How to Choose the Best Referral Rewards [24+ Examples]

You’ve decided to start a referral program. Why do you need referral rewards or incentives?

It’s simple: Rewards are the fuel for any referral program, answering the “what’s in it for me?” question for anyone who’s thinking of participating.

You may have loyal customers who will refer you to others without any incentive — in fact, that’s a great sign that referrals are a good strategy for you! But a lot more customers will be motivated to share if they receive a reward for their efforts.

Referral rewards are incentives that you give to people when they share your business with their friends, or when they become your customers after a referral.

And these rewards have long been proven to increase the likelihood of referrals.

Referral rewards or incentives give customers a reason to share your brand with others (and can also give the people they refer more incentive to buy). So instead of hoping for passive word of mouth, your company can create a more reliable, more scalable customer referral program.

A good referral incentive should attract customers, make sense for your business, and not take away from its bottom line. Today, we’ll help you decide on the best referral rewards, plus when and how you’ll give these rewards.

What are referral rewards and incentives?

A referral reward is any incentive given to participants within a referral program.

Popular referral rewards are cash, gift cards, store credits, and discounts. But you could also give out free products or services, swag, or tangible gifts.

You can give referral rewards to:

• The person doing the referring, when one of their friends becomes a new customer or lead, AND
• The friend being referred, when they make their first purchase from you

Benefits of referral rewards

Referral rewards encourage people to share your business and help convince the friends they refer to become your new customers. So, they’re a key piece of any referral program.

They motivate customers, employees or partners to become advocates and share your business with friends, by creating excitement around sharing and giving them a reason to refer right away. When people see a reward in your program’s headline or other promotions, the reward grabs their attention and convinces them to start sharing.

Rewards also create social currency for advocates: since their friends can get a deal because they know the advocate, the advocate gets a boost in their reputation.

And by rewarding the friend being referred, referral incentives create a sense of urgency and help motivate the friend to take action (make a purchase). Referred friends also appreciate that a peer sent the incentive!

As you can see, you’ll reap the most benefits if you reward both the existing customer and the referred customer (called a “double-sided” reward program). You’ll both motivate people to create word of mouth around your business, and motivate newly referred friends to buy from you.

Choosing a referral reward that fits your business: 4 key steps

Referral reward options are nearly endless. How to design rewards that fit your business?

You’ll need rewards that motivate sharing (and purchasing), and that are sustainable for your business to pay out. They must be enticing and relevant, without compromising your bottom line. It’s also best to keep rewards simple, so they’re easier to understand and manage.

Still not sure how to decide on the best referral incentive to offer your customers? We cover all you need to know in four basic steps:

1. Decide who gets the referral reward — the member (referrer), the new customer (referred friend), or both
2.  Choose when rewards are paid out
3. Decide on the value of your rewards (how much will you spend?)
4. Select the type of rewards

Step 1: Who gets the referral reward?

When planning your referral rewards program, one of the first things to ask is who do you want to motivate?Deciding who will get the referral reward helps to lay the foundation for all other elements in your referral campaign.

When you know who you’re targeting, it becomes much easier to plan what incentive to offer, what program structure to use, and how to write your headline and messaging.

You have four options when deciding who to reward:

• Only the referrer (the advocate or member)
• Only the friend being referred
• Both the advocate and their friend (“double-sided” rewards)
• No rewards

Rewarding only the referrer (advocate) works well for newer companies seeking to grow their brand awareness, as it’s an affordable way to motivate quick sharing. Free content subsciptions (like newsletters) should also reward only the referrer, because they aren’t earning money directly from purchases. These types of companies can still give out low-cost rewards to motivate sharing, funded by ad revenue.

Rewarding only the referred friend is common when regulations prevent you from rewarding referrers. If you aren’t bound by any of these regulations, you should give a reward to the referrer as well (or instead) because referrers want to know what’s in it for them.

Double-sided referral programs reward both the advocate and the new referred customer. For all businesses where a purchase is made, double-sided rewards are best, as they incentivize both the member to refer and the referred friend to purchase. If you’re not already offering a double-sided referral reward (or planning to offer it), then we strongly recommend that you consider it as a best practice.

Referral programs without any referral reward exist, but this isn’t recommended. Yes, even without any incentive, some customers like sharing cool things with their friends. And non-incentivized referrals are the most genuine form of recommendation.

But the majority of customers lack motivation to refer without an incentive. If the customer has to go out of their way to refer, the chances of them referring are especially slim.

Still, if you have no budget to offer incentives, legally can’t offer any incentive, or have a natural referral rate without giving incentives, you could start a program without rewards. Aspirational or luxury brands may also prefer not offering tangible rewards.

