What Is A Referral Program? A Complete Guide

The success of a business largely depends on its customers. A large customer base drives up sales and can also be a great way to promote the business, create goodwill, and invite more customers through word of mouth. This is one of the primary reasons why companies use referral programs that allow customers to refer and earn money by inviting other potential customers to the business. IDFC FIRST Bank's MyFIRST Partner Program is an excellent example of how you can build a network and earn money through a referral program.

However, as popular as these programs are becoming by the day, not many people know how they work or how to create one to their advantage. In this guide, let's talk about all there is to know about referral programs.

What is referral marketing?

Marketing is a significant concern for every business. When a company creates a product or service, it has to make sure that customers get to know about it. This is done through advertising and marketing the product. Now, an enterprise may use several types of marketing strategies. One of them is referral marketing. 

Referral marketing is a strategy used by businesses that encourage existing customers to invite more people to the company. It is also popularly known as the word of mouth marketing that uses traditional methods like interaction and persuasion to attract more consumers. As simple as it sounds, referral marketing has been an extremely useful and effective tool for many companies. 

What is a referral program?

As explained above, referral marketing happens through word of mouth. In a referral program, an existing business customer is often rewarded every time they invite a new customer to the company. Such a program is also known as a refer and earn program because every time a customer invites a new customer, the former is offered an incentive.

Referral programs can differ based on the nature of the business. For instance, in the case of the IDFC FIRST Bank's MyFIRST Partner Program, the referral program can help one reach out to a larger customer base and help them resolve their financial issues by securing a personal loan from the IDFC FIRST Bank. In return, you, as the IDFC FIRST Bank's MyFIRST Partner, get to earn 1.5% of the disbursed loan amount.

Why are referrals important?

Referrals thrive on creating positive affirmations. When a business rewards a customer or when a customer gains benefit from it, like in the case of the IDFC FIRST Bank's MyFIRST Partner Program, they are more likely to tell others about it. This pushes the happy customer to spread the word and invite their friends, family, and peers to use the business' products. Additionally, people are far more likely to believe their family members or friends than impersonal advertisements on newspapers, televisions, and social media. 

Referral marketing is one of the most impactful tools anyone can use to create awareness of their offerings and build a solid customer base. It is also cost-effective and benefits both the customer and the business – a win-win situation for all parties. 

What are the different types of referrals? 

There are three types of referrals. Let's check what these are and how they differ from one another.

1. Direct referrals

As the name suggests, a direct referral is when an existing customer refers new people to the business. These people are in search of a similar product, and they are introduced to the company through the referral in a seamless manner. Direct referrals may or may not reward the customer for each referral. In fact, most direct referrals result from genuine customer satisfaction when customers introduce the product to their friends out of pure will. 

2. Reputation referrals

Often, companies with good reputations are able to attract customers based on their brand name. As a result of a stellar reputation and presence in the market, customers who may not have tried the products may also end up recommending them to others. This is common in the case of luxury items, cars, and others. 

However, it may be hard for businesses to reach a point where such organic referrals can benefit them. Very few companies enjoy such an impressive reputation in the market that can takes years to build. 

3. Incentivised referrals

This is the most widely adopted marketing strategy by most companies. This type of referral works based on referral earning, where an existing customer invites a new customer in return for an incentive or reward, such as a commission, bonus, gift, cashback, or discount. Some incentivised referrals may also reward the new customer with a discount. This can differ for each company according to the product or service. 

Since these referrals have earning potential, most customers are happy to join such programs. 

How does a referral program work? 

A referral program allows customers to earn money by referring. Here's how a traditional referral program works:

1. A business asks its existing customers to become brand advocates or ambassadors for its products and services by joining its earn and refer program. 
2. Each customer who joins the referral program is given a unique code or link. 
3. Every time the customer invites a new customer to the company, they share this code or link with them. 
4. The code or link is scanned, and for every new customer, the existing customer gets a commission. 

Since every referral program works differently, you must understand them before opting for one. With money earning apps like the IDFC FIRST Bank's MyFIRST Partner App, you get a flat payout of 1.5% for every personal loan disbursal through a referral. So, every time you refer a friend, family, or anyone you know, you earn money. Furthermore, the registration is free, takes under 5 minutes, and you can earn Rs. 50,000 or more every month by referring other people.

This can be a great source of income without any investment. Moreover, since the payouts are released weekly, you have nothing to worry about and can enjoy your money as soon as you earn it.

How can you create a referral program? 

Here are the steps to creating a referral program:

1. Create a product or service

The first step is to create a product or service that you want to sell. You can create a referral program based on the product or service. For instance, tangible products may work well with discounts as referral earnings. However, services may find commissions a better way to incentivise customers. 

2. Get to know your customers

Understanding your customer base will help create a program that consumers find appealing. For instance, if students or youngsters form a significant part of your customer base, a program that offers commissions may appeal to them as most students are looking for a source of income while pursuing studies. 

3. Set incentives

You can set an incentive-based on your product and customers, such as a discount, commission, etc. 

4. Invite existing customers

Start inviting your existing customers to your program and enjoy the new customers coming your way!

Referrals can help customers earn money and businesses expand their reach. They are undoubtedly an asset for both. If you want to enjoy their benefits and start earning money, you can make use of money earning apps like the IDFC FIRST Bank's MyFIRST Partner App. Simply download, refer people for personal loans, and start earning on every disbursal.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.