Small business referral programs can be game changers. However, a successful program requires strategy and implementation. Don’t worry—this blog contains everything you need to create a successful small business referral program.

Also, you’ll discover the keys to program success and practical ideas from 14 case studies. They show how small firms in various sectors have used referral programs to achieve outstanding outcomes.

What is a Referral Program?

A referral program is a marketing strategy that incentivizes existing customers to recommend your product or service to their network of friends, family, and colleagues. It capitalizes on the power of word-of-mouth marketing, where satisfied customers become advocates for your brand

Let’s say you have a friend who shares your passion for cookies. You tell them about this wonderful chocolate chip cookie bakery you discovered. On your advice, your friend visits and tries the cookies.

Referral program marketing is like that but for stores. Customers who like your store will tell their friends and family about it, so your shop gives them a small gift to say thanks.  

Here are two common types of referral programs:

• Customer referral programs: This is a program that rewards current customers who bring in new ones.
• Partner referral programs: Under this plan, businesses will collaborate to leverage word-of-mouth marketing to attract new customers.

This article discusses customer referral programs, showing how they work and how to make one work for your small business.

Many small business referral programs, such as Bluebird, Everlywell, Nature’s Bakery, etc., are successful. Other parts of this blog post will give you more information. Continue reading!

Benefits Of Referral Programs For Small Businesses

Now, we both know small business referral programs can get more customers and keep the ones they have. Let’s look at some of the main referral program benefits:

Boost Customer Acquisition:

According to a Pew Research report, millennials care greatly about word-of-mouth ads. 48% say that word-of-mouth is more important than TV ads. And 23-28% say they wouldn’t buy or use something if their friends didn’t like it.

Cost-effective marketing:

Research from Annex Cloud shows that link referral program marketing has response rates that are 3–5 times higher than any other platform. This organic customer growth is much more economical than paid advertising channels.

Promoting customer loyalty:

When a customer refers a friend, it builds a connection and trust between the customer and the brand. Your customers feel appreciated when they tell others about your goods, which makes them more loyal. 

Higher retention rates:

Ambassador study shows that 82% of Americans consult friends and relatives before buying. That means referred customers have a higher lifetime value than those acquired through other channels. This is because they come in with a built-in level of trust and are more likely to make repeat purchases.

Improved brand awareness:

Customers commonly promote goods they love because people want to brag about things they love. When people talk about a certain brand in a casual setting around 90 times a week, it’s good for the brand.

You may get prospective customers, strengthen relationships with current ones, and boost your business’s development potential all at once.

How To Set Up A Small Business Referral Program?

Customer loyalty is the golden ticket to sustainable growth for any small business. This tutorial shows you how to develop a small business referral program:

• Finding the target market: Who are your ideal referrers? Understanding your customer base helps tailor the program for maximum impact.
• Providing referral rewards: What motivates your customers? Design irresistible rewards that entice them to spread the word.
• Facilitating smooth and straightforward referral rewards: Get your program noticed!
• Promoting the referral program effectively utilizes strategic marketing channels to promote your referral program and encourage participation.
• Tracking and evaluating program performance: Monitor and adapt your strategy to maximize results.

Read on!

Step 1: Identifying the Target Audience

Although satisfied customers are more inclined to recommend your product, ReferralCandy’s research reveals a shocking truth: Only 29% of consumers do so without rewards. That means customers need motivation for the referral program.

To put it more simply, knowing your target audience helps you make a referral program that talks to them and gives them benefits they want. In turn, this makes the program work better and leads to more good recommendations. 

1.1. Customer segmentation:

Sort your customers into groups according to: 

• Customer buying history: 

Analyze purchase data to find high-value consumers who spend often or recommend others. These loyal customers are ideal for your program.

• Product interests: 

Analyze what products customers purchase together or explore most. This lets you target customer with referral program offerings that match their interests, enhancing referral success.

This focused strategy encourages loyal consumers to promote the company and attracts new customers who appreciate these unique offerings.