Step 2: When will you give the rewards?

Next, decide when and how often you’ll give out referral rewards.

Rewards should be easy to understand at a glance, and awarded based on the ultimate behavior you’re trying to drive (usually this is a purchase, but sometimes it’s a demo signup or other action that shows a lead is qualified).

Make sure the actions you reward are meaningful to your business, and that they indicate a high and predicable chance that the friend will convert to a paying customer (if the action isn’t the purchase itself).

When to give the reward?

• Rewarding for a friend’s first purchase is most common.
• Rewarding for a friend’s qualifying action in addition to a purchase can make sense, if your business has a longer sales cycle.
  • Qualifying actions could include signing up for a demo or trial, scheduling a consultation, or getting qualified as a lead by your sales team or CRM.
  • If you’re giving out rewards for qualified leads, then consider a lower-value reward (such as swag or access to an exclusive content piece).
• Multi-step rewards mean you’ll give out incentives when referrers bring in new leads and paying customers.
  • This adds extra motivation for businesses with longer sales processes.
  • The reward for bringing in a qualified lead should be smaller than the reward for driving a purchase.

How often will referrers earn rewards?

One-time rewards are most common, and often this is enough to motivate referrers and create excitement. Most people are trying to maximize rewards, especially in customer referral programs)

Recurring rewards are awarded when a friend makes their initial purchase, as well as when they make future purchases or renew their subscription.

• These work well for businesses with low purchase prices, and for subscription brands with a higher customer lifetime value.
• They reduce the risk of early cancellation, and let you start with a lower-value reward.
• Be careful, though, as the added complexity can make this harmful (especially in customer referral programs)
• Recurring rewards are more common for affiliate programs in competitive industries

Will you give rewards right after a purchase?

You might consider waiting a bit after a purchase to give a reward, in order to reduce fraud. But fraud is less common than you think.

Generally, you should reward right away, when you get paid (or when a lead is qualified). As long as you’re getting paid more than you’re rewarding, then you win.

We only recommend waiting until after the return period is over if there is a known issue. Otherwise, delaying the reward creates a negative experience for the person referring.

Alternatively, you can manually approve rewards before issuing them (this can be done in bulk with referral software). This helps you see if certain people have an excess of rewards owed to them.

Will you give a reward for every single referral?

Determine if your referral program will reward customers for every single referral, or only once certain numbers of referrals are reached (i.e. in a tiered program structure). When making your decision, consider the customer’s motivation – they may not feel it’s worth their time to do a lot of work for little reward. If you’re planning on offering a reward of relatively low value, it’s usually better to reward every successful referral.

Step 3: What should the value of your rewards be?

Next, think about how much your reward should be worth. Rewards must be motivating to customers, and must reflect the value of referrals to your business. But they must also be sustainable for your business to pay out. Often, the reward value doesn’t need to be as high as you expect, as long as the reward itself is motivating.

When choosing your reward value, ask these questions:

What is the average value of a sale?

• The higher the value of a sale, the higher your reward value should be.
• Remember that rewards are pay for performance (you’ll only pay out rewards for qualified leads and/or sales.)

How much does it usually cost to acquire a new customer?

• What do you usually pay for quality leads/customers? Make the reward value comparable.
• Usually, rewards should be close to, but lower than, your average customer acquisition cost.

What is the lifetime value of a customer?

• The higher your average customer’s lifetime value is, the more you can afford to pay out in rewards.
• On average, rewards should be worth 10% of your customer lifetime value (or lower).
• If customers have a low average lifetime value, award less expensive incentives like swag, or consider a referral contest.
• If you have a high volume of customers with a low average lifetime value (i.e. many ecommerce companies or newsletter programs), consider using a tiered program, where you only pay out rewards for every X referrals and offer lower-value rewards to start.

Step 4: What type of reward to offer?

The right type of reward depends on your type of business and customer base. What type of products or services are you offering? What reward would best motivate your customers?

Rewards must be relevant and exciting to your audience, to motivate the behaviors you want to drive. Pick something your audience cares about – you know them best!

They should also be easy to manage and distribute. And consider purchase frequency – does a reward make sense based on how often they purchase from you?

