Shoppers trust people they know more than any ad. Edelman’s 2025 Brand Trust study found that 84% of consumers rely on friends and family for brand recommendations, far more than any other source.
A referral program harnesses that trust, turning happy customers into a low-cost growth channel. By rewarding them for sharing a unique referral link or code, you create a repeatable way to acquire loyal customers.
Considering starting your own referral program? This guide deep dives into what a referral program is and why it matters, and provides a six-step guide (with real-world examples) to help you create your own.
What is a referral program?
A customer referral program is a word-of-mouth marketing strategy that rewards existing customers for recommending your products to others. Referrals can be made to family, friends, or anyone on popular social media platforms who is looking for a product like yours.
Since you are leveraging your existing customer relationships and trust, referral programs are often more cost-effective than other types of marketing. The referrals themselves are free (although there may be costs associated with referral software or any incentives you provide). Perks can include discounts for your brand’s products, free products, or exclusive access to email newsletters or special events.
Ultimately, encouraging existing customers to refer your company to their network increases their lifetime value and aids customer retention. These loyal customers are worth up to 10 times the value of their first purchase.
Why referral programs are important
Referral programs can be extremely effective when strategically planned and implemented. Here are three benefits to referral programs for retailers:
Drive conversions
Referral marketing boosts conversions, with data indicating referrals are twice as likely to convert as leads from paid marketing channels, including social media marketing and traditional marketing like television and radio ads.
New customers earned via referral have pre-established trust in your brand. Impact’s recent referral marketing report found that 86% of consumers find recommendations and reviews important in their purchase decisions, compared to only 2% who consider traditional ads as important.
Reduce customer acquisition costs
It’s expensive to market and promote your brand and products. The more you can reduce these expenses, the more your profit margins grow.
Many shoppers are willing and eager to share their experience on your behalf—at no out-of-pocket cost to you. More than three-quarters of customers are willing to refer a friend after a good experience with your business.
Find qualified leads
Referrals often share characteristics with the referrers—your target customers.
This makes them an effective way to reach your ideal audience. In fact, referred customers make more purchases than customers from other channels—and they also refer about 30%–57% more new customers. There’s an undeniable snowball effect.
How does a referral program work?
A referral program works by inviting your current customers to become brand ambassadors. When they join your referral marketing program, they receive a unique code or link to share with their personal network.
There are a few components to every referral program:
- Signup: Customers need a way to join your referral program, usually by creating an account or customer profile.
- Referral link or code: Every member of your referral program needs a unique identifier so you can track referrals and apply rewards. This may be a link or a code.
- Referred incentive: While optional, it’s a good idea to incentivize the first purchase from a newly referred customer. You can offer a percentage off, a dollar discount, rewards points, or a free gift.
- Referrer reward: Again, it’s not mandatory, but it is effective to encourage existing customers to refer new customers. Rewards can mirror the referred customer’s incentive, or be something else.
Your referral program software tracks each customer code or link. If someone uses the shared code, the referrer earns a reward.
Most platforms automate this process, so you don’t need to manually monitor or apply discounts.
Types of referral programs
Referral programs generally fall into three categories: incentivized, direct, and reputation-based.
Incentivized referrals
The most popular type of referral is incentivized, where a customer has a reason to share your products with their personal network. In return, they might receive a discount on their next purchase, a complimentary product or service, or a cash incentive.
Lifestyle brand Erin Condren offers a double-sided refer-a-friend program: referred customers get a $10 coupon code for their first purchase, while the referrer earns 1,000 “EC Insider” points (equal to $10).
Direct referrals
Direct referrals happen when satisfied customers actively recommend your company without any incentive. It’s the most traditional form of referral, often driven by customers genuinely happy with the product.
Reputation referrals
Reputation-based referrals are when you have built a brand strong enough that people are confident in recommending the products or services you offer—even if they haven’t bought from you themselves.
While it’s a good target to aim for, it’s not necessarily easy to get these types of referrals. They happen as an indirect result of having great products and a strong brand reputation.