1.2. Identify your loyal customer:

You could also give discount coupons for your small business referral program to your most loyal customers. Building a community is the easiest way to get people to buy from you. 

Next, look for people who give good reviews on social media, give feedback, or buy from you repeatedly. Offer them benefits from your private promotion scheme to encourage them to help you even more. 

Read more: 14 Ways To Increase Customer Reviews.

Step 2: Offering Attractive And Relevant Incentives

After finding your ideal referral candidate, build your program’s rewards. It drives satisfied consumers to share the news. Consider these common options:

• Referral discounts: Offering discounts on after-purchases that motivate the referrer and the friend they have recommended.
• Freebies: Offer free shipping, product samples, or extra things as a reward for people who get others to buy from you.
• Cashback incentives: Consider offering cash rewards for successful referrals for a more direct approach.
• Loyalty Points: Consumers receive referral points, which they may redeem for a reward according to your loyalty program’s redemption rules.

Get ideas from Quip, a stylish and affordable electric toothbrush. They give referrals $10 off their first order of $30+, and referrals get $10 off each successful referral.

Step 3: Making The Referral Process Easy And Seamless

The next stage is to make sure your referral program works well for both you and your customer when you have appealing incentives.

3.1. Design a user-friendly referral system:

Your reference program should work with your existing website or app. Consider features like referral pages with clear directions, unique reference links, and simple ways for referrers and referees to keep track of each other.

3.2. Leverage referral program software:

Here are some software that can make the whole process of getting referrals easier:

• For Shopify stores, the top choice is BON Loyalty.
• For BigCommerce stores, you might consider ReferralCandy.
• For WooCommerce and Magento stores, you can consider Ambassador Referral and Referral Rock software.

These tools can do things automatically, like making unique referral links, keeping track of friends, and giving out rewards.

3.3. Clear instructions and user support:

Don’t leave your customers guessing! Ensure the steps for joining your referral program are clear and easy to follow. There are many ways to do this, such as through pop-ups, banners, FAQs, explanation videos, or pop-up widgets on your website.

Also, ensure that your customer service quickly responds to questions and that the suggestion process goes smoothly.

Step 4: Promoting the Referral Program Effectively

Now that you’ve made a great program with great benefits and an easy-to-use interface, it’s time to get the word out.

4.1. Leverage Your Social Media Channels

Statista’s data shows that 38% of Gen Zers (born 1997–2012) spend more than four hours a day on social media. If you want to reach young people with your referral program, don’t forget how powerful social media can be, especially when you’re a small business! 

On the social networks you already use, you can share the post about starting your reference process. It’s important to create unique content that shows how both referrers and referrals can benefit. 

4.2. Consider Influencer Marketing

If you think Facebook Ads are too costly and dangerous for a small company that doesn’t know how to attract new customers. Influencer collaborations could be the answer for you. 

More than half (53%) of Gen Z social media users have made a purchase based on an influencer’s suggestion, according to Pew Research. That’s why it can be so effective to collaborate with influencers whose audiences are similar to your own.  

Need some inspiration? Look at Youfoodz, an Australian company delivering fresh, healthy meals. They collaborated with 81 influencers to showcase their convenient and delicious options. 

Here is an example of an Instagram post that Brittany Daisy, who has more than 10,000 followers, made.

4.3. Email Marketing

Remember your existing customer base. Email marketing is a powerful tool for spreading the word about your referral program.

Write a convincing email explaining the program’s benefits and giving clear directions on how to join. The key? Include a call to action to encourage them to tell their friends and family about the program.

Research by GetResponse shows that personalizing your emails can significantly boost click-through rates – almost 29%. In other words, people are much more likely to click on a link if the email feels tailored to them. That’s why identifying your target audience from the beginning is crucial.

Sephora’s Beauty Insider program is a great example. They send Rouge members (their most loyal tier) personalized emails offering exclusive 20% off codes to share with friends.

4.4. In-Store Promotions

For brick-and-mortar businesses, remember the power of in-store promotion of small business referral programs. Train your staff to mention the referral program to customers during interactions. 