The table below outlines the most commonly used referral rewards across different types of businesses. Find which rewards work best for you, and read more about them in detail:

	Infrequent or high-value purchase	Frequent or repeat purchase (including subscriptions)
Common referral rewards	Cash, swag, gift cards, donations, tech items, gift boxes	Cash back, discount, gift cards, store credit, free products, free subscription service period, donations
Companies using these types of rewards	Casper, Hiver, SimpliSafe, Culligan Water, Provident Bank	ActiveCampaign, Dropbox, Omsom, Fiverr, GetResponse

1. Cash / Cash back

Cash is one of the favorite referral program rewards among customers. While it doesn’t tie back to your company as much as other referral incentives, cash is more enticing as customers can spend it on whatever they want. It’s only fitting that cash is one of the best-performing rewards in referral programs.

Best for: Most businesses where a purchase is made; especially great for businesses where purchases are infrequent, or where the referrer isn’t the one making the purchase

Recall Paypal’s $10 double-sided incentive: $10 for the referrer and $10 for their friend when the friend first opens an account.

 

Or, look at mattress brand Leesa’s offer to send $75 cash straight to the ambassador’s Paypal account for each referred friend who makes their first purchase.

In these cases, cash is a great incentive that aligns well with the business – Paypal offers free accounts for online payment, and Leesa’s products are higher-ticket, infrequent purchases. If customers aren’t planning to make a purchase every month, discounts won’t be as alluring. They’d probably be more motivated by cash!

Cash rewards also tend to generate a lot of buzz, which are great for referral programs in a new or competitive space. Plus, when compared to other referral rewards, the amount of cash doesn’t usually have to be as much as credit or discounts for it to motivate customers.

2. Gift cards

When speaking of referral program rewards, gift cards don’t mean prepaid vouchers for your products – they refer to third-party gift cards for other companies, such as Amazon, iTunes, Starbucks, or even Visa and Mastercard.

Best for: Most businesses where a purchase is made; especially great for businesses where purchases are infrequent, or where the referrer isn’t the one making the purchase

Along with cash back, gift cards are the best-performing referral rewards, as the recipient can choose how they want to use the reward. Plus, with Referral Rock’s Tango integration, customers can choose their preferred type of gift card from Tango’s menu based on their country.

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Customers love a gift card reward. Gift cards are usually spent on more memorable items (as opposed to cash), but also offer customers a lot of flexibility and control. In fact, in a recent audit of Referral Rock customers, we found that the most common type of reward for referrers/advocates was gift cards (61%), followed by PayPal and Wise transfers (30%), and coupons/discounts (9%). Gift cards was also a popular reward for referrals. 

Another benefit: gift cards can be used by anyone, even if they aren’t the direct customer. Let’s say you’re a company in a B2B referral incentive program – you can easily give the gift card reward to one of your employees.

Gift card rewards are also highly customizable, and you can select a gift card that’s relevant to both you and your customers. For example, a sports company can give Adidas gift cards, while a travel agency can offer Airbnb gift cards. Most companies will also offer a range of gift card quantities and denominations to fit your budget.

Weed Man Lexington enjoys these benefits thanks to their gift card referral program. Customers get to select their reward from a gift card menu, so the freedom of choice brings extra motivation.

3. Discounts

Discount coupons are one of the most commonly used referral program rewards. And for good reason – discounts provide benefits for both customers and businesses, alike.

Best for: Businesses where people purchase frequently; great option for convincing the referred friend to make a purchase

Usually, discounts are presented as a percentage off a purchase. But they can also be presented as a set dollar amount off of a purchase exceeding a certain value (say, $15 off a purchase of at least $50).

For repeat customers, discounts provide great value, especially if a brand offers a wide range of products or requires repeat purchases. For businesses, these repeat purchases boost sales and encourage customer loyalty.

However, for products with a relatively long lifespan, such as cars or mattresses, discounts may not seem very valuable. If customers aren’t planning to make another purchase in the near future, they likely won’t be interested in discount coupons.

One example of a referral discount comes from jewelry brand Lokai’s referral program.

• The 20% off reward is very enticing for customers who are planning on making a purchase soon.
• A discount makes sense for Lokai’s program because they offer many different bracelets.

And as shown below, The Children’s Place is another good fit for a discount reward structure.

• The Children’s Place also drives frequent purchases. After all, children grow quickly, and there are plenty of wardrobe options to choose from.
• The brand gives $10 off a purchase of $40 or more, to both the referrer and friend, as its referral reward (a set cash discount).

4. Store credit/account credit

Store credit, or account credit, is the perfect middle ground between discounts and cash. Like discounts, credit can only be used to buy the same brand, keeping the value within the business. Like cash, it’s a referral program reward offered at a monetary value.

Best for: Businesses where people purchase frequently, pay-per-use business models, and subscription services

Many top referral programs use store credits as their referral rewards.