Choosing the right referral program structure
While types of referral programs describe the overall approach to your program, structures define how rewards are delivered. Choosing the right structure helps you motivate customers and scale your program effectively.
Flat fee referrals
This is a common type of referral structure. A customer simply signs up for your program, and whenever someone makes a purchase through their link, they receive a reward.
Divi, for example, gives referrers $20 cash for every friend who makes a purchase.
Tiered referral programs
A tiered structure motivates customers to refer more people by unlocking better rewards at preset milestones. This model works well for brands with repeat customers or product lines like beauty, apparel, and consumables.
The "Share Happiness" referral program from Happy Mammoth is structured around milestone bonuses to reward its most active referrers. Customers can unlock exclusive rewards by reaching specific referral targets.
After referring five people, a customer receives a free Happy Mammoth product. Upon reaching the next milestone of 10 referrals, the customer is rewarded with a $500 credit to use in the company's store. Altogether, the program offers up to $700 in value.
Tiered referral programs often stack rewards. For example, “Refer 1 friend, earn 10% off; refer 5, get a free product; refer 10, join our VIP club.”
Multi-step referral programs
A multi-step program pays out rewards as referrals complete specific actions across your funnel. For example:
- A friend joins the company email list → the referrer gets a 5% discount.
- A friend books a demo or adds to cart → the referrer gets a $10 credit.
- A friend makes a purchase → the referrer gets a high-value gift or double rewards.
Multi-step structures are more popular amongst high consideration industries (like furniture) or B2B products like software as a service (SaaS), where buyers search, sample, or demo before buying.
How to build a referral program
- Start with a great product
- Understand your customers
- Determine the incentives
- Choose a referral marketing tool
- Invite previous customers to join the program
- Make it easy for people to refer you
So how do you create your own successful referral program? Here are six simple steps to get started:
1. Start with a great product
A referral program begins with a product people genuinely value. Go through the full product development process. Conduct market research, source quality materials, find reputable suppliers, and test your product from prototype to soft launch before its full release to your target audience.
These steps ensure your product is high-quality and trusted by your customers—the entry point to building a strong referral program.
2. Understand your customers
What does your target customer value? Why do they purchase your product over a competitor’s? Which incentives drive the most referrals?
Knowing your ideal customers and what influences their behaviors can help you educate participants in your referral program—and give them the insights to effectively connect with their networks.
Shopify's unified customer profiles can help. These profiles consolidate a customer's purchase history, support interactions, and loyalty activity into one 360-degree view. That helps you identify your most loyal advocates and tailor incentives effectively
You can collect this information by leveraging ecommerce analytics tools such as Shopify’s analytics and reporting, and others available through the Shopify App Store.
3. Determine the incentives
Incentives encourage customers to participate in your program. Make a plan to determine which customers receive rewards and clearly state the details on your website.
Some companies reward both the referrer and the new customer. This is a win-win: New customers are incentivized to make their first purchase through a referral link and the referrer is also rewarded.
Dollar credits are among the most popular referral rewards. Other reward options include percentage discounts, free products, free month subscriptions, and points to redeem on future purchases.
Whatever you choose, keep customer lifetime value (CLV) in mind. The cost of acquiring each referred customer (i.e., the cost of the incentive) should be less than the total revenue they generate.
4. Choose a referral marketing tool
Select a referral marketing software that handles referral invitations, generates unique codes or referral links, and tracks conversions. Many of Shopify’s loyalty apps automate the process and integrate with your customer data:
Next, design a landing page explaining how the new program works (including any referral incentives you give). Include a form for people to join. Ensure signups receive their unique referral link by email.
The best referral marketing platforms let you monitor campaign performance, and give referrers a dashboard to track their progress.
5. Invite previous customers to join the program
Loyal customers are your best referrers because they already know and trust your brand. Invite them to join your referral program using email marketing.
Start by sending a broadcast to announce your new program and any incentives. Most referral marketing tools can send a customer’s unique referral code or link automatically without a separate signup.
Keep momentum going by promoting your referral program in your purchase confirmation emails—when customer excitement is fresh. Consider using the footer of the email to invite new customers to join your referral program.
