend is built the fly as you grow
3 You can set up a fully working 7 Run all your other promotions
referral program in 15 minutes on the same software
4 Link your referral program with 8 Save time and money on
other promotional campaigns in-house development
The Referral Playbook 16
About [Link]
A fully equipped, and easily
customizable promotion service that
gives you all the flexibility you need.
[Link] was built as a response to the very
limited functionality of all available coupon,
discount, loyalty, referral and product
bundling tools out there that are barely
meeting the needs of scaling businesses or
big enterprises. Our Promotion Engine helps
you build the most sophisticated campaigns
without additional development resources.
What makes [Link] unique? We provide
one holistic solution for coupons, bundling,
discounts, loyalty and referrals, with features
that allow you to fully customize and scale We built the world’s
easily to meet any business requirements.
most powerful & flexible
After a seamless integration, developers Promotion Engine to
have little maintenance effort and can focus
enable teams to easily
on their core product. Take a look at our
quick start guide and API-documentation to run any promotion type,
learn more, or simply book a free live demo with minimal resources.
where you can discuss your own specific use
cases.
The Referral Playbook 17
The World’s Most Powerful Promotion Engine
Create and deploy creative and targeted campaigns using
any of your customer and live session data.
MAKE YOUR PROMOTIONS POSSIBLE
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BOOK YOUR FREE DEMO
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