• For example, Airbnb gives $20 for every invited friend who books a stay, as well as $40 for the friend to use on their first trip.
• And Postable gives a $5 credit toward your next order for every referral that ends up placing an order – “The more friends you refer, the more money you make.”

Store credits are especially useful if your product is pay-per-use or purchased on a regular basis. And by making it easier for customers to keep buying from your business, store credits are a great way to build customer loyalty.

The difference between a store credit and an “amount-off” discount is that a store credit can be used on any purchase. Also, store credits are often cumulative (i.e. they can be stacked and applied all at once to a single purchase).

5. Free products or services

People love getting something for free. When that free item is one of your products in exchange for referring a friend, this can help accelerate sharing and build more excitement around your brand (especially for new customers making their first purchase).

What if you’re a SaaS or another service business, though? You can still offer upgrades, temporary free access to premium features, or free added perks that would normally come with a higher-level service plan.

Best for: Companies where purchases are frequent; great reward for referred friends.  If you’re planning to offer free products (as opposed to services), it’s best if you sell relatively inexpensive products. This will also only work if the referrer is the direct buyer of your product or service.

Free product rewards worked especially well for Harry’s. The razor brand used free products to build buzz before their official launch, and collected a staggering 100,000 emails from referrals in only a week!

The product or service you choose must be cost-effective to offer for free, relative to your average customer acquisition cost. And of course, it must be worth a referral, from your customers’ perspective.

6. Branded swag

Swag is one of the most fun referral rewards or incentives. It can be a tote bag, a mug, a sweatshirt, a water bottle, or any number of free products outside of the standard sales cycle.

Best for: Content models where the content is offered for free; businesses with a brand strong enough that someone would be excited to wear or use something branded

Swag can also be very cost-effective when ordered in bulk. This makes it a perfect reward for newsletter referral programs (like Morning Brew’s referral program), as they offer their newsletter for free and rely on ad revenue.

Bonus: The right swag can do wonders for your business. In addition to being an attractive referral offer, branded swag also serves as advertisement for your business.

Deciding on what swag to offer can be a bit tricky, though. The item has to be something people want and even worth talking about, in itself. For example, would your customers really be excited about a coffee mug with your logo? How about if it came in a cool design or pattern? You also want to consider the weight of the item and the cost of shipping.

To see all the different swag you can offer, Swag.com has a lot of fun options for every type of customer. They can also handle logistics and shipping for your company (in branded packaging, of course!).

7. Free subscription period

If your business offers subscriptions, as well you might want to consider offering a free subscription period in your referral rewards program. Not only does this encourage existing customers to stay with your business, it also gives interested individuals a free taste of what you have to offer – and this may be just the nudge that turns them into a long-term customer.

Best for: Subscription-based businesses, including meal delivery services, content subscriptions, online courses/classes, and SaaS companies

Social scheduling SaaS Postcron offers a free month of their premium subscription – for both the referring customer and new customer – in their referral program. This encourages loyalty and referrals from existing customers, and whets new customers’ appetites.

8. Donations

Donations are an unconventional, but very meaningful, referral reward. Offering customers the opportunity to turn their referral reward into a donation turns the standard program into a win-win-win situation.

Best for: Businesses with a social good mission; businesses that can’t offer traditional rewards due to laws or industry regulations

As so well-described in a Forbes article, “the business gets referrals, the charity gets donations, and the client gets to feel good.”

• The donation could be made to a non-profit organization or a foundation.
• It could go toward a community project sponsored by your company (a popular example of this is TOMS, the original One for One giving model).
• You could donate to any approved charity that the customer selects, as Vena Solutions offers as a reward.

Donations can even run alongside other rewards.

For example, customers can have the choice between getting $45 in cash back or donating the same amount to charity. You may find your customers actually prefer to give back when it’s something they’re interested in and easy to do.

Or, you could offer a reward for the customer in addition to a donation, as Lauber & Will Insurance does.

9. High-value items

For especially valuable referrals, you might decide to offer big-ticket items, such as electronics. Travel experiences, dinners out, event tickets, and other VIP events also make great rewards. Of course, this assumes the value of an individual purchase, and a customer’s average lifetime value, is high enough that you can afford to pay out these rewards consistently.

Best for: Higher tiers of rewards (after multiple referrals), contest rewards for winners, businesses where purchases are expensive, but the referrer isn’t always the one making the purchase

Email management and help desk software Hiver uses high-value items as part of their tiered rewards. Three qualified referrals earns someone a Kindle reader, five referrals earns a high-end dinner out, and 10 referrals earns the latest iPhone. As a B2B SaaS, the average customers are worth a lot more than the value of these rewards, so they’re still sustainable for Hiver to give advocates.

