There are so many ways to acquire customers in 2025 and beyond, from paid advertising to organic methods like SEO. Still, word-of-mouth marketing remains one of the most effective ways to grow a business profitably.
Even today, 13% of all sales are driven by this method. You can’t afford to leave that much money on the table, especially considering how easy it is to set up a customer referral program and turn your most loyal advocates into an organic sales channel.
That being said, how does a referral program work? There’s no one-size-fits-all answer as you can tailor the program however you’d like. The common theme, though, is that customers are incentivized to refer their friends, family, and anyone who will listen to your brand.
You can reward them with discounts, free shipping, exclusivity, or anything else that you think they’ll be motivated by. Brands will typically incentivize the first purchase for the person being referred to sweeten the pot, too.
Learn more about how to start a referral program for your business below, including why Rivo is the best platform to build your Shopify referral program.
What is a referral program?
First, what is a referral program? It’s a structured marketing strategy that incentivizes your existing customers to recommend your business to others. It’s word-of-mouth marketing at its finest.
You reward customers for bringing in their friends, family, or network, ultimately turning satisfied, loyal customers into brand advocates who actively help grow your audience.
Discounts are offered to the referrer or as a perk for the referred - most of the time, though, both parties benefit from the referral. Of course, you also benefit as the business owner since you’re getting a new customer into your ecosystem for a fraction of what you’d pay otherwise!
How does a referral program work to boost your bottom line?
So how does a referral program work to boost your bottom line? The short answer is it’s one of the most profitable marketing channels you have at your disposal as a Shopify brand.
Bringing down acquisition costs (and any costs, for that matter) is more important than ever in this increasingly competitive digital shopping environment. Referral marketing can reduce customer acquisition costs by up to 50% according to Winsavvy.
More importantly, though, referred customers are known for being as much as 18% more loyal with a 16% higher customer lifetime value (LTV) than non-referred customers. These will be some of the most profitable customers you land.
These customers aren’t just more profitable, they’re much more likely to convert from a lead to a sale. Leads generated from referrals have a 30% higher conversion rate than other marketing channels. People trust recommendations from friends and family.
Starting a customer referral program actually happens to be among the best strategies for customer loyalty, too, as customers who feel like they’re playing a role in growing the brand will continue to support it financially.
This creates a feedback loop where loyal customers refer their friends and family, and because of the initial connection, those new customers become loyal customers over time. Eventually, they may bring their own people to support your brand!
You can read through more customer retention statistics in our blog if you’re still not convinced of the power of loyalty. For now, let’s get into how to start a referral program below.
How to start a referral program for your business: Step-by-step guide to setting up a customer referral program
Part of what makes starting a customer referral program such a no-brainer is that it only takes a few steps, and once you have it in place, it’ll bring in new customers on autopilot. Here’s how to build a referral program for your business with Rivo.
Step 1: Define your goals
Before you do anything else you need to set clear, actionable goals for what you want to get out of referral marketing.
Simply saying you want to generate more profitable sales is an acceptable answer, but that’s not always what brings brand owners to learn how to start a referral program. It could be growing brand awareness, for example.
Starting here is important as it dictates the rest of the setup process, from choosing rewards to designing marketing campaigns. Be specific and measurable - for example, aim to increase new customer acquisition by 20% in six months.
Step 2: Choose the best platform to help accomplish them
Once you know what you want to achieve, it’s time to find a platform that can help make your goals a reality. What matters most is seamless integration with your Shopify store. This way you can pull in all your customer data in a snap and hit the ground running fast.
You should ensure the platform you choose lets you customize referral workflows and create unique rewards tailored to your audience. Being able to track performance with detailed analytics will help optimize performance down the road, too.
Rivo is built specifically for Shopify brands looking to create an on-brand, white-labeled referral marketing program. It takes just a few minutes to let your existing customers help you grow your brand. You can also set up a Shopify loyalty program while you’re at it. Compare your options below:
You can also request a demo for a one-on-one walkthrough of all that Rivo can do for you, making the most of your customer referral program.
Step 3: Determine the right reward structure
Once you’ve picked a platform it’s time to get to work bringing your program to life. While you can technically incentivize the referrer OR the person being referred, we suggest rewarding both parties.
The specific reward structure is up to you. You might offer discounts, free shipping, complimentary products, store credit, or some other exclusive perks. It’s not a bad idea to poll your VIP customers with a few options and see what would motivate them the most.
Whatever direction you take, it’s imperative that your rewards are actually enticing. If a customer has to refer 10 friends just to get a 10% discount, that’s not really going to move the needle. Earning rewards should be easy, or they won’t participate.
Step 4: Building your referral landing page and getting the program live
You’ll need to build a standalone page on your website to host the details of your customer referral program. This is where you’ll send customers to learn more about how they can take advantage of the program.
The landing page needs to be clear, compelling, and on-brand. Anyone can ship their landing page fast with our intuitive page builder at Rivo.
There are a few essential components of the landing page:
- Clear headline
- Explanation of the program
- Rewards section
- Step-by-step instructions
- Call-to-action (cta) buttons
- FAQs section
- Social sharing options
You can always get inspiration from our case studies, but HexClad is one example in particular we want to point out. These guys did a remarkable job setting up their landing page and building out the customer referral program as a whole. It brought in $450k in the first 90 days!
Step 5: Launch the program and get your customers excited
Announce your program with a bang! Blast it across all your channels, from social media to email, in-store promotions if applicable, and on your Shopify store.
You might consider offering even greater incentives for the first 24 hours or week your program is live to really move the needle, like “double points for referrals” or something like that.
Put the program either in the main navigation or in the footer of your site, and link to it in all communications going forward. Speaking of which…
Step 6: Continue to promote the program
Hopefully, the sales start trickling in the moment you push your program live, but learning how to start a referral program isn’t a one-and-done process. Regularly remind your customers about it through newsletters, social media posts, and product packaging inserts.
This is important because new customers may not have been there for the launch, but they’re just as eager to advocate for your brand - especially if there’s something in it for them!
Step 7: Monitor and optimize as time goes on
You’ll want to keep an eye on the performance of your referral program and look for ways to expand it. Pay attention to metrics like the number of referrals, conversion rates, and ROI.
Identify what’s working and where there’s room for improvement. You may need to tweak the reward structure or simplify the referral process if you’re not meeting the goals you set from the start.
But with Rivo helping guide you through it, you can rest assured you’re building a customer referral program that pays for itself.
Wrapping up our guide on how to build a referral program
So, how does a referral program work? We hope this guide has left you with complete clarity on not just the benefits of referral marketing but how to start a referral program yourself to reap all it has to offer. It’s quick and easy with Rivo, the best platform for loyalty and referrals.
Our blog has additional resources on topics like loyalty segmentation or why loyalty programs fail. But at this point, the only thing left to do now that you know how to build a referral program is to get started to work.
If you’re still on the fence about how Rivo can transform your referral strategy, let’s talk. Request a demo today and start driving more profitable growth and building brand advocates for life.
