How To Build An Effective Customer Referral Program In 5 Steps?

A customer referral program is a word-of-mouth marketing strategy that incentivizes satisfied customers to recommend a product or service to their family and friends.

Creating an effective customer referral program can help boost audience reach, brand awareness, and customer loyalty.

Many consumers are inclined to refer a friend, using customer referral programs to earn money. Because of digital technology, most people are familiar with referral links and how such a program works.

If you recommend a product or service to your family and friends, and they decide to purchase it, you’ll earn a commission on every sale.

But how can you build an effective customer referral program? Read on and follow the five steps below.

1) Set Goals

The ultimate goal of building a customer referral program is to make a customer a brand advocate to help generate more leads for a business.

It’s essential to set goals based on your sales and marketing needs. What do you want to get from a customer referral program?

The answer to this question should help you set specific, realistic, and measurable goals. 

Building and implementing a customer referral program typically includes the following goals:

  • Increase Brand Awareness

One of the primary goals of creating an effective customer referral program is to boost brand awareness. Whenever a customer mentions your product, service, or brand in a post or comment and shares it with others, more people become familiar with your brand.

There’s even a chance of making it viral.

  • Generate Free Trial Users

Brands can benefit from launching a referral program because it can generate free trial users. If these users are satisfied with your product and decide to keep using it, you’ll be able to convert them into loyal customers. On the whole, it’s an effective reward program that can get new people to sign up.

  • Create A Buzz
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Brands want to go viral aside from boosting brand awareness and generating free trial users. A customer referral program can help generate business buzz to reap long-term benefits, such as more loyal customers, brand authority, and thought leadership.

2) Choose The Right Tools

Many businesses find building a customer referral program challenging, especially startups and small-sized businesses with a limited budget and few employees.

Therefore, choosing the right tools like referral marketing software is necessary. By doing so, businesses can build referral programs using templates without programming or coding knowledge.

Referral marketing software enables entrepreneurs to run prelaunch campaigns by building a list utilizing a multi-tiered reward system to reward more people.

Here are some tips when choosing the right tool for building customer referral programs:

  • Assess Customization Capability 

Choose a referral marketing tool that can customize widgets and emails using referral templates. This will help you obtain a significant number of website visitors from newsletters.

  • Consider Integration Capability

Pick a customer referral marketing tool you can easily integrate into your custom forms. This allows you to quickly track signups and run several campaigns as you incentivize successful referrals.

  • Check Fraud Detection Feature

Choose a tool with a fraud detection system to avoid becoming a victim of spamming and cheating. This feature can help detect threats and promote a high email deliverability rate.

  • Ensure Responsiveness Of Widgets

Widgets must be responsive regardless of the device used by visitors when referring potential leads. Choose a referral marketing tool that remains responsive to mobile devices, like smartphones and tablets. 

3) Determine What Rewards To Offer

Once you’ve decided on the best referral marketing tool, the next step is to determine the rewards you want to offer on your customer referral program to grow your loyalty income. However, many entrepreneurs commit mistakes in this particular step. 

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Some entrepreneurs choose rewards that aren’t directly or indirectly related to their business.

For example, they offer gift certificates from high-end brands. Because a referral program aims to generate more loyal customers, the rewards must be directly or indirectly related to your business rather than helping other companies.

Instead of rewarding gift cards to customers from another business or app, use your products or services as a reward.

For instance, you can offer a 50% discount off a voucher code when a customer recommends your health and wellness products to someone, which is redeemable in your online store.

4) Promote Your Customer Referral Program

Word writing text Referral Program. Business photo showcasing internal recruitment method employed by organizations

Once you have identified your goals, the right tools, and the rewards to offer, it’s time to promote your campaign.

Make your existing customers aware of your referral program to gain the promising benefits of this marketing tactic. 

Check out the following ways to promote your customer referral program:

  • Email Marketing

The fastest way to launch a customer referral program is by sending emails. Email marketing is applicable if a business has a solid customer base and email list. Your newsletter subscribers are your primary sources of referral traffic.

When crafting email content, ensure it contains complete and easy-to-understand campaign details. This will make rewards earning fast and easy for your target email recipients. 

  • Website Banners Or Mobile App Pop-ups

A business can also launch a customer referral campaign through website banners or mobile app pop-ups. You can quickly convert a customer into a brand ambassador with the right timing, formatting, and technique.

  • Paid Ads

You can use social media or search engine ads to promote your referral campaign. Make sure to narrow down your target audience who share similar interests. Moreover, boost your referral program conversion rate by creating an appealing headline.

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5) Incorporate Gamification Into Referral Campaign 

Gamification is a compelling lead generation strategy. It involves creating games, like quizzes, lucky draws, crossword puzzles, and memory games to attract more people to participate in a marketing activity like a customer referral program. 

While this step is discretionary, most successful referral campaigns use gamification. So, if you want to generate more prospects with your referral program, embracing gamification tactics is a strategic move. 


Build an effective customer referral program by following the steps above. Setting the right goals, using the right tools, and launching a referral program at the perfect timing can help you grow your business and attain long-term success.

Don’t hesitate to seek professional advice if you lack referral marketing knowledge and skills.