Create Referral Codes For Your Customers [HOW TO]

How to create referral codes

Are you looking for an effective way to accelerate growth in your business?

Look no further than referral marketing!

Referral marketing is where you ask your current customers to refer their friends, and if they do so, you reward them for referring new business your way.

To track these referrals you’d use things like referral codes, referral links, or referral software. Often these methods are all used together when a business launches a referral program.

In this article we’ll talk you through how to create referral codes for your customers, and how to actually prompt them to refer their friends. Keep reading if you’d like to get more referrals and grow your business in 2023.

Let’s get started!

What Is A Referral Code?

The jargon answer: A referral code is a unique combination of letters or numbers that serves as an identifier for individuals participating in a referral program. It acts as a key that unlocks rewards or incentives when used by someone to refer others to a particular product, service, or business.

The simple answer: A referral code is the code your customer would share with a friend they want to refer to. If that friend then uses that code on checkout to redeem a discount or bonus, you would then be able to track who that referral code belongs to. 

The biggest use case for referral codes is in influencer marketing 👇

Influencer posting on IG with a referral code

Why Referral Codes Are The OLD Way Of Referring

Referral codes have long been a popular method for businesses to track and reward customer referrals. These unique codes are shared by customers with their friends and family, who then enter them during checkout or sign-up to receive incentives or discounts.

This method works, but has been improved over time to make the act of referring more personalized and more likely to be successful. Marketers also were looking for ways to overcome the drawbacks of using referral codes to manage their referral program.

Drawbacks of using only referral codes include:

  • Referral codes require customers to remember and manually input these often complex codes, which can be cumbersome. More often than not they forget the codes by the time they are ready to buy.
  • Referral codes don’t work with longer sales cycles because – as mentioned above – they get forgotten if not used instantly.
  • Referral codes also don’t provide a personalized experience – for example if I provide my friend with a referral code, they still have to figure out how to get to your website and once they do there is no personal message inviting them to become a customer.

Referral links have revolutionized the way businesses track customer referrals, replacing the old and unreliable method of using referral codes – Kirsty Sharman, founder of Referral Factory.

Referral links have revolutionized the way businesses track customer referrals

Here are some examples of referral codes in use:

Influencer tweeting a gym code
Tweeting a referral code for a beauty brand

In both cases you’ll see the limitations – the users share their codes on social media, but no information about how to use them. This creates brand awareness, but often not as many sales as it should because the promotional codes get seen, but not used. In order to push the person invited from interested to purchasing, you should make sure it’s clear how to use the codes and where to go to redeem them!

Referral links operate by providing each referrer with a dedicated landing page to invite their friends to your business. This personalized landing page is tailor-made for the referrer, simplifying the promotion of your business and tracking of their referrals. Moreover, these landing pages allow you to create enticing ‘offers’ that customers can readily share with their friends to accept or unlock.

Referral links allow you to make a much more personalized referral experience, and they give you much more control as a business as to what you offer the person being invited. Imagine them as personal invitation pages that each of your referrers share with their friends. Here are some examples of referral links in action:

Example of referral links in action
Example of referral links in action
Example of referral links in action

When it comes to referral programs, opting for referral links offers numerous advantages over using referral codes. Firstly, it creates a more streamlined experience for both referrers and their friends. Referrers no longer need to bother with remembering and sharing complex codes; instead, their friends can simply click on the link, effortlessly visit your site, and make a purchase.

Moreover, the implementation of referral links simplifies the tracking and rewarding of successful referrals. Each referrer receives a dedicated landing page, enabling you to easily monitor the number of referrals they’ve generated and determine the rewards they’re eligible for.

Another compelling reason to choose referral links over codes is the ability to gauge the exact reach of each referrer’s efforts. Tracking codes can be challenging, as you only discover that a code has been shared once the referred individual uses it during checkout. In contrast, referral links allow you to track crucial metrics for each referrer, such as reach, referrals, and converted referrals.

Referral links allow you to track crucial metrics for each referrer, such as reach, referrals, and converted referrals

In essence, incorporating referral links is a strategic move for any business seeking growth through word-of-mouth marketing. By offering customers an effortless way to share your business with their friends, you can effortlessly generate new referred leads that already trust your brand.

You can generate links (or referral codes) for:

  • Your customers 
  • Your affiliates 
  • Your employees 
  • Your influencers 
Create referral links

To create referral links, begin by creating an account on Referral Factory. This platform will provide you with the necessary tools and features to generate unique referral links for your customers. Once your account is set up, use a referral program template to create your referral program, you’ll need a formal referral program setup in order to create unique links for each user. Launching a formal referral program is your way of communicating with your customers how to refer friends and how they will be rewarded.

Use A Referral Program Template To Launch A Campaign

Why waste time and effort starting from scratch when you can use a referral program template to launch your campaign? You can create a referral program for as little as $95 per month, and with access to over 100 referral program templates you’ll be up and running in no time. 

These campaign templates offer you a ‘referral strategy’ out of the box as they are designed by experts, your referral campaign will be more likely to be a success if you start with templates. Trust us! You can fully customize each template with your brand’s colors, texts, videos, and more – this will create a seamless referral experience for your customers.

Easily Track All Your Users Referral Links

Tracking referral links is crucial for the success of your campaigns. By monitoring and analyzing the data and metrics from these tracked links, you can gain valuable insights into the performance of your marketing efforts. Setting up link tracking in Referral Factory is a simple process that allows you to easily track all your users’ referral codes. This combination of code tracking and campaign analysis empowers you to optimize your strategies and maximize the impact of your advocate-driven promotions.

How To Create Referral Codes For Your Customers

When creating referral codes, you have the option to generate them randomly or sequentially. Random codes offer a higher level of security and are less predictable, while sequential codes can provide a sense of order and organization. Consider your specific needs and preferences when deciding which method to use.