To raise awareness, consider displaying signage or promotional content at checkout points. Also, choose loyalty program software that allows point-of-sale (POS) system integration features. 

Read 5 Best Digital Loyalty Programs For Small Businesses if you haven’t discovered appropriate loyalty program software.

Need more ideas? Read on: 12+ Creative Ways to Promote a Referral Program.

Step 5: Monitoring And Measuring the Success of the Program

It’s important to track and analyze the performance of your referral program. This is why it’s important to understand key performance indicators (KPIs) like:

• The number of successful referrals is how many referrals signed up for the products or took other action after seeing your site via the program.
• Share rates indicate the number of customers who actually recommend others and the frequency with which they do so.

Here are some tools that can help you track and analyze your referral program data:

• Google Analytics is a tool that tracks referral traffic and gives visitor behavior data. 

You can open Google Analytics and go to Reports > Acquisition tab > All Traffic tab > Referrals to see the desired information. You’ll find a list of your site’s referral sites ordered by session volume.

Read more: How to find referral traffic in Google Analytics?

HubSpot is a marketing software that tracks referral programs and provides thorough statistics. 

You can use HubSpot’s Traffic Analytics features to track referrals. Click the Referrals source in the Sources table to see the referrer website that sent visitors to your site. Referrers lead to particular pages from the website that connect to yours.

Find out more here: How do you track referrals using HubSpot?

Looking at your program’s data can help you find ways to improve it. If some customer groups aren’t participating as much, change your messages or rewards to make them more appealing.

14 Case Studies Of Successful Small Business Referral Programs 

This part examines 14 real-life small business referral program case studies that show you valuable lessons and provide perceptive information.

Case Study 1: Bleubird 

The first small business referral program case study is Bleubird; the environmentally friendly clothes of this fashion company are making headlines.

Bleubird understands the power of a good recommendation. When a happy customer refers a friend who places an order, both parties are rewarded. The referrers earn 500 points, while their buddy gets 15% off their first order.

Why does it work?

Bleubird’s program depends on two things to succeed: shared purpose and value. This, in turn, draws in new customer by offering an alluring 15% off their first purchase.

Second, the eco-friendly fashion focus of Bleubird appeals to a clientele that respects sustainability. When a firm shares its values, customers are more likely to believe suggestions. According to a Salesforce study: Sixty-eight percent of consumers value companies that operate in society’s best interests.

Finally, the 500 points customers get for referring one can be used to earn future purchases. This gives current customers a long-term reason to buy again.

Case Study 2: Nature’s Bakery

The snack company Nature’s Bakery is the focus of our next case study. They understand the importance of loyal customers. Each purchase made by a recommendation earns current customers 75 points.

Why does it work?

Nature’s Bakery’s program cleverly targets its most valuable asset: its regular buyer base.

This method works especially well for marketing products like snacks. It’s easier for people to repurchase snacks than something big like a new car. By rewarding existing fans with points for referrals, they encourage repeat purchases and brand advocacy. 

Also, Nature’s Bakery’s referral program fosters community among its customers. It makes its customers brand ambassadors, encourages them to share their passion for the product, and promotes healthy eating.

Case Study 3: Everlywell

Our third small business referral program case study focuses on the Everlywell health and fitness program. The brilliant slogan of their referral program is “Don’t let friends pay full price.” This evocative line grabs attention right away and highlights the program’s mutual benefits.

When someone uses a referral link, they score a 15% discount on their first purchase. The referrer is also rewarded with a $35 Amazon gift card. 

Why does it work?

This two-sided method is supported by PWC’s study. Their poll shows that 53% of customers stick with brands that give them good benefits. This idea is wonderfully used by Everlywell. By giving benefits to people who refer others, they get customers more involved and build trust through shared value.

This also fosters a sense of community and positions Everlywell as a brand that cares about its customers’ well-being and wallets.

Case Study 4: Bandier 

Get motivated then by Bandier, a fitness fashion company. With each successful recommendation, the referrers will get $25 in points, and the referred person will receive $25 off their first $100 transaction.