10. Referral gifts

Sometimes, companies will choose to offer a referral gift box or gift basket for successful referrals, containing several tangible rewards at once. This opens up the opportunity to personalize the gift for each referral, which can be a great incentive for the most faithful advocates.

Best for: Brands that don’t want to offer a reward that ties back to their business (say, luxury brands and businesses where purchases are infrequent). 

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No matter what referral reward or incentive you end up choosing, always provide a good customer experience. If customers are happy, then word of mouth is bound to happen, with incentives being more like an added referral bonus (much like a finder’s fee).

Referral program reward structures

Now that you’ve decided who will receive your referral rewards and what rewards to give, it’s time to take a look at the finer details of different reward structures you could use.

Double-sided rewards (“give and get”)

With this reward structure, you’ll reward both referrers and their friends when a friend makes their first purchase. A double-sided reward can be the same for both parties (i.e., $20 credit each), or different (i.e., a $50 gift card for the advocate, and a 15% discount for the new customer).

Best for: All business types where a purchase is made, as long as they have enough resources to give referral rewards or incentives to both parties. It’s also best for businesses to have a good referral software tool so they can track key metrics and make the most of this referral program.

Pros

Cons

Giving both parties a reason to join in your program can lead to the highest number of successful referrals Customers will be more inclined to refer others to your business if they’re getting something for their efforts Shows advocates a way to share without making them look self-serving (they are offering rewards to new customers, too) makes the entire process more effective By offering a referral incentive to the referred friend, you increase the odds of a purchase

Some companies aren’t willing or able to give out too many incentives A company will have to track more incentives for both sides of the equation, which makes this potentially more work

HelloFresh includes multiple reward schemes in their refer-a-friend program. Their HelloRewards referral code offers a double-sided incentive, giving a $20 credit to the referring customer and $40 to their referred friends.

(HelloFresh also offers a one-sided incentive to send new customers: a Freebie box with a free week of meals.)

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Rewards only for the referrer (“get only”)

In this structure, the referrer gets a “thank you”reward after their friend makes their first purchase, but they don’t give their friend a reward. These rewards encourage customers to bring more people to your company. And with the strong recommendation in mind – plus, a reasonably priced product offer – the referred friend is likely to make a purchase, even without a discount incentive.

Best for: Companies that are new and need to grow their brand awareness, as well as those selling more affordable products. Also, free content subsciptions like newsletters that don’t involve a purchase.

Pros	Cons
Customers will be more inclined to refer others to your business if they’re getting something for their efforts Since happy customers are the first movers in the process (everything starts with their referral), the incentive often results in many new leads Rewarding existing customers is proven to foster relationships, improve customer retention, and increase brand loyalty	No matter how great a product or service really is, referrals may not seem as authentic when only existing customers receive compensation for bringing in new business

With their clients being companies instead of individuals, Justworks rewards referrers $200 for every employee in a referred company that signs up. This means $400 for referring companies with two employees, and $20,000 for referring companies with 100 employees.

Plus, you don’t have to be an existing customer to join their referral program – Justworks invites everyone to participate.

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Rewards only for the referred friend (“give only”)

Offering an incentive for the referred friend will encourage them to move toward a purchase, and hopefully end up as long-term customers. In this case, the program relies on pure altruism from referrers, though, as there’s nothing in it for them. While one-sided incentives for new customers may lead to a smaller amount of referrals, they may still lead to a greater customer base.

Best for: Businesses that operate using subscription models or frequent purchases, or that are considered a luxury purchase. Also, businesses where regulations prohibit rewarding referrers, but that aren’t restricted from incentivizing new customers.

Pros	Cons
By offering a referral incentive to the referred party, you increase the odds that they’ll make a purchase Opportunity to tie the reward back to your business (discount, freebie, free product) to further increase the odds they’ll purchase	Without the promise of any reward, people don’t have any incentive to actively refer others to your business… even if they are loyal and truly love your brand

Meal subscription box Blue Apron gives customers the opportunity to send a free meal box to friends who haven’t yet tried the service. Since there isn’t a reward on offer for the existing customer, this referral program is all about performing an altruistic act for a friend.

Tiered rewards (milestone rewards)

Some programs include various levels of referral rewards and incentives, usually based on the number of actual referrals. While this is more complicated, a tiered program structure does create an opportunity for customers to become dedicated members of your referral marketing program.

