A referral program is a growth tactic that encourages existing customers to recommend a brand to for example their friends, family or colleagues. A great way to stimulate this form of word of mouth is by using referral rewards. 

If done correctly this can be a very effective way to increase your customers, as 9 out of 10 people trust peer recommendations more than traditional advertising. More and more companies use this kind of trust-based marketing to reach new customers. 

Referral rewards often go in two ways. The referrer receives a reward and the referee as well. You can offer a one time incentive, where both the referrer as the referee receive a discount for example. Or you can offer accumulating rewards. Customers of Tesla, for example, receive different kinds of rewards based on their amount of referrals. You can attend an exclusive party after 5 successful referrals, or purchase a non-public model after 10, etc. 

To experiment with referral rewards it is important to target the right customers. These should be ones who are already very happy with your product or service. 

So how do you identify the right customers to target?  

Identify your advocates: this can be done by using the NPS score for example, where the advocates are the ‘promotors’ (those who answered with a 9 or 10 to the question, “how likely is it that you would recommend our company/product/service to a friend or colleague?”). 

Then start with testing which rewards your advocates would find truly valuable. Reach out to your promoters. They are most likely to engage with you, so they are a great target audience for qualitative research. Collect insights by conducting interviews, with the aim to find out what kind of referral would work best for them. Afterwards quantify your findings. Use A/B testing for example, to prove what reward would produce the best results.

Tools Referral Rewards