Why does it work?

Bandier’s program follows the successful model of Bleubird and Everlywell by offering benefits to both parties. However, they’ve added a key twist: a minimum purchase of $100 to qualify for the discount.

This small change is meant to attract potential high-value customers who are likely to spend more overall. That means Bandier can maximize the return on investment of its referral program.

Case Study 5: Brooklinen

Next, visit Brooklinen, a premier supplier of affordable, high-quality textile goods for the home. Referrers get 1,000 points that may be used for their subsequent purchases, and the person they recommend will receive $25 off their first purchase of $100 or more. 

Why does it work?

Brooklinen’s referral program takes inspiration from similar structures like Bandier’s but with a clever twist. Brooklinen prioritizes rewarding its increasing customer base.

Brooklinen’s referral program hinges on the concept of loss aversion. They cleverly played on the psychology of customers because 1,000 points is not a small number of points, and customers will feel sorry for not using it. This means they will also ensure repeat purchases from existing customers.

This psychological push encourages current customers to buy more to “use up” their points. Their referral program undoubtedly takes a smart approach to customer acquisition.

Case Study 6: The Sill

Let us now explore The Still, a shop that offers flowers and decorative plants. The referee will get $10 off their first purchase, and the referrer get 500 points.

Why does it work?

Looking at the earn points table below, we can see that the activity of introducing new customers is the activity that earns 500 points (the most points). And according to The Still’s conversion, 500 points equals a $10 discount.

You can say The Still understands its audience. Obviously, this focused strategy appeals to certain like-minded people. They are those already interested in landscaping and more open to suggestions from loved ones.

This environmental connection fosters a sense of shared values, making referrals from loved ones even more persuasive.

Case Study 7: MeUndies

Turn our attention to MeUndies, a well-known company for its expressive and lighthearted swimwear and underwear.

For each successful referral, friends who click on a unique referral link and complete a Qualified Referral transaction get 20% off their first purchase of $12 or more. The referrer also gets a $12 shop credit.

Although MeUndies does not have a referral program page that is as attractive and easy to navigate as the programs we have introduced. Still, their referral program is working well.

Why does it work?

MeUndies is aware of the need to use a two-pronged strategy to attract new customers and retain current ones. Their rewards offer tempting incentives for both sides.

Unlike Bandier and Brooklinen’s referral programs, which require a higher minimum buy for the discount, MeUndies keeps things accessible. With a minimum order value of just $12 for new customers, it’s easier for everyone to get the benefits.

Case Study 8: Rothy’s

Turning now to Rothy’s, a line of environmentally friendly fabrics that are wardrobe mainstays.

For the referreds, $20 off their first $50+ buy, and the referrer $20 off each offer fulfilled. This referral program cleverly combines environmental consciousness with smart customer acquisition.

Why does it work?

Win-win scenarios have great power, as Rothy’s does. Their program offers appealing benefits to both the recommended person and the referrer.

As with the success stories of Bluebird and The Sill, which we discussed before, Rothy’s environmental values have enabled the company to establish a solid community. 

Customers who share the brand’s values are more likely to recommend Rothy’s to friends and family with similar beliefs. This fosters trust and goodwill, leading to a higher referral conversion rate.

However, there is a strategic twist. Rothy’s wants to attract consumers who respect sustainability and quality, as shown by the $50 least buy threshold for the referral discount. 

Case Study 9: Reckless Ericka

Ranking eleventh is Reckless Ericka, a company well-known for its exquisitely crafted clothing. Their referral campaign follows a well-known strategy but does it with an emphasis on the customer experience.

They give the referrer a $30 coupon and $10 off their first buy (at least $50) for the person they recommend.

If you follow all the brands mentioned above, you will realize that Reckless Ericka uses a familiar strategy of directly targeting value rewards for current and potential customers.

So, why is it successful?

However, unlike MeUndies’s program, customers might have to navigate a text-heavy referral program page. Reckless Ericka prioritizes a smooth user experience.