With tiered rewards, you start off by giving the advocate a smaller reward, and then offer larger rewards as they bring in higher number of referrals (like The Hustle does with its tiers of swag).

For instance, you might offer a 20% discount for one referral, a free product after three successful referrals, and a $50 gift card for five referrals. This is a great way to motivate repeat referrals and create super-advocates.

Best for: Content subscriptions, SaaS businesses, travel agencies, ecommerce; any industry can reap the benefits, though, as long as you set rewards strategically

Pros	Cons
Motivates repeat referrals Can create super-advocates Keeps program participants engaged	Must set your reward tiers strategically to be sustainable Some companies aren’t willing or able to give out too many incentives Can be tough to track and manage if you don’t have the right software

Not all referral program software can handle tiered programs. Referral Rock can help you set up a tiered program with ease.

Bump rewards

Bump rewards are the opposite of tiered rewards: they jumpstart your campaign by giving higher rewards for the very first referral.

So rather than $15 for every referral, a business can offer $30 for the first referral and then a smaller amount, like $10, for every following referral.

If margins are tight or you can’t afford a higher reward, offering a larger reward for the first referral is a great way to get people engaged without overpaying.

Best for: Businesses that want to launch their first program and drive initial sign-ups; newer businesses and those with tight budgets

Pros	Cons
Creates a lot of excitement to start sharing, thanks to the valuable first reward May drive a lot of program sign-ups	Tends to drive fewer repeat shares, since later rewards are decreased Can be less motivating for existing program members

Multi-step rewards

Sometimes, a business has a drawn-out purchasing process. It may require an initial consultation, demo, or trial period before an actual sale is made. But if a customer has to wait too long before they can see their rewards, they may no longer be motivated to make any referrals. In this case, it makes sense to break down the entire referral process into steps.

A multi-step rewards structure gives the advocate (referrer) different rewards for each key step in the sales process their referral completes.

The rewards are cumulative, and will usually increase in value with every step the referred friend completes. For example, you might give a referring customer a smaller reward when a lead is qualified (say, they request a demo or sign up for a trial) and then a larger reward when that lead makes their first purchase.

Best for: Sales-led B2Bs and SaaS companies; other businesses with longer sales processes and/or multiple stakeholders involved in the purchasing decision; staffing agencies; higher ticket-value services that require a more “consultative” approach (i.e. HVAC installation, landscaping, plumbing, construction contracting)

Pros	Cons
Keeps advocates motivated in light of longer sales processes, even when their referral takes a while to make a purchase	Can be difficult to track and properly pay out these rewards without the right software

Here are some examples:

• A customer might earn $10 if their referral signs up for a trial period, and then $30 when the referral signs up for a paid account.
• If your business is installation-based like Trinity Solar, your referral program might offer $25 after a referred friend completes a consultation and $500 when the installation is complete.

Only select referral program software options can help you set up multi-step reward structures. Referral Rock handles multi-step reward structures, so it’s great for businesses that want to use complex rewards. 

Contest or drawing

People like to be appreciated (which is a main reason referral programs work so well). But they also like a bit of competition. A contest or drawing can help drum up excitement and even viral growth for your referral program, especially when a higher-ticket reward is at stake for the winner.

The rules are up to you.

• Will you give rewards to the people who make the highest number of customer referrals in a month or quarter?
• Or, will you give people a drawing entry for every referral they make, and then select the winner purely at random?

Best for: Businesses that want to increase engagement and excitement around their referral program

Pros	Cons
If there’s a worthy reward at stake, that’s a massive motivation for people to join the referral program Gamification can create repeat referrals and super-advocates Can create sudden bursts of engagement within contest seasons	Since contests don’t guarantee everyone a reward, the odds of winning may keep people from participating The motivation from contest rewards usually doesn’t extend to the referred friends’ end (prizes are usually only available to referrers)

Contests work best in a shorter time frame, such as during a seasonal or holiday promotion. And of course, the grand prize has to be something that really motivates your customers.

Even better, though, you could run a referral contest alongside your regular referral program.

Independent retailer Huckberry uses seasonal contests to boost their regular ongoing referral rewards program. Instead of their usual referral program reward ($20 for referring customers, $10 for referred friends), they offered $1,000 in Huckberry credit, as well as second and third place rewards.

Examples of referral rewards and incentives

When putting together your referral program, it’s always good to have a little inspiration. Of course, most of us are already familiar with programs that offer cash as a referral reward.

We’ve pooled together some examples of more unique referral programs to give you an idea of how creative you can get with your referral rewards and incentives.

Morning Brew

“Share the Brew” is the catchy referral phrase used by Morning Brew, a free newsletter geared toward young professionals.

