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Do you want to amplify your brand's reach without spending a fortune on advertising? Would you like your satisfied customers to become your brand ambassadors?

Here's a compelling reason to consider: According to Nielsen, 92% of consumers trust referrals from people they know. It highlights the immense potential of referral marketing.

In this article, we'll explore eight distinct types of referral rewards and guide you through establishing an effective customer referral program.

So, without further ado, let’s get into the nitty-gritty.

What are referral rewards and incentives?

A referral bonus refers to the benefits provided to clients who actively recommend others to a particular brand. These benefits can vary, including store vouchers, price reductions, or branded merchandise.

Such bonuses and incentives are typically provided through a structured referral scheme to involve current clients and boost organic marketing.

Many times, businesses opt to give rewards to both the referring and the referred clients. Dual-sided rewards like these are the most effective, as they genuinely express the company's gratitude for their dedication.

Now that we've understood the essence of referral rewards, let's delve into the 8 common types of referral rewards that businesses often employ.

8 common types of referral reward

The rewards businesses can offer are diverse and tailored to fit various customer preferences and company objectives. Here, we'll explore the eight most popular types of referral rewards that have proven effective across industries.

1. Gift Card

In referral programs, gift cards aren't just vouchers for a company's products. Instead, they're often cards for popular brands like Amazon, iTunes, or Starbucks.

Gift cards are a hit with customers. They offer flexibility and can be used by anyone, not just the direct buyer. For instance, a B2B company can reward employees with a gift card.

A sports brand might offer Adidas cards, while a travel firm might choose Airbnb. Companies can pick various card values to suit their budget.

However, gift cards come with expiration dates. It can be advantageous, prompting customers to use them quickly and allowing businesses to monitor usage.

For example, Weed Man Lexington has a gift card referral scheme. Customers pick from various cards, adding an element of choice and motivation.

2. Discounts/coupons

Discount vouchers are popular rewards in referral programs. Over half of global consumers value discounts the most.

These rewards benefit both the shopper and the company. Discounts are either a percentage or a fixed amount on purchases above a certain price, like $15 off orders over $50.

Discounts are valuable for brands with various products or those that see frequent purchases. They promote sales and build customer loyalty. However, discounts might be less appealing for infrequent items like furniture or bicycles.

For example, Lokai offers a 20% discount in its referral program, which is attractive for those looking to buy soon.

Similarly, The Children’s Place uses a discount model. Considering kids outgrow clothes fast and the brand has numerous clothing options, their offer of $10 off on purchases of $40 or more for both the referrer and the referred makes sense.

3. Store credit or points

Store credit strikes a balance between discount vouchers and actual cash. It's tied to a specific brand, ensuring the money remains within the business yet offers a tangible monetary value to the customer.

Many leading referral schemes, like Airbnb and Postable, offer store credits. Airbnb rewards both the referrer and the referred with credits for bookings, while Postable provides a credit for each successful referral.

Store credits are ideal for businesses with regular or pay-per-use products. They not only incentivize purchases but also foster customer loyalty.

Unlike specific discounts, store credits can be used for any item. They can also accumulate, allowing customers to use multiple credits on a single purchase.

4. Service upgrades

Instead of offering new items to your customers, consider enhancing what they already possess. For example, if they've purchased a basic plan, upgrade them to a premium one or provide an extra hour of consultation.

The method is often cost-efficient, as the actual expenses are typically lower than the reward's market value. However, it's more suited for service-based or subscription businesses.

A real-time example is how Spotify occasionally offers its free users a Premium subscription trial.

5. Free products

People appreciate freebies. Offering one of your items as a referral bonus can boost brand awareness and encourage sharing.

For example, Harry's, a razor company, gave away free products as a pre-launch promotion and gathered an impressive 100,000 emails through referrals within a week.

When selecting a product for this purpose, ensure it's affordable compared to your customer acquisition cost and valuable enough for customers to recommend.

6. Free-month subscription

Many companies today use a subscription-based model, from meal kits like Freshly to streaming platforms like Netflix and Spotify. Software services often follow this model, too.

If you run a subscription business, consider adding a free trial as a referral incentive. It retains current subscribers and lets potential customers try your service. It could be the push they need to become regulars.

