What is a Referral Code: How Does it Work in Referral Marketing?

Discover what a referral code is and how it actually works with a referral marketing program.

What is a Referral Code: How Does it Work in Referral Marketing?

Referral programs are essential when it comes to attracting new customers. It’s a well-balanced strategy where customers get rewarded for referring people via word-of-mouth marketing. It can help businesses to thrive.

Why? Because people are generally influenced by what they hear, and consumers trust it more because of this. People who have good relationships with each other can easily influence each other to purchase a particular item or service.

Referral marketing is beneficial to organizations throughout the world. 88% of people say they had the highest level of trust in a brand with recommendations from friends and family. Word-of-mouth advertising should be a critical part of your marketing strategy.

Here’s what we are going to cover in this article:

Tip: Ensure that you have a great product (or services), and post-purchase, you have excellent customer service. People will be more encouraged to share your products with friends and family.

Rewards are essential. When starting your referral program, you need to motivate referrers to tell family and friends. These can be things like dollar amounts off their next purchase, points, or discounts.

You can track the progress of those who have signed up for your referral program using referral codes. We recommend using referral marketing software to create referral codes for your existing customers and track the results.


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What is a referral code?

It is a unique set of alphanumeric symbols or phrases, similar to a promotional code. Referral codes identify who in the referral program has successfully referred someone who has gone on to purchase.

These unique referral codes are the key that opens the door to tracking sales. To discover how this works in more detail, check out our support documentation.

Many businesses have found success through the use of referral codes. They allow companies to reward their successful referrers with a cash or gift certificate.

It also allows businesses to organize their referral marketing strategy and gives them a more powerful marketing tool. Referrals are a simple way to show your customers that you appreciate their business and loyalty.

How does a referral code work?

Before we go any further, it’s vital to understand how a referral code functions.

Imagine you are an ecommerce website. You discovered that your website started getting more visitors because someone told them about your business.
You decide that you want to get more referrals. You start a referral program to reward to anybody who brings a new client.

Gary, a long-time customer, uses your website occasionally to order new clothes. He had previously recommended your business to his coworkers, and they are now eager to try it.

Gary logs into his referral program account and copies his referral link. He sends a message to his coworkers or friends, instructing them to utilize his referral link.

His colleagues visit the website using Gary’s referral link. Perhaps, as part of your referral program, they get a coupon code for a discount.
The referred customer enters the code and purchases their item. Next, the software that manages your referral marketing program recognizes Gary’s referral ID. You then allocate the bonus to Gary.

Who doesn’t enjoy discounts? People refer others to your business, and they get rewarded. Your business gains the growth you desire, which results in a win-win situation for both parties.

How do you set up a referral program?

Here’s a quick look at how to set up a referral program. Bear in mind that the rewards given by a referral program depend on the business. Some businesses offer only discounts on the referrer’s next order. Other companies offer different types of bonuses.

1. Set up referral tracking software

Instead of manually creating a referral program, we recommend setting up referral tracking software. You can automate many steps to setting up a referral program with software. For example, allocating unique referral links to customers, allocating rewards to the right person, and auto-enrolling customers.


Start your referral marketing program now with Tapfiliate. Try all the features: 👉get a 14-day free trial here


Enrolling new customers into your referral program is simple with referral software. New customers will automatically receive an email to let them know their referral link. You can add loyal customers to your referral program by uploading their information using a CSV file. You can also give your customers a unique referral code.

Referral link and coupon code

There are various options for telling customers about their referral codes and links. However, there is no one approach that is the best fit for all situations.
It’s up to you to determine how you will persuade clients and partners to join in. To engage customers with your referral program, consider displaying their code or link when they login to your website. You could also send referral codes via email.

4. Track your results

Log in to your dashboard to see how your referral program is performing. See which customers are referring the most users to your website.
Assess what is going well and what could be improved and take action. Look at the data - what is the conversion rate, average order value, and total revenue from your program? How could you increase those numbers?