6. Make it easy for people to refer you
In addition to designing incentives, make sure your referral process is seamless and engaging. Provide templates customized to your brand voice for emails, social media posts, or direct messages—so customers can share with one click. Include key information such as brand name, type of reward (with reward value), and discount code or link.
You can also collect online reviews to build your overall reputation and grow a community of brand advocates. Ask happy customers to share their experiences on Trustpilot, Yelp, or other credible review sites where target customers are likely to visit before purchasing.
How to promote your referral program
An effective referral engine still needs to be marketed. Promote across your email, social, and shopping destinations so customers see (and share) your offer wherever they engage.
Email marketing
Email marketing is a leading channel that drives customers to take action. In fact, 50% of consumers directly purchased from an email in 2024, according to Marigold. You can also use it to launch a referral program and keep the momentum going.
Some emails you can send are:
- A launch blast: Send your whole email list a “get $15 per referral” email and make it easy to generate and copy a link.
- Post-purchase triggers: 48 hours after receiving an order, send an email saying “love your order? Share and earn.”
- Milestone updates: Send auto-emails when referral counts hit a certain number. The copy could be something friendly like, “You’re only one friend away from a $50 gift card.”
Use Shopify Email to manage your retail campaigns. Design branded emails in seconds with a drag-and-drop editor, and automate your emails with zero coding.
Social media
More than 5.3 billion people—64.7 % of the world’s population—use social platforms every month. For Gen Z, 63% say product reviews or ads they see there most influence what they buy. That makes social media a strategic place to promote your program.
Some ideas to get in front of customer’s feeds include:
- Post a short Reel/TikTok explaining “Give $20, Get $20” and pin it to the top of your profile.
- Create an “Earn Rewards” highlight that walks through how referrals work, then link to your refer-a-friend page.
- Run a user-generated content (UGC) challenge, saying “Post your unboxing, tag us, and share your link—best clip earns double rewards for a week.”
In-store promotion
Trust is easier to build face to face with shoppers. At the same time, many customers use their phones in-store, with 64% having scanned a QR code to check offers or reviews. That creates an opportunity to connect personal interactions with digital touchpoints, making it easy for shoppers to discover and share your referral program while they’re already engaged with your brand.
You can capture shoppers attention in-store by:
- Placing a countertop sign with a QR code that says, “Scan and share, get $20 off your next order”
- Including a unique share link on printed and digital receipts
- Encouraging staff to tell customers about your referral program
Be sure customers can access their rewards online and in-store. Shopify’s unified customer profiles ensure that a customer's loyalty points and referral rewards are tracked and available across all sales channels.
Website
Publish a refer-a-friend page that explains the give/get offer in three steps and answers “What’s in it for me?” up front. Link it from the main navigation, the footer, and every campaign.
For example, Rothy’s “Give $20, Get $20” page is available to anyone, no login required.
Best referral program examples
- immi
- Moonboon
- MeUndies
- Loot Crate
- Tentree
- Rothy’s
- 707 Street
- Junglück
- Swan
- Negative Underwear
- Bauer
- Good AirX
Check out these real-world referral programs for some inspiration:
immi
immi's program, called the "Ram Fam," recruits and manages a network of brand ambassadors and creators to promote their ramen.
First, immi identifies authentic fans, sends them products to try, and then provides them with unique affiliate links and discount codes to share with their followers.
When someone makes a purchase through an ambassador's link, the referrer earns a commission. The entire process, from applications to tracking sales and paying commissions, is streamlined through a single tool.
Moonboon
Moonboon's "Ambassador Family" is an exclusive affiliate program for creators and influencers who align with the brand's values of sustainability, quality, and Scandinavian design.
After vetting and accepting new members, ambassadors receive affiliate links and codes to promote Moonboon's baby sleep products. The program is a significant revenue driver, accounting for about 10% of the company's total monthly sales.
MeUndies
MeUndies has a referral program in addition to its affiliate and ambassador options. The program is available to customers who have made a MeUndies purchase before. It’s straightforward, rewarding $25 for every referred new customer when they make a purchase of at least $12.
