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Leveraging referral codes is an easy way to drive more business and reward loyal customers. Whether you’re just getting started with referral codes or looking to optimize your current program, we’ll walk you through what referral codes are, how they work, and the best practices to get the most out of your program.
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What is a referral code?
A referral code is a unique identifier made up of letters and/or numbers that businesses give to customers or users so they can share it with others to receive rewards. Referral codes are usually part of a refer-a-friend program, where customers get rewarded for referring new customers to the business.
When creating a referral code, it's important to keep these best practices in mind:
i. Make the code short and memorable to ensure it's easy to remember and type.
ii. Avoid using characters that can be easily confused with one another, like capital I's, lower case L's, or O's and zero's.
iii. Keep the format consistent for each referral program.
iv. Make the code case insensitive.
v. Personalize the code to improve the customer experience.
Referral codes are assigned to every referrer as soon as they join a program. These unique codes track and connect each step of the process, from when a customer sends a referral to whether that referral results in a purchase. Most importantly, these codes automatically distribute rewards to both the referrer and the referred customer.
Without a referral code, companies would have no way of knowing who sent the referral and who deserves a reward. Once the referred customer completes the desired action, like signing up for a paid plan, the referrer will receive their reward. In two-sided referral programs, both the referrer and the referred customer get rewarded.
Referral codes can look different depending on the company, but they generally consist of a combination of letters and numbers. They may also be part of a referral link, which we'll discuss in more detail later.
Referral Code vs. Referral Link
While the terms may be used interchangeably, there is a slight difference between the two. Referral codes are a combination of letters and numbers that the referred customer must manually enter to unlock a reward. They are usually shorter and act as a unique identifier to track who sent each referral.
On the other hand, a referral link contains the URL of the landing page that the referred customer will be brought to upon clicking on the link. Referral links generally contain a referral code at the end that helps companies track who the referral came from. Referrers can easily share the link via their preferred communication channel with a friend, making the entire experience of referral programs effortless.
Here's an example of a referral code within a referral link:
In short, the referral code is the unique identifier that tracks who sent each referral and is often placed inside a customer's referral link. The referral link is the entire link that customers share with friends when they participate in the referral program, containing the URL that the referred friend is sent to, plus the referring customer's unique referral code.
Why should you use referral codes?
Referral codes are a convenient tool that benefits both businesses and customers. They streamline the process of customer referrals and enable businesses to track referrals and reward customers efficiently. By simplifying the referral process, businesses can measure the success of their program and ensure they're getting the most out of their referral efforts.
Using referral codes automates and tracks every step of a referral program, making it more efficient for businesses. For customers, referral codes make it easy to claim rewards for successful referrals. They simply use the code when making their first purchase, and the reward is automatically sent to both the customer and referral.
Referral codes also ensure that the program runs smoothly and customers receive their promised rewards, which can boost customer satisfaction and loyalty in the long run.
Without referral codes, managing a referral program can be challenging, especially when dealing with a large customer base. Referral codes make it easier to manage the program and ensure that everyone receives the rewards they deserve.
To simplify the referral process even further, businesses can use referral program software. This allows them to track every referral, identify the most active referrers, and fine-tune the program accordingly. By leveraging this information, businesses can make the most out of their referral program and retain customers in the long run.
How does a referral code work?
Referral codes are an essential part of any successful referral program. Here's how to use them effectively:
Step 1: Set up your referral program
To get started with your referral program, you'll need to create it and launch it. This can be done manually or with the help of referral software such as ReferralHero. The referral program should offer your existing customers an incentive to refer their friends and family to your business. For example, you could offer a discount of 20% on the next purchase for every successful referral. Alternatively, you could offer a free product or service to both the referrer and the referee upon successful completion of a referral.
For more ideas on how to create a successful referral program, check out our comprehensive guide on building the best referral program.
Step 2: Assign a unique referral code to each customer
As soon as a customer joins your referral program, you should issue them a unique referral code. This code is used to tie the customer to every referral they send and to distribute any incentives they earn through the program.
To ensure high engagement, generate and assign the referral code immediately after the customer joins the program. Encourage them to start referring right away! Then, send the referral code to the customer through email, SMS, direct mail, or any other channel that works for you. Just be sure to include information about how and when the code can be used.