Referral program benefits

Using a referral program can help businesses save time and money. Referrers are attracting new customers in a less expensive way than running paid advertising campaigns.

Referral programs can also help businesses build closer relationships with their target audience. For online businesses, it can be helpful if they struggle to capture the spirit of customer engagement.

And finally, referral programs can improve brand visibility. For online businesses that may struggle to capture the spirit of customer engagement, referrals are beneficial. Brand advocates who love what you do are essential for success.

The way referral codes work to boost brand awareness, and reputation is pretty straightforward. With just a few referrers, a brand can be more successful as several people get to know about it.
It can also help to drive user-generated content for your business. Many people will want to share their experiences on social media.


Never tried tracking referral program results using Tapfiliate before? Try all the features: 👉get a 14-day free trial here


How to spread the word about your referral program

When telling people about your referral program, take note that the channels used depend on your type of business.

Here are some channels that you can use to spread the word about your referral program.

1. Social media

Social media is one powerful channel to leverage when looking to interact with people from different walks of life. The advent of social media has helped improve the growth of several businesses.
Evaluate which social media channels would be best for advertising your referral program. At best, you would use one to help target your desired audience.

2. Email

Email is one of the best ways to keep in touch with your customers. It’s direct, personal, and easily customized to send any message – including information on your referral program.

Get started by sending an email to introduce a new referral program (or remind customers of an existing one.) You can also segment your emails if you want, such as inactive and active customers.

Postable email about referral program
Image source: Postable

3. Landing page

Every referral program should have a dedicated landing page. Aside from promoting the referral code or link itself, the page also organizes all the essential program information in one place. You can create a simple landing page exclusively for your referral program.

Referral program landing page example
Image source: DeGiro

It should explain the program rewards and benefits, referral mechanics, and other details. A landing page’s efficacy is also influenced by good text, a clear structure, and a pleasant design. Make sure you think about it when you’re making it.

Have you always wondered whether a referral code differs from referral links? Both work in different ways.

As you might have already guessed, every eCommerce marketer understands that the fewer pre-purchase steps needed of customers, the better. As a result, online businesses prefer using referral links to codes in most cases.

Every referral link is unique and contains a unique referral code. When a user clicks through that link, the cookie gets immediately sorted, and the click gets tracked. The purchase, if made, would be attributed to the affiliate that made the referral.

The enrolled customer shares their referral link (or shares their referral code) with a friend. Their friend can go to your website or download your mobile app without extra work.

As a result, you might ask why someone still wants to utilize referral codes rather than direct links. Mentioning a code to someone sitting next to you is more straightforward than emailing, messaging, or texting a link to them.

How to generate referral codes

Referral codes get created by the businesses and then shared among referrers. Referral tracking software will relieve you of the stress and time-consuming task of manually setting up a referral program.

Links and codes get automatically generated when someone joins (or is added) to your referral program. Investing in automated referral software to complete the task will be more beneficial to you in the long run.

Referral code best practices

When creating a referral code, there are basic things that you must not neglect. These guidelines will help you make good referral codes.

Here’s a quick look at some referral code best practices.
- Use easy to memorize symbols, numbers, or phrases in cases where whole words get used
- Avoid creating codes that are case sensitive
- Keep your referral codes short
- Personalize the referral codes as this helps referrers to remember them
- Avoid the use of O’s and zeros. Or capital I’s and lower-case L’s

Wrapping up

If you run a successful online business, it’s a great idea to have a referral program. To be successful, use referral codes and links to track the progress of your referral program.

Referral codes and links will ensure that you reward every deserving customer without mistakes. Creating a referral program will help make it better and more convenient for your consumers.


Start your referral marketing program now with Tapfiliate. Try all the features: 👉get a 14-day free trial here


Paul Aroloye

Paul Aroloye is the founder of PaulAroloye.com. He simplifies SEO for online entrepreneurs and businesses, helping them 10x their organic reach with their websites/blogs and YouTube channels. You can connect with Paul on LinkedIn.

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