Loot Crate
Pop culture subscription box company Loot Crate also has a refer-a-friend program. Customers receive a referral link they can share with their networks. When someone makes a purchase using the referral link, the customer earns a reward such as a discount or special perk.
Tentree
Tentree is a sustainable apparel brand with their own refer-a-friend option. The referring customer and the new customer each get a 20% discount on their first or next Tentree purchase.
Rothy’s
Rothy’s is a Shopify brand that sells shoes and bags online and in their retail stores. Their referral program is straightforward, with a minimum purchase requirement.
Referred customers get $20 off a purchase of $100 or more, and referrers earn the same discount when their referral link is used.
707 Street
707 Street is a retailer known for trendy apparel and accessories. The brand has gained a loyal following among fashion and pop culture enthusiasts for their commitment to quality and exclusive collections.
The 707 Street Loyalty Program is a points-based system that rewards members for referrals as well as actions like signing up for the email list, making a purchase, or leaving reviews.
Junglück
Junglück, a German sustainable skincare brand, offers natural products from facial cosmetics to shampoo and hand soap. Their referral program gives customers a €10 gift card for each referral. When someone spends that gift card, the referring customer earns their own €10 discount voucher. Junglück uses the Yotpo integration for Shopify to manage their referral rewards.
Swan
Swan, a Shopify brand specializing in household appliances, runs a referral program through Yotpo.
The program is straightforward and similar to Rothy’s referrals, but with different amounts. Shoppers can refer a friend, and both parties receive a £10 discount on their next purchase of £30 or more.
Negative Underwear
Undergarment brand Negative Underwear uses the same structure as Rothy’s and Swan for their referral program.
Referrals are worth a $20 discount to both the referred and the referrer, with a minimum purchase amount of $75. Currently, the brand uses Shopify Plus to manage all of their commerce channels in a central command center.
Bauer
Hockey retailer Bauer is another multichannel Shopify brand. The BAUER MVP Loyalty Program is a tiered points-based customer loyalty program that rewards members for referrals and other actions.
Members can redeem points for discounts and be automatically entered for sweepstakes and giveaways. Additional benefits include free returns, early access to products and promotions, free shipping on qualifying orders, and more.
Good AirX
Good AirX built their referral program to capture customers already buying through their ecommerce store.
Both the referrer and the new customer are incentivized through discount codes: referrers get 10% off future products, and new customers get 7% off.
Choose the right referral program for your business
Now that you know a referral program's value, you can create one for your own business. Begin by clarifying what your target customer looks like (and explain that to referrers), choose an incentive, and make it easy for happy customers to recommend you.
The best part? With Shopify POS integrations, you can create an omnichannel loyalty program that rewards customers shopping in-store and online.
Referral program FAQ
What is the most successful customer referral program?
The lifestyle brand Erin Condren is a great example of a double-sided referral program. A new referred customer receives a $10 coupon to use on their first purchase. Once that sale is complete, the customer who made the referral is also rewarded with the equivalent of $10 in store points.
What is an example of a referral program?
A good example is the referral program Tentree offers. Its program rewards both the referring and the referred customer with a 20% discount on their purchase. This double-sided incentive encourages both sharing and first-time buying.
Are referral programs worth it?
Yes, referral programs are worth it. They are a cost-effective marketing strategy that drives high conversion rates because new customers arrive with pre-established trust. Referral programs help grow your retail business and increase customer lifetime value.
What is a customer referral program?
A customer referral program is a marketing strategy that rewards existing customers for recommending your products to friends and family.
What makes a good referral program?
A good referral program is transparent about what it is and what it offers. It provides reasonable incentives for customers sending referrals its way and delivers rewards promptly to maintain trust with customers.
What are four types of referrals?
The four types of referrals are:
- Word-of-mouth referrals
- Online reviews
- Social media recommendations
- Email referrals
How does a referral program work?
A referral program invites loyal customers to share a unique link or code with others. Marketing outreach may start as an email, SMS message, or website popup. When the referred customer makes a purchase, they may receive a reward or discount, and the original customer earns their own incentive.
