How To Choose Referral Incentives and Rewards

All businesses are unique in their own way, which is why what referral reward plan works for one business cannot be automatically transplanted to another with similar results. The essence of a referral program is to motivate customers to take advantage of products and services. It is therefore important to consider a lot of options when creating a referral program for a business. The choice of incentives and reward will also affect how best to promote the referral program.

According to an online poll, 88% of Americans indicates that the offer of an incentive will motivate them to share a product on social media or email. When the poll asked a demographic between 18 and 34 years, the percentage jumped to 95% which indicates the effectiveness and importance of a well-crafted referral reward program to any business. It is also easy to set up a referral program on both Shopify and WooCommerce and take advantage of all the benefits.

The importance of choosing the right referral incentives for your business

Many merchants have had trouble picking the right incentives to offer to their clients. When you poll most business owners and ask them why they have problems with their referral programs, they almost always have the same answer:

1. It needs to be perfect

Referral incentives will impact how much your referral links get shared and the traction that you will get. However, it doesn’t need to be perfect at first try. If at the first attempt, you find that the referral rate is too low and there’s a lack of interest, you can simply increase the incentives a step higher and watch or the results. In a case where the program is really catching fire and maybe becoming too expensive to maintain, it is also easy to reduce the incentives and wean customers off it gradually. It does not need to be perfect to be effective.

2. There are too many options for offers

You can have many different types of incentives and this can be overwhelming at times trying to decide. Do you prefer to give out cash? Be sure that it does not impact your profits so that you don’t lose money. You can also give out store credits on successful referrals so that you are also making revenue in the process. It is always advisable to keep the referral program as simple as possible so that customers do not get stuck in over-analysis and make the program inefficient.

3. It must not incur costs

A good referral program must cost money. You are either giving out a discount on your products and services or paying out cash, either way, profit is lost. The beauty of a good referral program is that you will have successful referrals which means you get your money back and see the needed boost in income for your business.

Types of referral program incentives: Referral Rewards and Friend Offer

Referral reward – This is what you give to your advocates and loyal clients when they refer their friends and family to your business successfully. It pays to make the reward tangible enough to make them want to make a move to earn it.

Friend or referral offer – This is an incentive that a store gives to a referrer when the referrals make their first purchase at the store. Some stores have a minimum amount that one must spend before being eligible to receive the friend or referral offer.

Ways of choosing a referral plan

Referral rewards – are your customers likely to make repeat purchases?

If your customers are those that make repeat purchases, a great referral plan is to use discounts. This is very popular and effective with the fashion industry whose customers are regular and very loyal to the brand. Examples are

  • Amuze is a luxury fashion line that is known for their exclusive discount prices on the top designer labels. Their referral program allows you to sign up and earn over 80% discount on many offers. You also have a chance to refer a friend and each friend gets $25 off their first order with the advocate also getting $25 off his or her next order too.
  • Boost Mobile also allows you to earn $25 account credit for every friend you refer and get as much as $500 in a year from referrals.
  • Payoneer is a payment platform that makes it easy for freelancers to receive payments to their accounts from anywhere in the world. They also offer all their account holders $25 for each successful referral that receives a total of $1,000 or its equivalent in other currencies in their account. Both the referrer and advocate earn the $25 reward.
  • US Cellular offers advocates a cool refer-a-friend program that avails you with up to $200 for each referral. Both you and a friend get $50 promotional cards for each smartphone activated and this extends to up to four lines activated.

Customers that love your brand will tell others and the more you reward them for it, the more eager they will be to share their brand experiences with others. Word of mouth advertising via referrals also helps to increase brand loyalty and improve the business’s revenue stream and customer adoption, especially for businesses that thrive on repeat business.

Friend Offers – A great way to reward current customers that are loyal

Doing a friend offer for your existing customers can be tough as it depends on the type of business that you run. One of the advantages of a friend offer is that it helps your customers to bring their friends to the business too. Examples of companies that use this friend offer include the following:

