8 Best practices for customer referral marketing

Barbara Jackson

8 min read Last Updated Jul 24, 2020

Customer referral marketing is a great way to spread awareness of your brand and grow your business. In fact, referral marketing generates 3 to 5 times higher conversion rates than any other channel. Referral marketing is a fantastic opportunity for your business. Follow these referral marketing best practices to see the maximum return on your marketing strategy. 

What is customer referral marketing?

Customer referral marketing is when businesses request and encourage customers to tell their friends and family members about the business. 

Why customer referral programs are important for your business

For any business to have success, they need to be trusted by their customers. Earning a customer’s trust takes time, and few are likely to trust a business they have never interacted with before. Referral marketing bridges this gap. Referrals come from a trusted source, like a friend or family member. When a prospect is encouraged to check out a new business through a referral, they are more eager to interact with your business. 

It is also important to note that people who have been referred to your business are more likely to be lasting, loyal customers. According to Wharton School of Business, a referred customer is 18% more likely to stay with a company over time. This common bond they share with their friends and family through your business makes them more likely to stick around. 

Customer referral marketing best practices

Now that you understand the importance of customer referral marketing, here are 8 best practices to follow when implementing your own marketing strategy. 

1. Want a referral? Just ask!

The most important quality of your customer referral marketing strategy is to make clear requests. Many customers are happy to refer a business, but they either aren’t aware that a business has a referral program, or they are not motivated enough to seek it out themselves. Keep in mind that 83% of customers are willing to refer businesses, but only 29% actually do. People rarely go out of their way to do something unless they are very motivated. This is why it is crucial to request referrals. When prompted, customers are much more likely to to refer your business to a friend or family member. 

A referral request also appeals to a customer’s sense of importance, because it reminds the customer that their voice matters. When the customer feels that their opinions are valued, it  encourages them to spread the word about your business. 

2. Offer incentives 

A great way to boost engagement when it comes to customer referrals is to offer a reward to the customers who refer your business. This incentive can make them more motivated to spread the word. Incentives are especially effective when you reward both the customer who gave the referral, and the new customer who found your business through a referral.

If you are worried about potential loss of revenue, don’t be! Offering a discount through a referral program may seem like you’d lose out on money, yet the opposite is true. Customer acquisitions through referrals spend 200% more than the average customer. Customers that find your business through referrals are likely to spend more in the long run. 

3. Know what matters to your customers

Don’t simply copy what you see another company doing. When you are considering referral marketing best practices, it’s important to understand your customers – remember what will work for your other business may not work for you. While looking at your competitors can be good research, it is also important that your referral marketing strategy is tailored to fit your business. Because of this, you want to offer an incentive that is relevant to your customers. 

For example, let’s say that you sell a product that is very high-end and therefore quite expensive. In this case, offering a small percentage off of the total price might not be the right incentive for your customers. Instead, consider sending customers a gift card as a reward for referring your business. 

Do I need to offer incentives to my customers? 

No, incentives are not a necessity for customer referral marketing. Though incentives can be a powerful motivator, so can fantastic customer experience. Many customers will be motivated enough to refer your business simply because they enjoyed the product and interacting with your business. That being said, if you don’t offer incentives, it is important to send out referral requests and include mentions of your customer referral marketing program throughout your customer communications. And remember, regardless of whether or not you add an incentive, always thank your customers for referring your business! 

4. Create a promotion strategy

Don’t send random, one-off incentive emails. Customer referral marketing requires a conscious promotion strategy. Promotion is an ongoing need for all businesses. If you want your business to grow, referral marketing is a channel you must cultivate over time. 

How can you start a promotion strategy? Add referral CTAs, or call-to-actions, in all of your customer communications. This can be a simple banner with something like “Refer a friend and get $10 off your next order, and they do, too!” or whatever your referral reward may be. This CTA should be clickable so that the customer can send a referral within seconds. Add these referral CTAS to your emails, newsletters, and post about your referral program often on social media. Be sure to mention your referral program on your website as well. Advertise your referral program across your platforms to help current and prospective customers take advantage of the opportunity. The more people know about this program, the more likely they are to utilize it.

5. Make it immediate

Regardless of your industry, it’s important to send your referral request as soon as possible. For most businesses, you can send a referral request right after a customer makes a purchase. For other businesses, like a medical practice, beauty salon, or financial service, send the person a referral request right after they have completed their appointment. 

Another strategy is to send out a one question satisfaction survey to all of your current customers that simply states, “Are you satisfied with [insert business name here]’s service?” If a customer answers yes, then direct them to the customer referral CTA. If the customer answers no, ask them how you can improve. 

6. Make it easy 

A good customer referral process should only require a minute of your customer’s time. Even if there is an incentive, ultimately customer referrals are favors to your business. You cannot be too demanding of your customers and expect them to dig through your website or their emails to find out how to refer your business. This means, if you send your referral request over email or text, the link to the referral should be included within the request. Increase customer engagement by making the process as integrated and straightforward as possible. 

7. Show your appreciation

One of the most important referral marketing best practices is to thank your customers. Be sure to show your gratitude to each customer who gives you a referral. If the customer was given an incentive, be sure the reward is sent to them right away. Virtual gift cards and discount codes make this easy to complete almost instantly. Another fun way to thank your customers is by featuring them on your social media or company newsletter. You could create a “Thank You” section to the customer who has referred the most prospects to your business. This will make them feel appreciated and encourage other customers to start referring your business. 

8. Invest in the right tools

Successful customer referral marketing is achieved through structure. You do not want your referral marketing to be a one-off experience, or forget to send out a referral request after a customer interaction. For this reason, many brands choose automated platforms for the ease of the customer and business. The right referral software will have customizable templates so that you can manage your brand’s voice, and save time on crafting the requests. This software should also be integrated with your other customer communications so that your customers can fill out their referrals seamlessly.

Start investing in customer referrals

By following these 8 referral marketing best practices, you will create a strong customer referral marketing strategy. Amplify the voices of your happy customers and attract new ones through referrals. Though referral marketing may invest your time, a referred customer is 18% more loyal than a customer acquired by other means. Once your referral program is up and running, you will be gaining more customers that appreciate your brand and will be loyal to your business long-term.