How to Build a Customer Referral Program?

One of the basic keys to reach customer success is by using your services to gain advocates for your business. An army of happy, satisfied customers can do a lot of legwork for your company.

Does Referrals Matter in Marketing?

Big YES, referrals matter because people ask people they know about any recommendations, and when people have good experiences they freely share it to people they know as well. A study was made by Nielsen to prove that referrals are actually the most trusted form of advertisement. It actually makes sense, when a friend tells you about a recommendation, since it’s a friend, you are more likely to try it out. I bet you’re already spending a good amount on marketing and advertising in the hopes that it would bring you profit. With referrals, most of the time they are free. When you create an army of satisfied, happy customers you are already spreading your business through word of mouth for free.

Why should you have a referral program?

When you have a well organized referral program, may it be small or large, it could help you get loyal customers at a low price. These programs give happy customers rewards for sharing how they feel about your products, services, or company. But, this is not all about sharing good feelings, these programs are also used to generate great return of investment. Yes, they could definitely bring you good money, for some, this alone is what makes their business successful. This is because referral programs don’t just bring you customers, it brings you targeted customers

Now, if you are aiming to grow your business, retain your customers, and reach your profit goals, this is the right time to create and use a referral program. Having a referral program reveals 2 things:

  • You are confident in your team and business to see a referral program as a positive investment.
  • You know that no matter how good your service is, there would be some customers who would need some push so they would go out of their way for your business.

The truth is, you are asking your customers to take up the marketing and sales department for you. So, when referrals are the core of your new company it’s important to be consistent and also have patience.

7 steps so you could build an effective customer referral program

1. Make sure that you are setting goals

Are your goals about growth and profit? Do you want to retain customers as well? What are you aiming to get from this referral program? Make sure that you have a clear sight of your goals.

2. List every source of referrals you could find

Advocates are the ones already connected to your brand in the present or the ones that you have already connected with before. You should list them out, list down current customers, past, leads, leaders in the industry, everyone you could think of. This would give you a solid start and a path to go through.

3. Go ahead and narrow down your list to the inner circle contacts, this should be a list of people who know the value of your business and has already or is willing to refer your business without any incentive. This is something that isn’t possible to automate, if you segment these contacts manually, you would gain more benefits from it.

Remember: timing is everything and not all referrals are equivalent to each other. There are right times to ask your inner circles to join your referral program, since they already know about your business, it becomes less stressful to start with them. Relationship is also important, so, it’s really ideal to start with them. Now, also remember that not every referral is the same, you have to be choosy when it comes to your inner circle. Make sure you identify who among your inner circle is can market your brand the way it should be. If you have customers who have been referral marketers before, they are good people to start with as well. Just make sure that they don’t get overwhelmed.

4. Make sure you are able to identify your incentives

There are two options that you could take, a non-incentive and an incentive type of referral program. There are many ways to do this, but you could start by segmenting your referrals in different segments where there rewards could differ. A study in Chicago showed that referrals that are non-cash are more effective when it comes to performance boost compared to other incentives. Also, make sure you don’t forget your referrer. When you finally have a referral program, make sure that you use your resources to notify your customers. Make sure that you promote as much as you can. You could use blogs, newsletters, email signatures, CTAs, and product updates to remind your customers.

5. Don’t forget to track

No matter what size your company is you have to make sure that you have set up your tracking system. This would make things easier and assure you and your referrers that no detail would be missed. You should track:

  • The person referred and by who
  • The date and time the person was referred
  • Whether the referred person converted
  • Was the sale successful?

If you don’t invest in customer relationship management, this is the right time to get started. A big key to success is when you keep track of your customer relationship.

Are reviews important?

Did you know that reviews are actually a form of referrals? It goes the same with social shares and celebrity endorsements. For example, someone popular, an influencer tried your product so he blogged about your product or even just tweeted his experience with your service, that is already a referral in its own form because people following the person who talked about you would check you out. This is also the best time to interact with them, this will keep them happy and when you show your appreciation, there’s a big chance that they will continue to support you.


A lot of companies use referral marketing as their marketing strategy. It’s a very effective strategy because of word of mouth, this article will get you started on creating your referral program because it has the key things of everything you need to know to get started.

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