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The Definitive Guide to Referral Incentives and Rewards

Businesses are molded differently, and that goes the same with the type of referral incentives and rewards that’ll work. If an incentive program works great in your friends business it doesn’t mean it will work well for you too. You have to personally plan your referral incentives and reward to make it fit your business and motivate the customers that you have. When creating your referral program incentives, there are some things that you’d need to consider. In this post, you would learn almost everything important to find the best incentive and rewards for your business.

Why Should You Reward?

In everything we do in life, there would always be pros and cons. And even when giving out incentives and rewards, there would still be pros and cons. And that means you shouldn’t take referral programs for granted and you shouldn’t do it without caution. Some things to plan here is when an incentive would be offered or not. You should be able to give a good reason to be shared, and the incentives shouldn’t be the reason but a bonus. When it’s only about the incentive then yes, you’d get more traffic but you’d hardly get more conversions.

Your customer should also have to have a good experience with you in order to personally share your product, so make sure that you always give your customer a wonderful experience. Word of mouth happens naturally and instantly if your customer’s experience with your business was good. Let’s get into the PROS and CONS.

Pros

  • It becomes a motivation
  • It shows that you appreciate what they do
  • It creates a chance for engagement

CONS

  • It depends but it could be expensive
  • People might try to cheat in order to receive more rewards
  • The customer might not align with your given incentive.

Who Should You Reward

So you already have the ability to decide whether giving incentives are appropriate or not, so this time you have to plan who should get the incentives you offer. When you decide on “who” you should thnk of the person that would match your business. But if your intent is to make more sales, giving incentives to both parties would be more ideal. And if you want to build a stronger relationship with your customers then go and try out a referrer reward. The key here is to think about its effects on reaching your goal and engaging your customer.

Having No Incentives at All

It’s not the usual but some business don’t tie their referral programs with incentives, sometimes it’s because of cost issues. Some businesses don’t have the extra money to give discounts or rewards so they just hope that it comes naturally and customers would really enjoy their experience with them.

Since word of mouth happens in real life it’s likely to happen. People like sharing what they enjoyed with people they know or when it becomes the topic, and that’s when referrals could naturally happen. But all you have here is hope that they refer a friend, chances are slimmer than when there are incentives because there are fewer motivations to do it. At the end of the day, this type of referral program provides the most genuine referral.

A Two-way Incentive For both referrers and referred

This is when both of the persons involved earn a reward. There are a lot of ways that you can offer here like discounts, credit, money, and the person they refer get something too.

Example referral:

  • Give $10- give $10
  • Invite your friend to both get $20 off.

This program can become very successful because every referral and referrer would be more motivated to bring you more conversions. With this type of program, your referrers would have more confident to share because they will be giving and not just receiving.

A One-Way Incentive just for customers

In this type of incentive giving, only the referred customer would be getting something. For example an online shop would be giving 20% off on the total purchase of the new customer. Or maybe a free trial service for an online tool. Put yourself in the shoe of your new customer, if a shop has been recommended you’d more likely try it and be more comfortable with it. If they offer free trial, the more that you will be comfortable. So a business would highly happen, now the problem here would be that your current customer, the one who should be referring wouldn’t really have motivation to do that. All you have to depend on here is the love of your customer for your business and sadly sometimes that’s not enough for them to take the time to share it to their friends.

What types of referral program incentives should you give?

When your customers are happy with their experiences with you, they get encouraged to share it to people they know. Referrals could definitely bring in customers and conversions, but how can a program be set up to bring in results? Referral software like Omnistar could back you up. What you’ll be aiming here for is a seamless experience to make your customers easily take part.

Now if you go and check, a lot of companies are offering discounts on their referral program. Coupons are also offered for their next purchase. And this drives customers to purchase again, unless you sell mattresses, of course.  For those type of products, gift cards are usually given instead.

Your ideas for referral incentives should be thought about deeply in order for it to become successful.  Think about your customers, what would they want? How can you make your current customers and new customers feel appreciated?

1. You can give Discounts

This one is known to be very successful, they encourage buyers to buy more while you don’t have to give cash or prizes. This makes customers spend more time and look for more products to buy.

But you should also be careful when you regularly have discounts on your page. Your customers wouldn’t see why they’d have to refer if you already have it. So try to make referral discounts sweeter and more eye-catching. 

