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7 ways to design a referral marketing program

Happy customers can be your marketing team’s secret weapon, but only if you can design an efficient customer referral program that gets you results. In this guide, we’ll break down a foolproof formula to supercharge your referral program and turn delighted customers into brand advocates.

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Download this checklist today to find out how to:

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  • Why every business needs a referral marketing program
  • A simple first step every business can take to get more referrals
  • How to make sure that your referral marketing program runs on autopilot
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Referrals can supercharge your marketing strategy

After all, Nielsen estimates that customers are 4x more likely to buy a product or service recommended by a friend or family member. Still, it's easier to measure the impact of customer referrals if you have a formal program in place. 

Our guide gives you seven tips to help you build a referral marketing program and maximize the power of word-of-mouth.

Before you download our guide, let us briefly examine referral marketing programs and how they can impact your business. 

What is referral marketing? 

Referrals have been around in the business world for centuries now. They are undoubtedly the oldest form of marketing that any business undertakes. In modern referral marketing programs, businesses add a little structure, analytics, and method to this marketing technique. 

A form of word-of-mouth marketing, referral marketing involves your existing happy customers being your advocate to their friends and family. While most customers are happy to do it without significant incentives, adding incentives and acknowledging their efforts can dramatically improve your referral leads. 

Brands like Shopify, Airbnb, and Etsy claim that most of their business comes via word-of-mouth marketing, especially referral marketing. Large retail brands are investing heavily in growing their referral programs and turning them into their biggest lead generators. 

Value of a referral program

Business owners and marketers love referral programs. A systematic approach to referrals can improve the quality of leads and make marketing easy. Here's how: 

Standardizes the referral process 

To know the impact of any marketing program, a business needs to understand the source of leads, their frequency, and the cost of acquiring these leads. With a referral program, businesses can track the quality and quantity of referral leads that come their way. 

A well-structured referral program standardizes the referral process and makes analytics easy for the business. 

Cost-effective method of lead generation

Social media advertising spots are becoming more expensive by the day. The acquisition cost per lead is increasing across every channel except for referral marketing. Since referral customers stay with a business for extended periods, their lifetime value for the business is relatively high, bringing down the acquisition cost. 

This is why referral marketing is valuable for businesses with high acquisition costs and looking to increase their customers' lifetime value. 

More qualified leads 

Leads from Google Ads, social media, email marketing, and other forms of advertising must be qualified to see if your sales team can convert them into customers. But referral marketing gives you qualified leads that can be pushed further down the sales funnel quickly. 

Since your existing customers have referred these new prospects, they already have a heightened awareness of your brand and the products. Because of that, sales become even easier than talking to someone who may need to learn more about your brand. 

Creates a viral marketing loop

All marketing campaign leads become stagnant over time. But referral marketing has the potential to keep growing and never stop if you do it well. The number of leads a happy customer can generate is limitless, and each lead they refer may go on to refer more people if they have a good experience with the business. 

This method creates a viral marketing loop where each lead holds the potential to generate more leads with very minimal investment from the business into this loop. 

How does referral marketing work?

Referral marketing benefits from the positive customer experience your brand has delivered to your existing customers. The most significant factor in the success of a referral program is how well your customers like you and want you to be your ambassador. 

In a referral program, the business approaches a customer who is happy with their product or service and is a potential referral source. Businesses usually incentivize customers with a reward, gift, or potential discount on future purchases.

The customer then looks for someone who might benefit by working with the business and refers them. 

In this case, you get a qualified lead who most likely has a current interest and need for your product or service. This makes it a highly effective lead generation program over most marketing campaigns. 

Structure of the referral program 

-Identifying customers who can refer 

Every business has some customers who are ideal  for starting a referral program. They may be prominent people in the community, long-time customers, or recent happy customers who have expressed interest in referring the business to their friends and family. Identifying them is an integral part of every referral marketing program as it tells you the potential of this exercise. 

-Identifying target users for the referral 

For the referral program to work well, the business should also understand the ideal target users. This includes identifying the best customers for your business or a particular campaign who your existing customers may know. For example, a dentist may ask their customers to refer their business to people with children since they have a discount program. 


The right incentive can make your referral marketing program a huge success. Choose something that your customers would like. Ensure it’s an ungated reward, which means the customer can use it even if the lead doesn’t become a customer. Ideally, gifts that are not related to your business work the best. 

-Design messaging 

Your referral marketing program needs messaging that connects existing customers, target audiences, and incentives. Make sure that it reaches your customers clearly and in the proper possible sense. Maintain consistent messaging across all channels for your referral program. 

-Choose the right distribution channels

Connect the referral marketing program with your customers through the right distribution channels. You can send them personally after each sale or use automation software like Birdeye to choose all customers in one go to receive the referral program message. 

If you want to elevate your referral marketing program and reap the benefits of this fantastic marketing channel, you need Birdeye's guide. Check out the tips curated by our team to take your marketing to the next level. 

Download the guide now. 

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