What truly sets Reckless Ericka apart is their use of a loyalty widget pop-up powered by BON Loyalty. This clever feature lets customers easily access the program details from the product page or homepage. It makes it easier for customers to take part.

This referral program is a great example of how a tried-and-true plan and an easy-to-use layout can work together. 

Case Study 10: GYMBROs 

We would like to share with you a fascinating referral program from GYMBROs, a local Australian gym store that operates on the Shopify platform. Under their referral program, each referrer and the person they suggest get 100 points equally.

This is the only referral program we mention in this blog post that offers loyalty points alone. It’s not the discounts or cash back consumers seek.

But why is it successful?

Gymbros exemplifies the strategic alignment of loyalty programs with brand identity. By offering exclusive, limited-edition Popsockets redeemable for 100 points, they cultivate a powerful sense of community among members.

This case study demonstrates the importance of designing synergistic programs. When a company’s loyalty program rewards are in line with its basic values, customer participation increases. 

Businesses aiming to build a strong brand identity or those with unique product offers might want to give GymBros’ approach some thought. Their Shopify shop runs using the BON Loyalty app. 

Case Study 11: Pura Vida Bracelets

Now, we’re introducing the handmade bracelet business Pura Vida Bracelets. They have a compelling story ingrained in their DNA. By selling bracelets, they also spread an optimistic and altruistic message.

Their program offers a $10 discount to the referrers and a 50% discount to the referreds on their first purchase.

What differentiates Pura Vida Bracelets’ referral program from the others?

They are the only program offering a 50% discount with no minimum purchase requirement for the referred friend. This generosity reflects its core mission. Consumers are driven by the awareness that their purchase supports a deserving cause in addition to the discount. 

Case Study 12: Allbirds

The sustainable apparel firm Allbirds is our list’s last small business referral program. For referrals and referrers of their first purchase, they are offering a $15 discount.

Like other environmentally friendly companies, Allbirds appeals to a certain demographic by posing the question, “Like Allbirds? Love the Planet? Tell your friends about Allbirds.” This encourages empathy and a logical feeling of trust, which boosts the program’s conversion rate.

Top 5 Customer Referral Program Challenges and Solutions 

Although customer referral programs effectively expand your company’s reach, they may also be daunting. Small businesses often worry about making errors and risking the program’s effectiveness. 

But fear not—here are the top 5 challenges and how you get over them to start a successful referral program:

Challenge #1: High Profile & Risk Of Errors

Referral programs act as a kind of customer service magnifying glass. However, a single negative customer experience might prompt customers to tell up to ten others about their experience.

That means errors in reward tracking, promotion delivery, or a confused program may spread quickly online and harm your company’s reputation.

What is your solution?

The answer is to start simply and test thoroughly. Don’t start by overcommitting to a difficult program. Begin with a simple referral program, such as giving discounts to the customer who is recommended and the referrer.

Also, try all of your program’s elements fully before letting all your customers use it. It includes tracking, contact, and reward delivery.

This will ensure the program is easy to launch and lower the chance that mistakes will be made public.

Challenge #2: Need For Cross-Departmental Buy-In

The effectiveness of a referral program relies on teamwork. Leads must be simply requested by customers. Marketing has to develop memorable slogans. Customer service also needs to be ready for a flood of new customers.  

Unfortunately, silos between departments can make things harder sometimes. 

What are the solutions for you?

Immediately meet with people from different departments to ensure that everyone understands the goals, benefits, and roles of each team in the program.

For example, Marketing should prepare salespeople to effortlessly incorporate referrals into their discussions. While customer support may prepare them to answer new customer queries.

Challenge #3: Difficulty In Achieving Repeat Referrals

After a while, the excitement of a new program can wear off. It might be especially challenging if your company doesn’t have a strong customer referral culture, where customers are genuinely enthusiastic about recommending your brand to others.

One reason for a lack of a referral culture might be a program that hasn’t been integrated. This means components such as website functioning, staff communications, and product design that aren’t aligned with promoting the program.