2. You could try Cash

Since there are different types of businesses online, there are also different type of incentives to match it. and for some cash rewards are the most ideal way to go if your businesses don’t really get return customers often, like when you’re selling mattresses.

3. Also think about giving Credit

Credit is like a baby of both discounts and cash rewards. A lot of known companies also use this like Uber that gives $10 off on your next ride when you refer a friend.

With this type of incentive, the money would remain in your system. If your company offers something that could be used every day, or weekly then credits would be a good way to go to build more loyal customers.

4. Have you tried Swag?

This is when you give free shirts, mugs, bags, and other items as referral incentives. This type is great because it also works as an advertisement when your customer uses the item. To be successful here there should be known quantity to have a cool factor. People won’t really get excited with a mug that has your logo, but a person would be if the mug is something different. The key here is to make sure that it’s the swag that people want.

5. Lastly, you can give Gift Cards

If it doesn’t feel right to hand out cash then a gift card would be a great idea. This is a great incentive for referral programs that are smaller. This would work for small marketing agencies, you get to give a gift card to show your appreciation. A good way to go here is to have different types of gift cards that your customers could choose from.

Reward Structure when and how much should you be giving?

If you have your referral rewards and incentives planned out, that’s great. But don’t forget to plan about a few more important things:

When should you be giving:

Which event will trigger this reward? Should it be issued the moment a person clicks on the link? Should there be a schedule? Or do they have to make an actual purchase in order to get one?

Will you use a tiered system?

Should there be different incentives depending on the number of referrals? Should there be specific rewards for the first referrals?

How about a reward for every single referral?

Would you give rewards every time or on a given goal? That would definitely depend on the amount of the reward. If it’s something small then you could give it every time but if it’s something big then you could do when every goal is reached.

How will you prevent fraud?

There are measures that you could take in order to prevent this. There are also referral softwares that can help you keep tabs.

Your referral design should not only fit your business but the audience that you have too. You should think about incentives that would bring you conversions and in order to attain that your customers should be happy with you too.

Referral incentive ideas that are not commonly used

1. Donations

Either you can’t or you choose the nonmonetary items because it’s what your customers are looking after, donating on their behalf could be something that they would like. When it’s something easy to do or is interested in, they’d love to give back. Donating makes people feel good and that’s why even top companies do it. A good way to do it is when a customer refers a friend, you donate.

2. Do a Draw

Create a draw with a grand price. This could work with giving an entry in exchange for referrals. This too should be done in a short frame in order for it to become more successful. You could do it for specific holiday seasons to give it a good time frame that doesn’t seem random. And when it comes to your grand prize, it definitely should be worth it. It should drive people to put in effort in referring.  You have the ability to just give one grand price and make your customers have the chance to have an item they highly want.

3. Customer of the Month

People want to see that they are appreciated. You’d definitely heard employee of the month, right? Take the principles and apply it into your referral program. You can give them some company swag together with a social media shout out. You could also add VIP access, and let them be the first to know about events and sales as well as new inventory.

4. Make reward % different

A lot of referral programs have referral incentives that are consistent. Some companies offer their customers $15 for every person they refer that turns into a customer. Some offers a very high reward for their first referral, so what happens here is they get $50 for the first referred person and $5-10 for the next ones they get to refer. When you offer a high first incentive value, you are encouraging sharing and that would help promote engagement within your program. You also have the option to start small, which is the opposite and then increase the rewards every time they are able to refer someone.

You should experiment with the programs and incentives in order to find your match

It would always be a good idea to refine your referral program incentives so it would make more sense to the business that you have. Swapping out incentives you implemented would others to try which your customers would like better and work better for your business is also a good idea. But always remember that whenever you change or update anything in your referral program, you should update your incentives and let your customers know too.  What you want to aim for here is to still give value to your customers and make them feel appreciated without it having to be expensive on your part. The moment you are able to do it, you know that you’re on the right track. 

4 Response to "The Definitive Guide to Referral Incentives and Rewards"

  1. Comment From Maria Matinez

    Great article. I wish you made more of these because they are very helpful.



  2. Comment From James Johnson

    Hi there! I really like reading from your blog. I learn a lot from it.



  3. Comment From Robert Smith

    This is one of my favorite blogs to read whenever I feel like I have a shot time to read and learn. Your posts are short but very helpful. Thank you.



  4. Comment From Maria Garcia

    Has anyone have thoughts on OSI? I have been reading a lot of good things about it, some problems but are very minimal and could be solved. This article just made me want to start a referral program



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