Who gets the referral reward? The current subscriber, using a one-sided referral incentive

What type of referral reward? Mostly swag, but the highest-level reward is a work-from-home makeover, complete with tech

How is the reward structured? Tier-based reward structure, with customers getting greater rewards for more referrals

Athletic Greens

Athletic Greens puts “75 vitamins, minerals, and whole-food sourced nutrients in one convenient daily serving.” The brand has developed an easy way to get your daily greens, and invites customers to share the product with their friends through an easy referral program.

Who gets the referral reward? Both the current and new customers are rewarded, using double-sided incentives

What type of referral reward? The current customer gets $15 off their next order for every friend they refer, and the referred friend gets five free travel packs of Athletic Greens with their first purchase

How is the reward structured? Customers get the same reward for every successful referral, and the referred friend gets their free packs only on their first order

Misen

As a Kickstarter alumni, Misen offers high-quality kitchen tools at honest prices. As one of the pioneer DTC (direct-to-consumer) brands, Misen operates an ecommerce store and invites customers to share its products with others through an attractive DTC referral program.

Who gets the referral reward? Both the current and new customers are rewarded, using double-sided incentives

What type of referral reward? The current customer gets $20 off their next purchase, and the referred friend gets 20% off their first purchase (if the referred friend spends $50 or more)

How is the reward structured? Existing customers get the same reward for every successful referral, and the referred friend gets a discount only on their first purchase

Shutterfly

Shutterfly specializes in print-to-order photos, calendars, and other paper products. With so much in store, they use many of their own products as referral rewards.

Who gets the referral reward? Both the current and new customers are rewarded, using double-sided incentives

What type of referral reward? A variety of the company’s products (while customers are offered a free photo book, they can choose to send their friends free products or discounts)

How is the reward structured? Customers get the same reward for every successful referral, with a limit of 10 rewards per year

Courtesy Chevrolet

Car dealerships operate in a competitive industry. To separate itself from the pack, Courtesy Chevrolet offers a very generous gift card for every successful referral.

Who gets the referral reward? Anyone (customer or not) whose referral results in a car purchase at the dealership

What type of referral reward? $100 Courtesy Chevrolet Visa prepaid card

How is the reward structured? One-sided, only the referrer gets the reward – they get the same reward for every successful referral, with no limit to how many they refer

Booking.com

Booking.com offer cash as its referral reward. But instead of the amount being added to your Booking.com account, it goes straight toward your credit card.

Who gets the referral reward? Both the existing customer and their friend, in a double-sided structure

What type of referral reward? The current customer gets $25 in cash back, while the referred customer gets $25 in Booking.com credit

How is the reward structured? Customers get the same reward for every successful referral, with no limit to how many friends they can refer

What are the most common types of rewards?

To give you an idea of the most popular types of rewards, we looked at anonymized data from 500+ programs run on Referral Rock — here’s what we found.

Reward types for members 

The most common rewards for members (aka customers or affiliate partners referring customers) were gift cards (61%), followed by cash (30%), and coupons (9%).

Gift card and cash rewards for members make a lot of sense for both customer referral and affiliate programs. While discounts are more common for lower-cost consumer products like clothing or cosmetics, many companies will reward cash or gift cards for items that are less likely to be repeat purchases (e.g. home services, air conditioners, bank accounts). Cash payouts are common for affiliate marketing programs, where affiliates are incentivized by ongoing monetary rewards.

Reward types for referrals 

The most common rewards for referrals (someone who purchased after they received a share from a friend) were gift cards (56%), followed by coupons (37%) and cash (7%).

Coupons are a more popular choice when rewarding referrals, which makes sense — you’re trying to incentivize a purchase from someone new. An exclusive offer, like a percentage or dollar amount off (e.g. 25% off, $20 off) is compelling, especially after someone has received a product or service recommendation from a friend.

Fixed reward amount vs. percentage of sale amounts 

The majority of programs in the data offered a fixed-amount reward (92%) vs. a percentage of sale (8%).

Percentage-of-sale rewards are more common for affiliate programs and less common for customer referral programs. It can also be harder to come up with a percentage-of-sale amount that makes sense across products and services, so many companies start with a fixed amount to make it easier to predict payout costs.

Insider reward tips and best practices

Looking for even more advice on choosing the best referral rewards? Check out these insider tips:

✅ Ask your customers what rewards they’d like to receive by running a poll with a few options. This way, you’ll pick incentives that truly motivate your clients.

