A referral program is a promotion method where a business pays a reward for recommendations. It works like this: The user (referrer) places a recommendation (offer) – for example, on a social network or on their own website. The material contains a special link, which is called a referral link. A referral link is a unique URL for a specific referrer. It leads to the advertiser’s website. Sometimes, instead of a link, the referrer offers its audience a unique promo code. Another user (referral) sees the offer, clicks on the link or uses the promo code when placing an order. The referrer receives a reward for each such person. Referral marketing solves the following business problems. Attract customers with minimal costs .
Usually, referrers are offered a percentage
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of sales or bonuses as a reward: discounts, points, gifts. This approach allows you to reduce promotion costs. Increase recognition . For example, if a company is recommended by many bloggers, its brand begins to gain popularity. Increase audience loyalty . People may trust recommendations from their favorite bloggers and friends more than regular advertising. If you choose a referrer that is popular with the target audience (TA), the likelihood of attracting loyal customers will increase.
What kind of business are referral programs suitable for?
Buyers actively study reviews and opinions of others when choosing almost any product. As a result, both B2C and B2B niches utilize this method of promotion. Below are several industries where referrals can serve as an additional source of new buyers and clients:
Beauty salons: When people choose a specialist,
they often ask friends for advice or watch bloggers’ reviews. Companies in this sector can collaborate with popular beauty bloggers to promote download the free skip It ebook their services. When selecting a cosmetology clinic or dental service, people prioritize quality and safety. A recommendation from a friend or expert in the medical field can instill confidence.
Cosmetics, clothing, and accessories:
Subscribers of beauty bloggers and stylists often want to know where the expert bought eyeshadow, blush, or a dress. When influencers mention a brand and offer a promo code, users may feel compelled to purchase products from that brand.
Banking services: Banks frequently encourage regular customers to refer friends in exchange for bonuses. For instance, if a customer brings a friend who opens a debit card, they receive 1,000 rubles to their account.
Online stores and delivery services:
Advertisers provide regular customers with sale leads individual promo codes for friends. When a new customer uses the promo code on their first order, they receive a discount, while the referrer earns additional bonuses for future purchases.
This type of promotion has both advantages and disadvantages:
Pros:
- Advertising can be cost-effective.
- You can quickly adjust the campaign (e.g., replace bonuses with discounts if they fail to attract the audience).
- It offers a chance to build a loyal customer base.
Cons:
- You need to constantly monitor sales and manage referrer payments.
- Some partners may act dishonestly, like spamming referral links to strangers, which could damage the brand’s reputation.
- It can be challenging to track results and assess the quality of the referrer’s work (e.g., they might have non-target audience members click on the ad, leading to ineffective promotion).
Types of referral programs:
By mechanics:
- Single-level: Referrers earn rewards only for direct clicks on their ads.
- Multi-level: Referrers earn not just for direct clicks but also for actions taken by secondary referrals (i.e., friends of the original referral).
By conditions:
- Referral links: Referrers share a link with an embedded code, which others use to complete a target action (e.g., signing up for Yandex Business’s Advertising subscription).
- Promo codes: Invitees enter the code on a website or share it with a manager, usually sourced from a blogger or friend.
Yandex Business Referral Program
In some cases, companies customize their offers based on rewards.
By reward type:
- Discounts: For example, a taxi service might provide a promo code that offers a discount to both the new customer and the referrer.
- Gifts: Instead of a discount, the taxi service may offer the referrer one free ride for bringing a friend.
- Percentage of sales: Advertisers aiming to boost sales may offer rewards based on the size of purchases made through referrals.
- Fixed payments: When the goal is to attract new audiences, companies set a fixed amount for each invited person. The more clicks the referrer’s ad generates, the higher their fee.
- Additional bonuses or cash: These are typically redeemable for products or services from the same company. For instance, in Yandex Advertising’s affiliate program, customers who use a promo code receive an extra budget boost for launching their first ad campaign on Yandex Direct.
How to launch a referral program:
To effectively attract an audience through a referral system, follow these steps:
- Analyze your target audience:
Identify referrers and craft compelling offers. Consider who the campaign is targeting and study their behaviors. For example, visitors to a cosmetic clinic might hesitate to try a new procedure due to uncertainty. In such cases, offering a free or discounted first session can help. - Select suitable referrers:
Prioritize individuals within your industry who have strong reputations and are popular with your target audience. For example, if you sell fabrics, collaborate with a sewing blogger. Look at engagement metrics such as likes, comments, and shares. If you rely on regular customers for referrals, choose those who are familiar with your products and satisfied with your services—their recommendations will carry more weight, and offering them bonuses will reinforce loyalty. - Define the rules:
Make sure the program’s terms are attractive to referrers and profitable for the business. For instance, if a T-shirt store has a limited marketing budget but wants to leverage influencer marketing, it could offer the referrer a customized T-shirt and a 5% discount to their followers. - Craft your offer’s message:
If collaborating with bloggers, outline key points they must include in posts or videos. For customer-driven referrals, clearly describe the terms of participation on your website and social media. - Promote your offer:
Use all available channels to communicate the offer, including website announcements, social media, email newsletters, and outreach to influencers. Even small businesses can implement a referral program and integrate it with their loyalty programs.