Step 3: Make It Easy for Customers to Share Their Referral Code
The success of your referral program hinges on your customers' ability to share their unique referral code easily. You can achieve this by including the code on all promotional emails, in the customer portal, and any other relevant locations. With easy access to the code, customers can share it with friends and family quickly and frequently.
To encourage customers to share their referral code, you should promote the program regularly. Social media and messaging apps are popular channels for sharing codes with networks through email, social media posts, or messages.
However, it's important to keep in mind that even your most loyal customers can sometimes forget about your referral program. To avoid this, you can include reminders about the program in different places, such as a small banner in the footer of your website, on your social media profiles, or in your email signature. For example, a dental clinic's referral program could offer a discount to both the existing customer and the referred friend. To remind their patients about the program, they could include a small banner with the program details and referral code in their monthly newsletter and on the checkout page of their online booking system.
If your referral program allows customers to share their code in person, it's important to make it as simple and memorable as possible. For instance, you can create printed referral cards that customers can hand out to friends and family, with a simple code like their first name and the month and year they joined.
Step 4: Tracking the codes
In order to understand which customers are referring others and how successful your referral program is, it's important to have a system in place to track referrals.
For online transactions, such as e-commerce purchases or SaaS subscriptions, links and cookies can be used to easily track referrals.
However, tracking offline transactions requires a bit more effort. Here are some tips to help you out:
- Keep a record of who received the code and when it was issued. You can use a spreadsheet or an online platform to manage your codes and easily track which codes were used by each customer.
- Ensure that customers enter their referral code at checkout. This will help you track the usage of each code and determine its success.
- Ask customers to enter their referral code on any orders they place via phone, email, or in person. This makes it easy for you to track the success of each code.
For more complex offline or multi-step sales, referral program software can simplify the setup and experience for both you and your customers.
Collecting referral codes after every successful sale is essential. You can allow referrals to enter their codes during the checkout process, or you can have your staff manually enter the code. Remember that it's important to establish a method for connecting the referral code to the customer and the referral.
Check out our free resources here if you want more information on setting up a referral tracking system.
Step 5: Promote your referral program
Lastly, it's important to promote your referral program to ensure that as many people as possible are aware of it. You can utilize email campaigns, social media posts, and even print ads to reach customers and encourage them to use their referral codes.
6 examples of companies using referral codes
To help you understand how referral codes work, let's take a look at some common examples. Typically, referral codes have a standard format and are located at the end of the referral link.
Example 1: Parcl
Parcl is a blockchain-based platform for real estate investment that enables users to invest in a digital square foot of physical real estate.
Their referral program is simple: when users sign up for the waitlist, they are given a unique referral link to share with their friends. Customers who refer their friends can earn early access to an NFT. Sharing is easy, with options including Twitter, Whatsapp, email, Reddit, and Telegram.
As shown in the screenshot below, the unique referral code is located at the end of the referral link.
Example 2: youcopia.com
YouCopia is a home brand that specializes in storage and organization products and sells them through popular retail accounts like Amazon, Target, The Container Store, and Walmart. Their referral program offers both the user and their friends a discount on their next purchase, along with a meal donation on behalf of the user.
In this referral code example, YouCopia creates a unique referral code for each user by combining their name with a series of alphanumeric characters. Similar to the Parcl example, the referral code is found at the end of the entire referral link.
Example 3: Ibotta
Ibotta is a free cashback rewards app that gives users real cash for everyday purchases.
To refer a friend to Ibotta, users can easily find their referral code in the app's dropdown menu on the Home page. Sharing the code is simple: users can copy and paste it, send it via text or email, or refer friends directly within the app. The new user needs to sign up with an Ibotta referral code to receive the bonus.
Ibotta’s referral code example is slightly different. Instead of a unique link, users receive a code that they must manually type into the app to redeem. The program also allows for social media sharing, which automatically adds the referral code to the new user's first purchase.
