What is a referral program and how to make money on recommendations
Miscellaneous / / May 27, 2022
Earn additional income without extra actions.
Konstantin Rybchenko
What is a referral program
A referral program is a marketing tool through which a company partner attracts new customers, and also receives a reward for recommending goods and services. It can be a discount, free service, points, gifts or money. Such programs are also called partner or affiliate programs.
A person who recommends a product or service is called a referrer, affiliate, or ambassador. And new program participants who followed a special link or used a promotional code are referrals.
Here's how it works: a marketplace user sends their promo code to a friend, who gets a discount on their first purchase. The referee is then awarded points. Another example: a beauty salon offers to bring a friend. If a person does this, he receives a 20% discount on a particular procedure.
Banks, online stores, marketplaces, cryptocurrency exchanges, airlines, confectioneries, have their own referral programs.
manicure salons and so on. And their goal is to encourage the customer to recommend the product or service to other people.What are referral programs
Referral programs differ in the form of recommendation, the model of construction and the way they receive benefits. Let's talk about each type in more detail.
in the form of a recommendation
In this case, it all depends on what the recommendation includes: a clickable link, a code word, or a set of numbers and letters.
- Referral link - contains a unique user ID, used only online. It can be used to track the partner program participant who brought the client. If you click on the link, but you don't like the offer and you don't buy anything, then its author simply won't earn anything.
- Promo code or code word - Can be used both online and offline. For example, it can be voiced when buying in a store or driven into a special field on the seller's website.
By model type:
The model determines the range of referrals from which the program participant receives a reward.
- Single level model - the reward to the participant is charged only for those people whom he invited. For example, it may be a bank client who receives money for the fact that his friends become clients or employees of this organization.
- Layered Model ("pyramid"). The participant receives bonuses for those whom he personally attracted to the program, as well as for those who were invited by his referrals. This is how network marketing companies work.
How to benefit:
The type of program depends on who gets the promotion: only the referral or both him and the referral.
- One way program - only the referrer gets the benefit in it. For example, a patient of a dental clinic brings his friend and receives an additional discount for the next appointment.
- Bilateral program Both the referrer and the referral benefit. Example: online school of English language, whose courses are sold in packages. The reward in the referral program is additional lessons. If a member shares a referral link with a friend and he buys an English course, then both of them will receive two additional lessons.
Who can participate in the referral program
Anyone can participate in referral programs. Most of them are aimed specifically at individuals.
Referral programs that can be used by legal entities are available for companies and services operating in the b2b sphere: domain name registrars, online business platforms, banks and other representatives of the segment.
How to make money from referrals
To do this, you need to share your referral link or promotional code:
- in publications and stories in social networks;
- on the forums;
- via email newsletters;
- on your own website;
- in private messages in messengers;
- using advertising on the Internet, targeting those who are interested in the service or product that participate in the referral program.
For example, bloggers talk on their pages about using a particular product, recommend it, and attach a referral link. The audience is interested in this product or service, starts using the link, and the referee benefits.
The reverse story also happens: a person sees that when paying for the goods there is an opportunity to enter a promotional code, and begins to search for it on the Internet in order to reduce the cost of the goods or receive a bonus. If you place such a code for another resource on your site, you will bring people to it for free who will take advantage of the offer. This will help you earn and save them.
What are the pros and cons of referral programs?
At first glance, it seems that referral programs have no disadvantages. However, this is not quite true. Moreover, the positive aspects are obvious, while the negative ones are more related to human perception.
pros
As mentioned above, the one who recommends the service receives benefits: money, discounts, gifts, bonuses. At the same time, he may not take active actions, but simply place a link or promotional code in the public domain and receive passive income from participating in the program.
If we are talking about a one-way program, then the referral at least receives a recommendation to use a proven service or service. If he participates in a bilateral one, he also receives the benefit provided for by the rules: points, an additional product, savings and so on.
Minuses
Negative moments are more pronounced for the b2b sphere. For example, a company recommended hosting to its client, he registered, but he had problems with the service.
Automatically, the company will be associated with the referral with this complexity, although in fact it has nothing to do with the operation of the site. And the client will put in his head the sign equal to “bad hosting = bad company”. This leaves an imprint on business reputation.
In the case of individuals, the disadvantage is that a person is embarrassed to recommend a one-way program to friends. He thinks he's cashing in on them. With a bilateral program, there are no such doubts. True, in both cases, you can get a negative response if the referral's expectations are not met.
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