  • SugarSync is a file storage application that has a tiered referral program that offers a referral program that rewards both sides with higher storage allocations of up to 10GB for free. The more you invite heavy power users, the more rewards you get as they subscribe
  • Equityfeed is a stock trading app that gives their customers a 10% discount for them and any new customers that they refer. This referral program has been responsible for a large part of their new business acquisition. The high percentage of trial users who become paid customers indicates that this is a program to bear in mind when choosing a referral program for your business.
  • Lastpass provides a password storage service and has a referral program where customers are rewarded with a free premium plan with any successful referral. LastPass also promotes their referral program in their dashboard to ensure that existing users have an opportunity to take advantage of it.
  • Upserve is a popular restaurant management platform that takes a different approach to referrals by making a donation of $200 to the Clean Water Fund.
    Evernote is a commonly used software for organization that offers a two-sided referral program that gives users free premium subscriptions when they bring in successful referrals. Customers are also rewarded with higher storage capacity and additional months to their subscriptions for free.
  • Hubstaff offers a software as a service time tracker that helps businesses to keep up with staff working hours for more efficient billing. The refer-a-friend program that Hubstaff uses offers both the user and their friend who successfully signs up with 10% discount on their subscriptions. This has worked well in the past with the Hubstaff team always looking for ways to improve the customer experience and therefore encourage more word-of-mouth advertising from the customers to others.

Cash rewards as a referral reward

A lot of companies offer a cash reward to customers when they make a purchase or subscribe for a service that isn’t likely to be repeated. An example is a mattress company where the customer is unlikely to buy another one for a number of years typically. In this case, a cash reward or a cash back is a more appropriate incentive as it provides instant gratification to the customer. This goes a long way in building customer loyalty and ensuring that customer feel some level of appreciation from their brand.

  • Lyft is the largest competitor with Uber in North America. When customers refer their friends, they get a referral bonus of up to $50 in cash for their referrals and discounts for their rides.
  • HomeSuite is a vacation marketplace that also offers a two-sided referral program that gives a discount of $100 to new referrals. The referring user also receives $100 to use on their next rental booking.
  • DapperTime gives their referral advocates $10 in cash because it is better for their clients to make successful referrals and use the funds to buy another product which keeps the referral process exciting and incentivized.
  • Videoblocks also gives their referrers $20 for every successful referral that they make. They also add 90% discount off the normal annual subscription rate which is an additional benefit for customers when they make use of the referral program and bring paying customers to the company.
  • EventBrite has a referral program for their users where only the advocate is rewarded with $10 each time one of their friends or family signs up to the program. This works as more of an affiliate program unlike others and may not be as successful because the advocate profits while the new user does not get any rewards until he also refers to someone else. While it could lead to a constant stream of new business, it is not always the most effective.
  • Indochino runs a special multichannel refer-a-friend program that offers rewards to both the referrer and the referee. The loyal customer gets a $100 cash reward to spend on their next order while the friend referred successfully is credited with $50 to use in the store. This program is particularly effective because it encourages the referral of new customers, incentivizes old customers to do repeat business and overall increases customer retention and revenue per customer.

Cash Discounts or Early Access Rewards

For a company that is doing a crowdsale or a pre-order type of product, a good referral program to use is to offer a cash discount on the early signups. Here are some examples of early access rewards used as a referral incentive:

Xbox Live members can get early access to most of their Black Friday deals and earn a subscription of just $1 for the first month in which they join the program. New users are also given free access to over 100 new and old games and online access to play with friends.

ADIDAS also uses referral incentives to for their new product releases to make customers sign up for a discount code on their purchases too. This has been very effective for them and usually results in multiple sign ups and a strong demand for products.


Don’t forget that referral incentives go a long way to encourage positive behavior that makes your revenue much better. If you want your customers to become strong advocates of your brand, you need to make it worth their while. By offering them good rewards, it goes a long way to deepen brad loyalty in improve word of mouth advertising. This has been proven to be many times more effective than other forms of advertisement. Referral programs are especially effective for new products and brands that need to spread the work quite aggressively but deepen customer loyalty at the same time.

7 Response to "How To Choose Referral Incentives and Rewards"

  1. Comment From Miguel Constantine

    Good tips and reminders

  2. Comment From Harry Brooke

    Very informative.

  3. Comment From Jenny Hailman

    This is very interesting, good read!

  4. Comment From Sarah Connor

    MUST take note of these! Sounds obvious but I didn’t think of these while I was planning.

  5. Comment From Leyla Denver

    Which is better? Incentives or rewards? Nice article!

  6. Comment From Karl Fredstone

    This is really helpful for those who are still starting, your content is really well thought of.

  7. Comment From Kimberly Lee

    Always the best posts! Can’t wait for the next!

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