What Is a Referral Code and How To Make Them

Have you heard something about referral marketing but are still wondering what a referral code is and how to get one for your customers?

Here’s the scoop: referral marketing is where you ask your current customers to refer their friends, and if they do so, you reward them for sending new business your way. To track these referrals (to know which customers referred their friends) you’d use referral codes or referral links.

In this article, we’ll take you through what a referral code is and how to create referral codes for your customers (using referral program software tools). If you want to skip the small talk and jump ahead to the part where you generate actual referral codes or links, then enter your website below and hit “Start building.”

We know that finding new customers has never been harder. That’s why we created this deep dive on everything you need to know to get more referrals and grow your empire in 2025.

Keep reading if you’d like to learn more about how referral marketing works, what you can actually do with referral codes, and how to use referral links to track and manage your referrals.

What Is A Referral Code?

A referral code is a unique combination of letters or numbers that identifies and connects participants 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.

Put even more simply, a referral code is what your customer would share with a friend they want to refer. If that friend then uses that code on checkout or sign-up (often to redeem a discount or bonus), you can track who that referral code belongs to.

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

How Does A Referral Code Work?

Referral codes work by serving as digital keys, typically unlocking exclusive benefits for both the referrer and the referred individual. Promotional campaigns where people give out referral codes are often called ‘refer a friend programs’.

Here’s a step-by-step breakdown of how a referral code works:

STEP 1: Sharing the Code

A satisfied customer shares their referral code with someone. This can be done through various channels, including social media, email, or messaging apps.

STEP 2: Redemption

The recipient of the referral code uses the code during checkout or sign-up. This signifies the conversion of a potential lead into a customer.

STEP 3: Referral Tracking and Validation

The system recognizes the referral code, attributing the referral to the original customer. This method of referral tracking ensures the referrer is credited for their referral.

STEP 4: Rewards and Incentives

Upon successfully redeeming the referral code, the referrer and the new customer are typically rewarded. This reward system shows appreciation to the existing customer for their advocacy and incentivizes the new customer to purchase, fostering brand loyalty.

What’s the Difference Between Referral Codes and Referral Links?

The difference between referral codes and referral links comes down to how they are shared and used in referral programs:

1. Referral Code
   • A unique alphanumeric code (e.g., “SAVE20” or “JOHN123”) assigned to a user.
   • Can be manually entered at checkout or sign-up to track referrals.
   • Often used in offline promotions, print materials, or when sharing verbally.
2. Referral Link
   • A unique URL (e.g., www.example.com/signup?ref=JOHN123) containing the referral code embedded within.
   • Clicking the link automatically applies the referral, making it easier to track.
   • Primarily used for online sharing via email, social media, or messaging apps.

The key difference between them is that referral links are easier to use since they automatically apply the referral, while referral codes require manual entry. One advantage referral codes have is that they are equally easy to share online and off, whereas referral links are best shared online. 

Why Referral Codes Are The OLD Way To Track Referrals

Referral codes work but have been improved upon over time to make referrals more personalized and successful. Drawbacks of using referral codes include:

• They require customers to remember and manually input complex codes
• They don’t work with longer sales cycles because they get forgotten.
• They don’t provide a personalized experience. If you provide a referral code to your friend, they have to figure out how to get to the website, and navigate to the code entry.

In both cases, you’ll see the limitations, such as influencers or affiliates sharing their codes on social media without information about how to use them.

Referral codes work well when there is an existing brand awareness, but for most businesses it’s a missed opportunity. To push conversions, make sure it’s clear how to use the referral codes!

Why Referral Links Are The NEW Way To Track Referrals

Referral links give each referrer 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 the tracking of their referrals.

You can see how it works by entering your website below. This is a free tool by Referral Factory, it creates a custom referral link for your business in one click.

Referral links allow you to make a much more personalized referral experience, giving you much more control as a business about what you offer the person being invited.

Imagine referral links as personal invitation pages that your referrers share with their friends. Here are some referral program examples, showing participants’ referral links in action.

In customer referral programs, opting for referral links offers numerous advantages over referral codes:

• They create a more streamlined experience for referrers and their friends.
• They eliminate the need for remembering complex codes.
• They automate tracking referrals and how many each affiliate has generated.
• They offer instant feedback for your system instead of having to wait until after a conversion.
• They provide insight into what changes you can make to encourage conversions.

In essence, using a referral link as your tracking mechanism is a strategic move for any business seeking growth through word-of-mouth marketing. Referral codes work well for businesses who have longer sales cycles or don’t use digital checkouts.

How To Create Referral Links For Your Customers

To create referral links for people to share, begin by creating an account on Referral Factory. You can do that by entering your website below, this will generate a custom referral program for your brand. Once you have this, you’re ready to start issuing referral links to your customers and fans.

Once your account is set up, you’ll see the options to edit your pages and email notifications so you can communicate with people about their referrals.

Launching a formal referral program is how you effectively communicate with your customers how to refer friends, and how they will be rewarded. This is an official way to let people know that if they spread the word about your business, you’ll be happy to reward them.

How to Track Each Participant’s Referral Link

Tracking referral links is crucial for the success of your referral marketing 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 links/ 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

You can generate a referral code randomly or sequentially. Random codes offer higher 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 for creating referral codes.

• An example of a random referral code is: 8ja02hal2. 

• An example of a sequential code would be: Robert10

Upgrade Your Digital Checkout To Accept Referral Codes As Coupons

To effectively utilize referral codes, upgrade your digital checkout system to accept them. This allows customers to easily redeem their referral rewards while purchasing, improving the user experience and encouraging more referrals. Speaking of experience, make sure that once a referral code is entered, you show the buyer that you recognize it and have applied the discount.

