A customer referral program can help you get more customers and keep making money for your business, so if you want to be successful, you should learn the basics before you start building.
What does a referral program do?

A referral program is a form of word-of-mouth marketing in which customers tell their friends, family and colleagues about your business, goods or services. When the person they referred makes the first purchase, the customer usually receives a reward from the business.

To get people to join their referral programs, companies advertise the prizes they're offering, such as gift cards, points to redeem when shopping online, or branded merchandise. When consumers sign up, they can spread the word by sharing referral links or discount coupons with their networks.
Customer referral programs have many benefits

Referral programs are used by businesses because they help them acquire more customers, build trust, and make more money.

They create trust.
A 2020 BrightLocal survey found that 79 percent of consumers trust online reviews as much as recommendations from friends and family. Yet BrightLocal found that in 2021, only 49% of consumers felt that way. In just one year, reviews lost a lot of their importance, possibly due to fake reviews. This makes personal recommendations more important than ever.

While they may not trust every customer they meet, most people trust their friends, family, and coworkers. According to a survey by Sprout Social, 71% of American consumers say social media posts from people they know have some influence on whether or not they decide to make a purchase.

They bring in new business without spending a lot of money.
Referral marketing is a way for businesses to reach new customers by relying solely on referrals from satisfied customers. The only costs are the prizes you give participants and the paid advertising you run before the program begins. So, compared to most other forms of digital marketing, referral programs are more cost-effective to acquire new customers (CAC).

There are ATMs here.
According to Semrush, word of mouth leads to five times more sales and more money than paid advertising. According to a SaaSquatch survey, more than half of referral programs give users credit and 90% of those programs consider a transaction a /"successful conversion./" Ultimately, referral programs are a way for businesses to get both current and potential customers to make a purchase, which positively impacts their bottom line.

How do referral programs work?
To run a successful referral program, you need the right technology, the right products, the right message, and – perhaps most importantly – the right referral incentives.

When creating and launching a referral program, most companies use marketing software that tracks the referral code or link shared by a customer. Then, when a new customer purchases something using that code or link, your current customer receives a reward. The new customer can then refer someone else in their network, and so on. This continually brings in new customers, often referred to as a /"viral loop/." It's all thanks to a single customer.

The psychological concept of social currency helps explain why referral programs work so well. Referral Rock says that social currency is "your influence on social networks, online and offline communities, and the amount people talk about your business." Forbes says that "influence currency," and that's social currency, is how customers figure out how reliable a brand is. When your business gives something of value to its customers, it gains social currency.

People are usually willing to share something, usually something they know, if it makes them feel good or looks good. So they often spend their social currency by telling others about products they like or sharing their shopping stories. People who follow these promoters on social media are more likely to buy a product if it comes from a reliable source. When someone who has been recommended your business purchases something, both your sales and the referrer's social currency increase.

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Lyricist: Kamran Tagiyev
Voiceover author: Jeremy G.
Author of the animation: Asad Asadzadeh
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Project Manager: Kamran Tagiyev

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