One of the most common questions regarding referral programs, in general, is “how much does it cost?”. Fear not, though, as referral marketing is one of the most cost-effective ways to acquire new customers. But that’s just one reason why companies are slowly beginning to appreciate the potential of referral programs. Get to know 5 reasons why it’s a great idea to try referral marketing in your business, and learn how to create a referral program that converts for a reasonable price!

Referral programs in short

Referral programs are all about clever resource usage. They are meant for companies that already have their customers, preferably engaged or even loyal ones. The core of the referral program is to employ your existing customers to find new ones.

Asking people, who already know your company (and are fond of it) to spread the word about its products and services, turns out to be more than adequate. But the referral program won’t work if you rely on just asking. That’s where incentives kick in. 

An incentive is basically a reward your company has to offer your customers for referring new ones. Why is it so important? Studies show that even if people are happy with products or services, they are not very eager to talk about them – only 29% of customers share information about things they bought or places they visit selflessly. But with just a little push in the right direction, they turn into real brand ambassadors. And that little something is called an incentive. 

Two types of referral programs

But what about referees? What would they get for hopping on the bandwagon leading to your – for example – online store? There are two types of referral programs: single- and double-sided ones.

Single-sided referral programs 

They are cheaper but, in general, less effective. Of course, that doesn’t mean single-sided referral programs are ineffective! In such a program, your company rewards only referrers – existing customers who help your company find new clients. It’s up to them how they’d convince newcomers to buy in your store, sign up for the event your company holds, or whatever your referral campaign’s goal is.

Example #1

An online clothing store decided to run a simple, single-sided referral program for their customers: for each new customer they’ll bring, they’ll get a $10 gift card, but only after the new customer buys stuff worth $50.

Double-sided referral programs

Double-sided programs take some burden off of referrers’ shoulders. Double-sided means that both parties (a referrer and a referee) would be rewarded. The obvious upside of such an approach is that it means less work for your loyal customers (meaning they’ll probably refer more people) and more reasons for newcomers to join. The even more apparent downside is cost. 

Example #2

A pizza place started a double-sided referral program on its website. Referrers get a free small pizza for every third customer they bring, and the referees receive a -10% discount code for their first order and a -25% for their second order. Such a referral program would obviously cost more, but it’d probably bring more customers and encourage them to stay longer.

Five reasons to think about running a referral program

The main benefit of creating a referral program is lowering CAC (Customer Acquisition Cost) significantly. But it’s not the end of the list. So let’s make one, then!

  • Lower CAC – acquiring new customers is costly, but if you engage your existing customers to do a (significant) part of the job, the overall acquisition cost may be lower. Don’t forget, though, that each benefit you offer for the referrers and referees can also be a part of CAC.
  • Word of mouth is more convincing than advertising – ever heard a great review about something from a friend of yours? People are more likely to believe someone they know, trust, and respect than a random ad they stumbled upon while browsing the web. And that leads us to another benefit:
  • Higher LTV – it is proven that referred customers have a lifetime value up to 25% higher than customers acquired the traditional way!
  • Re-engagement of the customers – referral programs work both ways: a nice bonus for referrers can re-activate long-time customers who have been on a break with your brand lately.
  • Forget about burning money – you don’t have to pay thousands of dollars for a campaign that might not work at all. Aside from the software you use for running a referral program, maintaining it won’t burn your money because you’d reward referrers and referees after they perform the desired action.

The most successful referral program examples

There are tons of real-life examples of referral marketing around us, and they prove that referral marketing might work wonders for both small and the most prominent companies around the world.

  • Uber – every Uber app user has an “Earnings” tab available when they get access to their personal referral link. It’s a double-sided referral program in which both referrers and referees get an in-app credit: passengers to spend for the next ride as a reward, and drivers to cash it out.
  • Budsies – a Budsies referral program creates a classic win-win situation: every time a customer refers a friend, they get a $20 coupon for shopping at Budsies. The referred friends, of course, won’t leave empty-handed – they’ll receive a 10% off the first purchase, which is an excellent addition to their initial experience with this brand.
  • Walmart+ – Walmart decided to end their usual referral program for Walmart Grocery in early 2022. In exchange, they offer Walmart+ referral program for all the Walmart+ members – the rewards are simple yet incentivizing – $20 for both referrer and referee sounds like an excellent start for joining the Walmart membership program.


Low costs, great chances for stellar revenue, getting new customers while activating existing ones – what’s not to like? Knowing that a referral program can be a real deal in almost any circumstance your company is in, maybe it’s time to think about how to create a referral program yourself?