A referral program is a marketing strategy used by businesses to encourage their existing customers to refer their friends, family, or acquaintances to the business in exchange for a reward or incentive. The program is designed to increase customer acquisition by leveraging the trust and social networks of current customers.
Typically, a referral program works by giving current customers a unique referral code or link that they can share with their friends or family. When someone uses that code or link to make a purchase or sign up for a service, the referring customer is rewarded with a discount, cashback, free product, or another incentive.
Referral programs go by different names, including:
- Advocate program
- Customer reward program
- Invite-a-friend
- Loyalty program
- Refer-a-friend (RAF)
- Rewards program
Referral marketing vs. affiliate marketing
Referral and affiliate marketing do overlap under the umbrella of performance marketing, but they’re different. Affiliate marketing is the promotion of products and services online by affiliate marketers, who are usually full-time content creators, bloggers, and YouTubers. Companies pay affiliates to generate leads and sales.
Referral Program Affiliate Program Target users Existing customers, brand ambassadors, and loyal fans Content creators, bloggers, YouTubers, and agencies Who they target Family, friends, acquaintances, and colleagues Anyone Used or tried the product/service Likely Not likely Compensation Credits, rewards, and discounts Cash Can make a full-time living No Possible Reporting Basic Advanced Many program policies/rules No Yes Disclosure requirements No YesGiven the differences between referral and affiliate marketing, which one should you choose? Promote referral offers if you want to occasionally share deals with your friends and people you know but don’t want to focus on creating content. Go with affiliate marketing if you want to create content, part- or full-time, to passively make extra money.