Example 4: The Hustle
The Hustle is an online newsletter that offers a refer-a-friend program. A subscriber's referral status is shown at the bottom of every email, along with a clickable referral code and a "Share The Hustle" button. The Hustle also follows a similar approach where the referral code is placed at the end of a referral link, making it easy for subscribers to refer others in just a few clicks.
To make the referral process more engaging, The Hustle uses attention-grabbing headlines and GIF images that highlight each milestone reward achievable with the corresponding number of referrals required.
Example 5: Doordash
Doordash's mobile app makes it a breeze for users to refer their friends. The app displays a share button for email and text, which is easy to find and use. While the referral code is complex, users don't have to worry about memorizing or manually typing it. Moreover, users can share their referral link on other platforms as well, with an auto-populated pre-written message.
Example 6: Turbotax
Turbotax has made referring friends a breeze with their sharing page that allows users to easily share the referral link or code with their friends and family. The need to memorize or manually type the link is eliminated, as users can simply send the invite via email directly from the page. The sharing page also features a pre-filled message that users can customize with additional information before sending it to their friend's email address or sharing it on social media. Sharing the invite link is also hassle-free as users can easily copy-paste the link to their preferred communication channel.
Bonus: referral code program FAQ
Creating a referral code program FAQ is an essential step for any business looking to launch a successful referral program. Providing customers with all the information they need to know about your program - such as how the referral code works, where to find their referral codes, and any applicable terms and conditions - will not only help them understand the process better but will also save you time and energy from answering customer inquiries.
We’ve put together a list below of the 16 most common referral code questions that customers may have. Customize it for your business and use it however you see fit! You may also find it helpful to include screenshots or images to make the process easier for customers to understand, as well as create explainer videos if necessary.
Note: Many of the answers below depend on your policy. Select the one that applies to your business.
1. What is a referral code?
A referral code is a special set of numbers, letters, or symbols that give customers discounts or other benefits when they purchase products in our online store. It's a great way to get a discount for your favorite items.
2. How do I use my referral code?
Using your referral code is simple! Just apply it at checkout when you're making a purchase and you'll receive the associated discount or benefit.
3. What types of discounts can I get with a referral code?
The type of discount or benefit you receive when using a referral code will be [ ].
4. How long do referral codes last?
i. Our referral codes do not expire.
ii. Please make sure you check the expiry date before making your purchase to ensure you don't miss out on the deal!
5. Where can I find my referral code?
You can find your referral code in the footer of our emails or visit your member portal at www.mywebsite.com/referralprogram
6. Is my referral code valid on all products?
i. Yes, your referral code is valid for all products.
ii. Your referral code is valid for [certain types of products or services].
7. Do referral codes work on sale items?
i. Yes, your referral code is valid on sale items
ii. Your referral code is valid for [certain types of products or services].
8. Do I need to spend a certain amount to use a referral code?
i. Yes, you will need to make a minimum purchase of [ ]
ii. No, you don't! There is no minimum purchase necessary.
9. How many times can I use a referral code?
You can use your referral code as many times as you want!
10. Do I need to create an account to use a referral code?
i. Yes, you’ll need to create an account to use a referral code
ii. No, you don't need to create an account in order to use a referral code. All you have to do is enter the code when prompted during checkout and you'll get the discount.
11. Do I need to sign up for emails to get a referral code?
Yes, you need to sign up for our emails to get your unique referral code.
12. Do referral codes work at physical stores?
No, referral codes are typically only applicable to online purchases.
13. Can I use multiple referral codes at once?
No, you can only use one referral code per purchase.
14. Do I need to enter a referral code at checkout?
Yes, you'll need to enter a referral code at checkout in order for it to be applied to your purchase.
Note: in the case of a referral link, customers do not need to enter a referral code at checkout as tracking is done behind-the-scenes through cookies.
15. How do I share my referral code?
Sharing your referral code is easy! Go to your account settings, find the Referral Program section, and copy your unique code. Then, share it with friends and family via text, email, or social media.
16. What if I forget or lose my referral code?
Don't worry if you forget or lose your referral code. Reach out to our customer support team [email address] and they'll be more than happy to help you out.
In conclusion, referral codes are an excellent tool for businesses looking to increase customer engagement and drive more sales. Give referral codes a try today and start seeing the benefits for yourself!
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