What is customer retention?

What are referral programs?

A referral program is a marketing strategy that rewards existing customers for sharing a business’s products or services with others. These programs encourage customers to act as brand advocates, typically offering incentives like credits, discounts, or exclusive rewards for each successful referral.

When structured for retention, referral programs also serve as a loyalty-building tool.

For example, many companies use gamification to make referrals feel rewarding, offering points, exclusive swag, or tiered incentives to keep customers engaged and appreciated. For instance, some companies reward loyal referrers with branded merchandise or tech gadgets, deepening customer loyalty by recognizing their support.

Start with customer insights:

Begin by analyzing customer data, conducting surveys, or gathering feedback to identify what excites and engages them most. For example, you might find that certain customers value exclusive experiences over discounts, or that loyalty increases when customers receive tangible rewards like branded swag or gift cards.

Use these insights to create incentives that feel personalized and meaningful. By aligning your rewards with what your customers genuinely care about, you increase the likelihood that they’ll refer others—and that their referrals will be interested in joining.

Choose rewards that resonate:

The rewards you offer in a referral program should feel valuable and relevant to your specific customer base. Consider what will genuinely motivate your customers based on their professional needs and goals. For example, rewards could include complimentary access to premium features, extended trial periods for new products, or exclusive invitations to industry events and training sessions.

Analyze competitor programs:

Examine how they position the program, the incentives they offer, the ease of their referral process, and any unique elements they incorporate. Take note of what resonates with their customer base—such as rewards focused on professional development or operational support—and observe any recurring pain points mentioned in customer feedback or reviews.

Use this information to identify gaps in the market and craft a program that offers distinct advantages. For example, if competitors provide only one-time rewards, consider offering tiered incentives for ongoing referrals, or structure your program to reward not only the referrer but also the new customer. By strategically positioning your referral program as a step above the competition, you can add unique value for your customers while creating a compelling reason for them to advocate on your behalf.

Keep it simple and accessible:

Ensure referral links are prominently accessible in their account dashboard or via email, and that sharing options are clear and require minimal steps. For instance, provide a copyable referral link, along with options to share directly via email or LinkedIn, where many B2B referrals naturally occur.

Optimize the program for mobile as well, so customers can make referrals during meetings, events, or on the go. Additionally, consider offering tracking tools that allow participants to see the status of their referrals and rewards, reinforcing transparency and trust. The simpler and more intuitive the process, the more likely customers will engage—and the more seamless the experience for the new clients they bring in.

What are loyalty programs?

While referral programs are designed primarily to attract new customers by engaging existing ones, loyalty programs are focused on maximizing customer lifetime value by keeping current customers satisfied, engaged, and loyal. Loyalty programs encourage repeat business by rewarding customers with perks that deepen their connection to the brand.

Loyalty programs can offer exclusive benefits, such as access to premium resources, personalized experiences, or tailored support. Many loyalty programs also incorporate gamified elements, where customers earn points or unlock rewards by completing certain actions. For example, a technology company might reward partner companies with points for each product sold, which they can later redeem for cash-equivalent rewards or additional support. By engaging customers through a structured loyalty program, businesses not only enhance customer satisfaction but also reinforce their commitment to long-term partnerships.

Define clear goals and KPIs:

Start with specific objectives for the program—whether it’s increasing retention, boosting product adoption, or improving customer satisfaction. Set up key performance indicators (KPIs) such as participation rate or increase in repeat purchases, and use these metrics to gauge the program’s success. Test the program with a select customer segment, gather feedback, and optimize before launching widely.

Tailor rewards to customer needs:

Understanding your customers’ needs and preferences will help shape rewards that are truly valuable. For instance, B2B customers may prefer rewards like premium training, exclusive events, or access to additional features over monetary incentives. A well-aligned rewards program is more likely to foster engagement and long-term loyalty.

Prioritize simplicity and clarity:

A straightforward loyalty program is easier to adopt and more likely to succeed. For example, structure rewards in a clear way, such as earning points for purchases or specific actions, with easy-to-redeem milestones. This approach ensures customers understand how to participate and see the value right away, boosting program engagement.

Refine program rewards with partnerships:

There’s merit (and more revenue) in creating partnerships. Offer products or services from other brands to diversify loyalty program offerings or opportunities to partner with existing customers. This will promote exclusivity and motivate customers to be part of the program. For example, a software company specializing in marketing and CRM tools offers customers co-marketing opportunities.