Here is an example of a random code: 8ja02hal2

Here is an example of a  sequential code: Robert10

Upgrade Your Digital Checkout To Accept Codes As Coupons

To effectively utilize referral codes, it’s crucial to upgrade your digital checkout system to accept these codes (the same way you accept coupon codes). This functionality allows customers to easily redeem their referral rewards during the purchasing process, enhancing the overall user experience and encouraging more referrals. 

You must also consider the experience, for example once a referral code is entered, you need to show the buyer that you recognize the code and have applied the promised discount.

Create Email Notifications To Update Both The Person Referring And The Person Invited About Referral Code Usage

Keeping both the referrer and invited person informed is essential for an effective referral program. Create email notifications that automatically update both parties about any progress or updates related to their referrals. For example if John refers to Kim, and Kim uses her coupon code, then both parties should receive an email notification letting them know the referral has been successful. This ensures transparency, builds trust among participants, and encourages continued engagement in your program.TIP: If you use referral software, these emails should be included and automated for you.

The presence or absence of an expiration date on a referral code depends on the campaign strategy and rules of the actual referral program. While some businesses create expiration dates on their referral codes, others may choose to keep them active indefinitely. With referral links it’s much simpler to control the expiry date, because you can turn the links on and off at any point – usually this control sits inside your referral software. 

With referral codes it’s not quite as simple, you MUST set the expiry dates before issuing the codes as this cannot be controlled at a later stage. Here are the main reasons you should consider putting an expiry date on every referral code that is issued:

 1. Promotional periods always come to an end: Referral codes may be part of a limited-time promotion, allowing businesses to drive short-term sales and create a sense of urgency among customers. By setting an expiration date, businesses can encourage customers to take immediate action and refer more individuals within a specific timeframe.

2. Inventory management: Referral codes that offer discounts or free products may have expiration dates to ensure that the business can manage its inventory effectively. By limiting the availability of the promotional items, businesses can avoid running out of stock of special items or rewards that have been promised to users. 

3. Tracking and analytics: Expiration dates on referral codes can help businesses track the effectiveness of their referral programs and measure their return on investment for each code. By analyzing the referral codes’ performance within a specific timeframe, businesses can make data-driven decisions and optimize their referral marketing strategies accordingly.

When is the right time to issue referral codes to your customers?

Let’s acknowledge the fact that we all lead busy lives, managing one marketing campaign after another! Therefore, it becomes crucial to ensure that your business is well-prepared for initiating a referral program. By doing so, you can maximize your efforts and ensure a positive return on investment for every referral code or link you issue. 

We have compiled a list of factors to consider when deciding whether your business is ready to issue referral codes or links. You want to make sure your business is ready to execute a referral marketing strategy before you kick start the process. The reason for this is to be sure that all your effort setting up a referral program is MOST likely to deliver a positive ROI. 

These are the factors to consider before launching your referral scheme:

Do you offer an excellent product or service?

The foundation of a successful referral program lies in the quality of what you are offering. Your product or service should efficiently solve the customer’s problem and leave them delighted with their experience. Customers are more likely to recommend something if they had a positive experience. In essence, having a great product/service leads to happy customers who, in turn, become more inclined to refer to others. A key indicator here is if you see a solid uptake in your loyalty program or loyalty companies. If customers are loyal to you, and come back time and time again, it’s highly likely that they will be comfortable to share their referral codes on social media or their referral links with their friends!

Are your customers happy?

Do you have an existing customer base?

While you might have been the first customer and referrer for your business as its owner, for your business to thrive, it requires more than just your patronage. The same applies to launching a referral program with referral codes. The larger your customer base, the more advantageous it becomes to leverage network effects, where the value of your referral program increases as you have more existing customers.

Having at least 100 to 1000 existing customers is recommended to fully benefit from a referral program, with the specific number depending on market factors and your price point. The more customers you have, the better the results you can expect from your referral program.

It’s pretty simple to understand – if 500 people share their referral codes with a friend, it will drive a lot more value than if 5 people share their referral codes with a friend. If you still have a small base of customers and you’re just starting out, don’t worry so much about codes and links and software – just pick up the phone, call your customers, and convince them to spread the word. Your early customers are the origin of your business, don’t be afraid to speak to them.

Are your existing customers engaged?

The quantity of customers is important, but so is the quality of their engagement with your business. Having thousands of social media followers or a substantial email list is insufficient if those individuals are not actively engaged with your brand. Engaged customers are more likely to share their referral codes with others because they have a deeper connection and interest in your products or services. 

To gauge customer engagement, consider the key benchmarks for primary digital marketing channels, such as the percentage of people who take specific actions (e.g., sharing, opening, commenting, or liking) in relation to the number of people who see your content.

Are your customers royal?

Have you invested in paid advertisements?

If you have previously used platforms like Google, Facebook, or LinkedIn for paid advertising to promote your business and offerings, it can be beneficial when starting a referral program. Paid advertising provides a benchmark for your Customer Acquisition Cost (CAC), which is the expense of converting a potential customer into a paying one.

Knowing your CAC can help you figure out the budget for the rewards or incentives for your referral program. Generally, the value of these rewards should be lower than the cost of converting a customer through paid ads. This knowledge can also be used to create a double-sided referral system, offering rewards to both the referrer and the new referred customer (on condition that the referral code is used on checkout of course).

Are your other advertising channels working?

Have you considered links instead?

As mentioned above, there is more than one type of referral – referral codes are one way, and referral links are another. If you want to learn more about how to create referral links for your customers then read this guide 👉

Are your considered referral links?

Learn By Referral Factory
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