✅ It may also help to look at competitors’ referral rewards programs. This will give you an idea of the referral rewards patterns in your niche and industry, and assist you in finding out ways to make your own program unique.

✅ Make the referral reward truly valuable. If you offer the same type of discounts elsewhere, or offer store credits when purchases are infrequent, the reward likely won’t be worth it. Choose a reward that customers will want to earn and use.

✅ If you’re giving a reward to the new customer (referred friend), it’s best to give a reward that’s directly connected to your business, to motivate that first purchase.

✅ Don’t be afraid to change up your incentives to boost engagement with your program. For instance, you might increase the amount of store credits you offer, or add a free gift to the cash referral reward, during slower business periods. Try changing up rewards based on seasons; this lets you experiment until you find a good reward value and type.

✅ Notify people when they get rewards, or when they’re getting closer to a reward, for added motivation.

Optimizing referral rewards

Rewards are a great way to grab your members’ and referrals’ attention, so make sure they stand out. Are your existing referral rewards enticing and relevant? If not, it’s time to optimize them, with help from our expert advice.

Increase the advocate reward value: Rewards are meant to excite and encourage your members to join your program and share. Try increasing the value of the reward (especially if you have a high customer value) to get more people interested.

Change the advocate reward type: If you’re confident in the reward amount, then maybe it’s the reward type that needs optimizing. Try something else that’s more appealing to your members, say awarding a gift card or cash instead of store credit. Feel free to get creative as you know your audience best. Or, better yet, ask them directly what type of rewards they would like to see.

Revisit your referral reward: Remember that rewards or discounts are great for getting potential customers to engage and take action. They help create urgency by offering a unique opportunity not otherwise available. If you’re not already offering a dual-sided reward (including a reward for the referral), then we strongly recommend that you consider it. If you are offering a reward to referrals, then consider either increasing the amount or changing the reward type to make it more appealing and relevant.

Common concerns

Even with all the reasons to offer a referral reward or incentive, a few concerns may come to mind. Here are the most common ones we’ve come across over the years:

How much will offering referral rewards cost?

One of the main benefits of referral programs is that you only give rewards for successful sales. Unlike other forms of marketing that require initial payments, referral programs are pay-for-performance. So while you’re offering something of value, you’re getting much more in return.

Plus, your rewards don’t have to cost much or even be monetary at all. Many companies get more creative with their rewards – offering swag, free upgrades, donations, etc. – which can even be more effective than offering cash.

To ensure you’re not losing money on your referral program, it’s important to determine your average customer value and — if you’re offering cash, rewards, or discounts — figure out a reward value that makes sense for your user base and your bottom line (learn more about calculating referral program ROI).

What if someone tries to game the system?

To be honest, yes, there are people out there who will want to get rewards without doing the work. This includes spamming a referral code or using multiple accounts (also called self-referral).

However, referral fraud can usually be detected with the proper tracking (i.e., high activity coming from one IP address). It can also be prevented in the first place with a referral software tool, which safely collects and tracks all your data.

How to get started with referral rewards?

For the most successful referral rewards scheme, you need referral program software. Once you’ve decided on your referral rewards, software automates the approval and sending of referral rewards once they’re earned, to keep your existing and new customers happy.

But you’ll need the right referral software for the most flexibility in issuing and managing rewards, because many types of referral software only handle simple “give one, get one” rewards. With Referral Rock, you can:

• Offer incentives that motivate your target audience: This includes more advanced referral reward structures, including tiered, multi-step, referral contests and more
• Trigger rewards based on status updates in your CRM, e-commerce platform, or other system of record: This is especially useful if you want to reward for qualified leads as well as converted referrals!
• Automate reward fulfillment with a variety of payout options:  This includes cash, gift cards, discounts, donations, and custom rewards.

Learn more about how our software can help you set up and manage rewards to grow your business!

Launch your referral program with the right rewards

The right referral rewards and incentives can make a big difference in the success of your referral marketing campaign. Start by deciding who should receive the referral reward, and then choose the type of reward (and reward structure) that best motivates customer referrals. Remember:

• If your customers are making infrequent or big-time purchases, it’s best to reward them with cash, swag, gift cards, or donations.
• If your customers are making frequent or repeat purchases, consider offering discounts, store credit, a free product or service upgrade, a free subscription service, or donations.

Follow the steps in this article, and you’ll be able to find the best referral rewards and incentives for your business, and build a program that keeps customers interested and motivated in the long run.

And if you’re interested in exploring software that helps you manage and issue rewards, you can book a demo with a referral program expert.

Searching for the best referral program ideas for all parts of your program (beyond just rewards)? We’ve got you covered.