Send Referral Program Email Updates

Create email notifications that automatically update both the referrer and the invited person about any progress or updates related to their referrals. For example, if John refers to Kim, and Kim uses her referral code, then both parties should receive an email notification. This builds trust among participants and encourages continued engagement.

TIP: If you use referral marketing tools or software, these emails should be included and automated for you.

How Can You Control The Expiry On Referral Codes (and Links)?

The presence or absence of an expiration date on the actual 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 program software. And, since a referral link leads to an easily customizable landing page, it’s easy to notify people whether the promotion is still running in a professional way.

With referral codes, it’s not quite as simple. You MUST set the expiration 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 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, so if you’re managing a business, make sure it’s well-prepared for a referral program. You want to make sure that all your effort is MOST likely to deliver a positive ROI. You need to know that once you start issuing each referral code, you’re getting something in return!

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

Do you offer an excellent product or service?

The foundation of a successful referral program lies in the quality of what you are offering. Customers are more likely to recommend something if they have had a positive experience. Sharing a referral code is an easy ask if you delivered a great customer experience.

A key indicator is if you see a solid uptake in your loyalty program or if you have good reviews. If customers are loyal to you already, it’s highly likely that they will be comfortable sharing their referral codes and links!

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. Having at least 100 to 1,000 existing customers is recommended to fully benefit from a referral program, but the more customers you have, the better the results.
If you still have a small base of customers and you’re just starting out, don’t worry so much about code links and referral software. Your early customers are the origin of your business, so don’t be afraid to speak to them. You can learn more in this guide to referral programs for small businesses.

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 a referral code with others because they have a deeper connection and interest in your business. 

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

Have you invested in paid advertisements?

Platforms like Google, Facebook, or LinkedIn for paid advertising to promote your business 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 incentives of 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 newly-referred customer (on condition that the referral code is used on checkout, of course).

Have you considered links instead?

As mentioned above, there is more than one type of referral tracking – 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 we suggest trying this free tool below. You’ll see what a referral program would look like for your business, and how people could generate links to share with their friends.

7 Examples of Businesses Using Referral Codes

Next, we’re going to look at six different referral code examples from real-life companies, showcasing how these businesses effectively utilize referral codes to enhance their growth strategies.

1. Coinbase Referral Program (uses links and referral codes)

Coinbase, a leading cryptocurrency exchange, employs a two-sided referral program to reward both the referrer and the referred customer.

By sharing a unique referral link, referrers invite others to sign up for a Coinbase account and make an eligible crypto trade.

Upon successful completion, both parties receive a bonus, the value of which varies based on the user’s country of origin.

The referral codes, personalized with a combination of letters, numbers, and special characters, enable seamless sharing through various communication channels.

2. ClickUp Referral Program (uses referral codes)

ClickUp’s referral program operates on a straightforward principle: users earn ClickUp credit points by introducing friends and family to the platform.

Each referrer receives a unique shareable link, and the amount of credit points earned depends on the type of plan the referred customer chooses.

These points translate into tangible benefits, fostering a sense of engagement and loyalty among users.

The referral codes, composed of letters, numbers, and special characters, facilitate easy sharing and efficient tracking of referrals.

3. AirTable Referral Program (uses links and referral codes)

Airtable, a modern spreadsheet tool with database capabilities, incentivizes its users to refer others by offering a $10 credit for every successful referral.

Referrers share a unique customer referral link containing the code, encouraging their network to sign up and verify their email.

Upon verification, the referrer receives credit, which can be utilized to upgrade to premium plans. The referral code, a combination of letters and numbers, plays a pivotal role in this process, ensuring seamless referral tracking and rewarding.

4. Dropbox Referral Program (uses links, not referral codes)

Dropbox, a widely recognized cloud storage service, revolutionized referral programs by offering extra space to users who invite their friends to the platform.

Referrers are rewarded based on their Dropbox plan, receiving additional storage for each successful referral.

The referral codes, comprising a complex combination of letters and numbers, simplify the sharing process. Users can effortlessly send invites via email or copy-paste the link, enabling convenient referral activities.

5. Willful Referral Program (uses links, not referral codes)

Willful, an online will platform, employs a user-friendly referral program offering a $10 Amazon Gift Card to referrers and a $20 discount on any Willful plan for the referred customers.

After a customer purchases a plan, they receive a unique referral link, making it effortless for them to share it with their network.

The referral code, a blend of letters, numbers, and special characters, ensures secure and straightforward sharing, enhancing the user experience.

6. Uptick Referral Program (uses referral codes)

Uptick, a weekly finance newsletter, embraces a milestone referral program where referrers unlock various rewards as they bring in more subscribers.

From Uptick Card Wallets to Sweatshirts, the incentives grow in value as the number of referrals increases.

The referral codes, consisting of letters, numbers, and special characters, enable referrers to effortlessly share the program via email, Facebook, or text message.

This approach fosters a sense of achievement and encourages users to participate actively in the referral program.

7. GrubHub (uses links and referral codes)

Grubhub is an American online and mobile food ordering and delivery platform headquartered in Chicago, Illinois.

Participants of GrubHub’s program must be adults with valid Grubhub accounts and reside in areas serviced by Grubhub.

Referrers and their friends receive discount codes when the referred friends make their first purchase.

These discounts expire after two weeks and are subject to minimum order requirements.

Turn Your Loyal Customers into the Best Brand Ambassadors

Creating effective referral codes (and links) really is the best way to approach customer acquisition and brand loyalty. If you want to use codes, make sure they’re simple and memorable, and if you’re using links, well, that’s most of the work done for you! 

Just make sure you have clear incentives, effective tracking systems (like the ones offered through Referral Factory), and that you are personalizing engagement.

A well-designed referral code system can be a game-changer in organic growth and strengthening relationships with your audience. So get out there and start referring to people, because the sky’s the limit.