Referral programs: What is the best for you?
Referral programs are an important part of an organization’s complete loyalty strategy. In this article, I have listed the most popular types of referral programs and which ones may work best for you.
However, confusion around what exactly it means seems to be common. Like most things, the devil is in the details: Depending on who is referring whom, what the reward is, and how the referral happens, the name and connotation of the program can change significantly.
Customer Referral Program
Referral: Customer -> Customer Primary Market: Consumer Common Rewards: Credit, Discounts, In Product Rewards
Customer referral programs reward existing customers for referring their friends, family and colleagues to a business. For digital services and products, referred users are typically sent to where they can download an app, signup for a trial or browse the online store. Customer referral programs are most commonly used for promoting consumer products, but can also be used for business-to-business products.
The referrer is often rewarded after the referred user has made their first purchase, or after they have used your product sufficiently. It’s common to reward both the referrer and the referred user in a customer referral program. Typically the referring customer is rewarded with something that can only be redeemed with the company, such as credits or discounts.
Partner Referral Program
Referral: Partner -> Customer Primary Market: Business-to-Business Common Rewards: Cash Payout, Gift Cards
A partner program is similar to a customer referral program except that the referrer is not an existing customer, but a member of a select group of trusted and often trained, “Partners”. Referred users can be asked to download an app, signup for a trial or possibly submit a demo request. These programs are most common in business products but can be found in consumer product as well.
Partners often have the ability to give preferential pricing to the people they refer and are typically rewarded with cash for their referrals.
Influencer Referral Program
Referral: Influencer -> Customer Primary Market: Consumer Common Rewards: Cash Payout, Gift Cards
Influencer programs are like partner programs in the sense that you recruit a group of people to recommend your product. However, in an influencer program, you are typically recruiting social media celebrities, podcasters or other people with an existing following instead of trained salespeople as in a partner program. Additionally, influencers aren’t official partners and thus can brand themselves as such. These programs are almost exclusively used in consumer products. but if your industry has a well listened to voice or a popular podcast an influencer program could work for you too.
While it is not required, the referred user may receive a discount or credit when they signup using the influencers links or code. Influencers are typically rewarded with one-time cash rewards for each new customer they help you acquire. Depending on your business it may make sense to pay out influencers after app download / trial signup or you may want to hold off until a new user pays.
Affiliate Referral Programs
Referral: Affiliate -> Customer Primary Market: Business-to-Business, Consumer Rewards: Credit, Discounts, In Product Rewards
Affiliate programs are often re-branded as “referral programs” due to some of the negative press they have received over the years. Despite some people’s feelings towards the word, affiliate programs can be very effective tools for the right business. Affiliate programs are essentially partner program open to the broader public. Unlike a partner program, affiliates come to you and apply to be part of your affiliate program. Because there is less of a connection between affiliates and businesses there can be problems with affiliates following the rules. Affiliate programs are almost exclusively used in consumer businesses such as streaming services or eCommerce.
While not as common as in other types of programs, it is possible for affiliates to provide a special offer to referred users. Affiliates are commonly rewarded with cash or gift cards. They can be rewarded for a wide variety of actions including trial signups, first purchase or a percentage of ongoing revenue.
Employee Referral Programs
Referral: Employee -> Employee Primary Market: Business-to-Business, Consumer Rewards: Gift Cards, Cash, Corporate Perks
Employee referral programs are the most different from the previously mentioned programs. Instead of asking the referrer to ask for help acquiring new customers, you are asking them to find new employees. These programs are typically limited to existing employees and used in all types of businesses.
These programs most commonly reward existing employees once a new employee is hired and has passed their probation period. Rewards are often in the from of cash, but can be gift cards or other corporate perks.
Wrapping it Up
Regardless of the type of referral program you are looking to run, always think about these three things:
Who is the referrer?
Who is being referred?
What is the right reward?