What are the solutions for you?

A good starting point is increased program visibility. It is possible to remind consumers about the program and its advantages by highlighting it in product/website design and other marketing channels. 

Here’s how to improve:

• Internal factors:
  • Product and website: Make it easy to share referral links or add social sharing buttons to the product or website.
  • Train staff thoroughly on the referral program and its benefits. Remind them to recommend the product genuinely based on positive customer experiences.
• External factors:
  • Marketing channels: Promote the program using clear messages and calls to action on all marketing platforms, such as social media, email, and website ads.

While increasing program presence is a good step (external elements – marketing channels), a deeper focus on building customer referral culture is necessary (internal elements – product, staff).

Challenge #4: Lack Of Patience And Realistic Expectations

Although customer referral programs are an excellent approach to draw in new buyers, keep in mind that they are not miracle money makers. It takes time to generate eager customers.

According to Dr. Ivan Misner’s blog, it takes 90-200 hours of relationship development to see a meaningful rise in referrals. This is shown by Dropbox, which took 15 months to produce meaningful benefits from the referral program.

So, patience and consistent promotion are key ingredients for long-term success.

So, what are the solutions for you? 

Motista’s survey found that emotional brand fans are 71% more inclined to suggest the brand. That’s why you should focus on building strong relationships with potential referral partners. This includes building a community, collaborating with others in your network, and providing value to them.

Challenge #5: Challenges In Campaign Tracking And Monitoring

Making sure every referral gets credited and rewarded accurately is crucial for program success. But let’s be honest, tracking can get messy if you don’t have the right tools and processes in place.

So, what should you do?

Invest in referral program software. These technologies may provide useful program statistics, handle awards, and automate referral tracking. 

Track your software’s performance, including metrics like referral rates, conversion rates, and reward redemption rates.

Using this information, you can pinpoint areas that need work and tailor your program to get the best possible outcomes.

FAQs About Referral Programs for Small Businesses

How to start a referral program?

Here’s is 5 easy steps to start a customer referral program:

Step 1: Define your goals and target audience.

Step 2: Create an attractive incentive system that benefits both sides. 

Step 3: Create a referral system.

Step 4: Promote and evangelize.

Step 5: Track metrics, monitor, and optimize.

How do I tell people to refer my business?

Through Marketing Materials:

• Website with directions, connections, and rewards that are obvious.
• Email Marketing highlighting the referral program and showcasing success stories from past referrers.
• Social Media promotes the program through engaging content.

What is a reasonable referral fee?

Referral Rock’s blog notes that while standard percentage referral fees typically vary from 5% to 35% of the transaction value, this is a broad range, and some businesses give even more because of a competitive market.

How do you optimize your referral program for increased customer engagement?

Enhance the user experience:

• Simplify the process. Make it easy for customers to understand the program, participate, and track their referrals.
• Mobile-Friendly experience. Ensure your referral program is optimized for mobile devices, as many customers browse and refer on their smartphones.

Leverage referral program automation:

• Referral tracking software: You can set up emails to welcome new program members, thank customers for their help, and tell customers to tell their friends about the program.
• Automated communication: You can set up automatic email processes to welcome new program members, tell customers to refer others, and thank them for their help.

What is a good referral amount?

Here’s a general breakdown to get you started:

• Discounts: 10-25% off a purchase is a common starting point.
• Percentage Commissions: 5-15% of the referred customer’s purchase value can be a strong incentive for B2B programs.
• Flat Referral Fees: Consider offering a fixed amount ($10-$50) for successful referrals.
• Free Products or Services: This can be a great option, especially if you have a tiered reward system based on the number of referrals.

The key is to experiment and see what works best for your audience.

The Ultimate Shopify Tool To Increase Repeat Purchases And Referrals

You might want to use the BON Loyalty app if you run a Shopify business. This Shopify store for reward apps lets small businesses create referral programs at an affordable price and is now chosen by more than 7000 merchants on Shopify.

Get started today and experience the BON Loyalty difference!