What Is Referral Marketing & Where to Get the Best Referrals

July 16, 2021
Stacy Wells

One of the outstanding and efficient business strategies available to organizations is referral marketing. Very few, if any, sources are more potent than delighted customers.

Although we are biased about the value of referral marketing, we are not the only ones. International experts agree that referral sales are a crucial business-building strategy. For instance, Nielsen found that more than three-quarters of people are more likely to make purchases when they hear about it from their friends and family.

77% of consumers are more likely to buy a new product when learning about it from friends or family. (Nielsen)

Other studies demonstrate that customers also consider referrals useful. Referrals are especially powerful when people have options and need help selecting a brand and before making purchases. Again from Nielsen, people are also four times more likely to buy when referred by a friend. 

Consumers are 4X more likely to buy when referred by a friend. (Nielsen)

Keep in mind that you should know how to generate positive word of mouth from your loyal customers. It is essential to learn how to ensure positive word of mouth among your loyal customers.

Getting referrals from customers and even new prospects is more complex than most people think. However, it's worth cultivating because referrals can be a golden goose for businesses. 

Keeping in mind the economic benefits from customer referrals and recommendations, brands must understand how to foster positive word of mouth from their existing customers.

Wooly works with thousands of people who refer their friends, family, colleagues, and followers to brands they love. This article will cover how to do referral marketing. Specifically, it will explore what referral marketing is and the types of referral marketing.

What Is Referral Marketing?

Incentivizing individuals to spread the word about brands and products to others they know is called referral marketing. The purpose of referrals in marketing is to inspire existing consumers to share their experiences with their network to turn them into new customers. 

A referral marketing strategy differs from a pure word-of-mouth strategy because it is organized and tracked. Brand marketers and managers usually have links and discount codes to follow referral sales.

what is referral marketing? tracking the referral sales from ambassadors and people sending referrals
Total referrals from one brand ambassador. Source: Wooly Platform

As organizations develop and grow their customer bases in various industries, referral marketing helps promote growth. Previously, referral marketing relied on disseminating information to a small network of persons through spoken communication. Now, reaching a much larger audience through the internet and social media makes it very easy to distribute referrals. 

Types of Referral Marketing Programs  

Referral programs come in a variety of shapes and sizes. However, before outlining the main types of programs, Don't get stuck thinking about set approaches. Referrals can come from many places. So work to get referrals constantly and tailor your program to the business and customers. 

Brands doing referral marketing benefit their customers in several ways. When people share a referral code or discount with their social circle, it builds their reputation and social currency.

Referrals also help others get a good deal on a product recommended by someone they trust. Brands can motivate people to send referrals with referral marketing programs that clearly connect activities and rewards. Learn more about referral rewards and payments.

The best referrals come from authentic sources—namely, users of the product or current customers. 

In each of the following four types of referral marketing program models, the common thread is customers. Think about it. The best referrals come from a person who is so delighted with their purchases and brand interaction that they sincerely want others to have the same experience.

Customer Referrals

One of the most common types of referrals is from existing customers. When customers refer friends and family, this is also known as a direct referral. 

The most reliable technique to generate referrals is to get consumers to think about who else may benefit from your products and services. Not only are customers a natural source for referrals, but they are also remarkably valuable.

If consumers are happy with your company, they are much more likely to share their experiences with their network. And the opinions and recommendations they share will be positive and build trust. 

Many companies fold customer referral programs into their ambassador marketing.  If you have a core of devoted customers, you can benefit from this position by launching a brand ambassador program

download the free brand ambassador playbook

Implied Referrals

In an implied referral program, a company makes it clear that they are working for someone else without explicitly asking for a recommendation in the process. An example of an implied referral is the yard signs that landscaping companies, exterminators, and contractors post after completing work. 

Organizations working with brand ambassadors may use an implied referral. Every time one of their advocates uses a product or wears merchandise, they are promoting the brand. Without even talking to other people or actively promoting a brand, an ambassador implies a recommendation. 

People within their circle may see an item and actually ask where they got it. This is a truly organic referral.

Incentivized Referrals

The distinguishing factor in this type of referral program is a definite reward connected to the referral. You provide your customer with a physical item that has value. They, in turn, give it to people they refer as an incentive to becoming a customer.

The most prevalent program arrangement is payment for referrals, such as monetary rewards, coupons, and discounts. Other incentives may be cash, prizes, gift cards, and store credit. 

Brand ambassadors work well in the area of incentivized referrals. Brand ambassadors can contribute much to the prosperity of businesses. These brand champions generate trust by promoting your company and products with their friends and social following. 

The results are usually large amounts of earned media value and also increases sales. 

These outcomes are difficult to replicate. Thus, organizations often reward and pay their ambassadors. Rewards come in many different forms. Before is a graphic that highlights the main forms of referral incentives.  

referral in1entives and rewards in exchange for referral marketing

Need some ideas for rewarding people for sending referrals, make sure you read the perks of being a brand ambassador.  

Community Referrals

There are a plethora of community groups that love and appreciate help from businesses. Consider partnering with a non-profit organization and supporting their cause and events. You can provide promotional or financial assistance. Non-profit groups are always looking for donations and items to use for fundraising. 

Another strategy is actually to commit a portion of revenues to a community partner or charity. One such company is Cotopaxi. Their mission and purpose are to produce "Bold products. Big events. Better ways to help others. GEAR FOR GOOD." 

Cotopaxi contributes 1% of its revenue to alleviating poverty and promoting community improvement. Their 42 grant programs in 6 countries support groups making significant contributions to improving the human condition. 


Referral marketing is very effective and can have a significant impact on revenue. 

When integrated into word-of-mouth marketing efforts, referral marketing drives qualified leads that brand advocates already vet.  

Remember, strive for excellence at every level of the company. Getting customer referrals is all about giving your consumers solutions to their problems and ensuring they are pleased.

Grow your ecommerce sales with people who love you. Request a demo today!

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