Referral marketing: setting up a programme that people use

The short answer

A referral programme encourages existing customers to introduce your business to people they know. Decide who can refer, offer a fair and clearly explained thank-you, make sharing simple, track each introduction to its source and thank people promptly. Check legal and platform rules with a qualified adviser, and never reward fake or misleading reviews.

Why referrals can work

People trust recommendations from someone they know more than they trust a business describing itself. A referral comes with a built-in introduction: the new person already has some confidence in you before the first conversation. For businesses that sell services or high-consideration products, this can be the most natural source of new customers.

A referral programme does not create loyalty. It gives satisfied customers a clear way to act on loyalty they already have. If your service has problems, a programme will only spread the problems faster, so fix the basics first. Measuring satisfaction with something like the net promoter score is a good first check.

Decide who can refer and what counts

Start by deciding who may take part. Past customers? Current ones only? Partners and suppliers? Then decide what counts as a successful referral. The clearest definition is an event you can verify, such as the new person completing a first purchase or signing a first agreement, not just clicking a link.

Write the rules in a few plain sentences: who is eligible, what the referred person must do, when the reward is given, and any limits. Keep the rules short enough for a customer to read in a minute. If you cannot explain the programme quickly, it is too complicated.

Think about who is in the best position to refer. Customers who have just had a good result are likely to be generous, and so are those who have been with you a long time. Others may prefer not to put their name to a recommendation at all, and that is fine. Programmes work best when taking part is a choice, not a burden, and when declining is easy.

Decide whether staff and their families can take part, and write the answer down. Rules that treat everyone alike are easier to defend and easier to explain.

Design a fair reward

The reward should feel like a thank-you, not a bribe. Several kinds exist.

Work out what you can afford by comparing the reward with what a customer is worth over time, using customer lifetime value. Rewards can have tax and consumer-law implications that differ by country, so ask a qualified accountant or lawyer.

If you already run points or tiers, compare this with how loyalty programmes work before you add a second scheme, so customers are not confused by two sets of rules.

Make it easy to refer

Every extra step loses someone. Give customers a short, personal link or a code, a ready-to-send message they can edit, and a dedicated page explaining the programme. Offer a simple way to share by email or a messaging app, and let customers introduce someone by name if they prefer to do it personally.

Ask at the right moment: just after a good outcome, a completed delivery, or a positive piece of feedback. Mention it in your post-purchase emails and on your thank-you page. Do not pester. One clear invitation, repeated at sensible intervals, is enough.

Provide a few wording ideas so customers do not stare at a blank message. A good draft explains who you are, what you did for the customer in one sentence, who might benefit and how to get in touch, all in the customer's own voice. Encourage them to change it. A message that sounds like a template will be ignored.

Also prepare for the other side. The person who receives the introduction should land on a page that welcomes them, mentions the introduction by name if the customer agreed, and offers a clear next step. Test the journey on a phone from the first click to the final form.

Track introductions properly

You need to know who referred whom, or you cannot reward fairly or learn anything. Use unique codes or links, and also ask every new customer how they heard about you in the enquiry form or on the phone, because some referrals happen by word of mouth with no link. Record the answer in your CRM.

Tag the links so your analytics shows referral traffic separately, using UTM parameters. Keep personal information out of the links. Reply quickly to every referred person, because a slow response wastes the favour your customer did you.

Keep a simple spreadsheet or CRM view with these columns: referrer, referred person, date, status, outcome, reward given and date. Review it monthly. If rewards are slow, customers will stop taking part, so name one person responsible for processing them promptly.

Watch for patterns that suggest misuse, such as many referrals from one address, referrals that look like the customer's own details or sudden spikes. Decide ahead what you will do, and apply the rules evenly.

Keep it honest and legal

Several rules of good conduct apply. Do not pay or reward people for reviews of your business or for positive reviews, and do not ask for fake ones; review platforms and many regulators take a dim view. Be open when a recommendation is rewarded, for example with a plain note like "referred by a customer who receives a thank-you". Do not send messages to people the customer names without checking that you are allowed to, especially by text or email; see SMS marketing basics and consent and WhatsApp Business basics.

Rules on incentives, privacy and advertising differ by country and may differ between consumers and businesses. This guide offers general good practice only; ask a qualified lawyer before launching.

Launch, review and thank people

Start small with a group of customers you know well. Ask for feedback on the wording and the steps. Check whether the process works from end to end before widening it. Thank every referrer personally, even when the referral does not turn into a sale. A handwritten note or quick personal message often means more than the reward.

Review after a few months. How many people took part, how many introductions became customers, and were those customers a good fit? Were there signs of abuse, such as someone referring themselves? Adjust the rules or end the programme if it is not serving you. Compare against other ways of keeping customers in retention versus acquisition, and see user-generated content for another way to use happy customers. If you want help with the set-up, see our digital marketing service.

Related guides

• Digital marketing
• Customer Lifetime Value Explained
• SMS Marketing Basics and Consent
• Referral marketing for small business
• Marketing funnel explained
• Transforming marketing with ai

Questions and answers

What is a referral programme?

It is a structured way for existing customers to introduce your business to people they know, usually with a clear process and a thank-you when the introduction becomes a customer.

What reward should I offer for a referral?

One that feels fair and that your margins can support. Compare it with what a customer is worth over time, and ask an accountant or lawyer about tax and consumer rules.

Can I reward customers for reviews?

Be very careful. Rewarding reviews, especially positive ones, can break platform rules and some regulations. Ask a qualified lawyer and the platform's current policy.

How do I track referrals without a link?

Ask every new customer how they heard about you and record the answer. Referrals often arrive by word of mouth with no link.

How long should a referral programme run?

Run it long enough to learn from, such as a few months, then review the results. End or change it if it is not worth the effort.