For instance, the social media scheduler, Postcron, gives the referrer and the new user a free premium month. It boosts loyalty and attracts new users.

7. Branded swag

Swag is a popular and enjoyable referral incentive. It includes items like tote bags, mugs, shirts, and water bottles, often given outside regular sales.

Ordering swag in large quantities can be cost-effective, making it ideal for free newsletter referral schemes that depend on ad earnings.

Choosing the right swag is crucial. It should be desirable and noteworthy. For instance, a simple logo mug might not excite, but one with a unique design might.

For a variety of swag ideas, check out They offer numerous choices and can manage shipping in branded packaging.

Well-chosen swag not only attracts referrals but also promotes your brand.

8. Donations to charity

Using donations as referral rewards is a unique and impactful approach. It creates a triple benefit: the company gains referrals, charities receive funds, and customers feel good about their contribution.

The donation can be:

  • To a chosen non-profit or foundation.
  • Towards a community initiative backed by the business.
  • To a charity of the customer's choice

Customers might be given an option: either receive a monetary reward or donate it. Some prefer donating, especially if the process is straightforward.

Another approach is to reward the customer and make a separate donation, as done by Lauber & Will Insurance.

After exploring various referral rewards, let's dive into the main topic. How can you set up a successful customer referral program? Let's dive in.

How do you create a customer referral program?

Let's explore the steps to create a program that rewards and strengthens customer relationships:

1. Set up the foundation

Before diving into a referral program, ensure your products and services are top-notch. The foundation of any successful referral program is a satisfied customer. Engage with them, understand their needs, and ensure they have a positive experience with your brand.

2. Target audience identification

Understand the demographics, preferences, and behaviors of your ideal customer. Tailor your referral program to resonate with this audience. By targeting the right people, you increase the chances of getting quality referrals who will benefit from your offerings.

3. Design rewards and incentive program

Rewards are the driving force behind any referral program. Decide whether you want to offer monetary rewards, discounts, freebies, or exclusive access.

Consider a two-sided reward system where both the referrer and the referee get benefits. Such a system encourages more participation and creates a win-win situation for all parties involved.

4. Make it easy to share

The easier it is to refer, the more likely customers will do it. Offer multiple sharing options through social media, email, or direct links, and keep the process straightforward.

5. Draft a clear terms & conditions

You must ensure clarity and transparency by clearly outlining the rules, eligibility criteria, reward distribution process, and other pertinent details. It not only prevents potential disputes but also builds trust with your participants.

6. Promote rewards program extensively

Visibility is essential for the success of your referral program. Use your website, email newsletters, social media channels, and even offline methods to promote it. Craft compelling messages and calls to action to make potential referrers want to be a part of it.

7. Track your referral’s mechanisms

Implement robust tracking mechanisms to monitor the success of referrals, conversions, and the program. Analyze this data to understand which strategies work and which need tweaking.

8. Collect feedback to understand your customers

Regularly engage with your participants to understand their experiences, challenges, and suggestions. It not only helps in refining the program but also strengthens your relationship with your customers.

9. Try interesting engagement strategies

Beyond the referral program, maintain regular touchpoints with your customers. Send them updates, appreciation notes, or exclusive offers. A well-engaged customer is more likely to refer and promote your brand organically.

10. Seek acknowledgment and recognition

Identify and reward those who consistently bring in high-quality referrals. It motivates them to continue and inspires others to participate actively.

11. Have a compliance checks in place

Every region has its regulations. Ensure your referral program complies with local laws, especially concerning data privacy and marketing. It safeguards your brand's reputation and prevents potential legal complications.

12. Review the performance

A referral program is not a set-it-and-forget-it initiative. Regularly review its performance, gather insights, and iterate. It ensures that your program remains effective and relevant and drives growth for your business.

Now that you understand how to create a referral program, the next step is how to run it successful.

That’s where you can trust Xoxoday Plum.

Manage referral rewards program with Xoxoday Plum

Integrate a referral rewards program to make all the difference. Xoxoday's Plum is here to simplify that for you.

Plum’s vast global referral reward program catalog ensures every referral feels special.

Its easy integration and real-time reporting features make the process smooth and efficient. With Plum, you're not just offering a reward; you're providing an experience.

So, as you set out to build or refine your referral program, let Plum be the platform that amplifies your efforts and delights your referrers.

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