Best Practices: How to Choose a Referral Reward for Your Store

The Referral Reward is the reward you give to your Advocates for successfully referring their Friends to the store. 

Before you decide on a Referral Reward, it’s important for you to know this: there’s no “perfect” reward structure. As you learn more about your Advocates, you can then fine-tune your reward structure to make them more appealing.

Here’s a quick decision-making process to help you choose a Referral Reward:

  1. If your Advocates are likely to make repeat purchases, give discounts. 
    The reasoning is simple: Given that your Advocates will likely make a repeat purchase sometime in the future, a discount on that purchase as a reward will be perceived as being valuable to them. And they will be motivated to refer their friends so that they can get the discount.
  2. Choosing between a % discount versus a $ discount? -- Consider the Rule of 100. 

    If your product costs more than $100, using a cash discount sounds more impressive. If your product costs less than $100, then a percentage discount sounds more impressive. Read more about the Rule of 100.
  3. If your Advocates are unlikely to make repeat purchases, give cash. 
    If your product is something that your customers are only going to buy once in a long while (a mattress, budgeting software etc.), then giving them discounts on future purchases will simply annoy them. It makes more sense to give them cash instead as it'll be more valuable to them.
  4. How much of a discount or cash should I give? 
    There is no hard and fast rule about this. Generally, we observe that retailers who give at least a 20% coupon code in Referral Rewards enjoy higher referral rates.
  5. Can I give out custom rewards instead? 
    Sure you can! Do note, however, that you will have to manually fulfill the custom rewards (e.g. free teddy bear, gift cards, etc.) yourself– ReferralCandy cannot do that for you. ReferralCandy will inform you each time your Advocate makes a successful referred purchase via email, and you’ll then have to send your reward to the Advocate yourself.

Jason is the author of this solution article.

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