What’s a Referral Code and How to Use Referral Programs in 2023

Learn about What’s a Referral Code and How to Use Referral Programs in 2023


The importance of referral marketing for businesses is nothing to sneeze at. Namely, in 2022, the global referral marketing software was estimated at $563.47 million (£452,88 million); by 2028, its value could reach $1 billion (£806,152 million).

That said, new affiliates should consider implementing referral marketing into their business models, given that it can potentially expand their profits by 16%. Moreover, the likelihood that people will buy a particular product or service jumps to a staggering 90% if it comes in the form of a friend's recommendation.

However, if you want to enter the world of referral marketing, you first need to learn what referral codes are and how to use them. With that in mind, check out this comprehensive guide to learn all about referral codes and the benefits they can bring your business.

What’s a Referral Code?

A referral code is a term that describes a unique set of words or numbers assigned to people participating in referral programs. The final appearance of this code will depend on the software you use to generate it. This means that codes can contain anything from numbers to words and even names of companies or people.

Offering referral codes is a way of rewarding your customers using loyalty marketing strategies.

How Do Referral Codes Work?

Referral codes are quite simple—you use the code you have from a service to refer somebody to their services, and in return, you get some reward. To understand better how referral codes work, let’s take a look at this fictional example.

You own a fast food business that you want to expand by creating a dedicated mobile app that users could use for orders. To motivate and reward your loyal customers for using the app, you also decide to create a referral program.

Your referral program includes one free burger for people who get you new customers using your referral code and one free burger for the first order of referred customers. So how does this work? Here is the step-by-step process:

  1. Referral codes work in a way that the person who refers your brand enters their app profile, copies the offered referral code, and sends it to another person.
  2. Once the second person receives the referral code, they must download the app, create a profile, and use the code when placing their first order.
  3. When the software running your referral marketing program recognises the first person’s referral code, it will add a free burger to their next order, as well as one to the second person, a.k.a. your new customer.

Real-Life Examples

Setting aside fictional examples, you can also see how referral codes work through real-life cases since many prominent brands use them to reward their users. Here are some examples that you may know:

  • Example 1: Ibotta – You'll find the Ibotta referral code in your profile menu. You can send it to your friends via text, email, or social media. Once they receive the code, they must use it during registration. Ibotta rewards its customers with bonus cash.
  • Example 2: Uber – You can use the Uber referral code to invite people to join the Driver app to earn bonus cash. To do this, you need to enter your app profile and select ‘Invite Friends Now’ or ‘Free Ride’.
  • Example 3: WorldRemit – All people who create an account on the WorldRemit app using a referral code will receive a reward voucher. This reward also goes to the people who send the code.

How to Create Referral Codes

Creating a referral code sounds more complex than it actually is. You can create a referral code using the ideas given below.

Use Referral Program Software

If you already use affiliate market software, you’ll have no problems using referral program software. This software will track referrals made by your customers and automate rewards payouts. Some of the most popular software referral programs are Post Affiliate Pro, Affise, Yotpo, and ReferralCandy.

Personalise Your Referral Codes

Personalisation shows that you care about your customers. On that note, you can create personalised referral codes by your clients' names.

Use Qr Codes

Instead of using numbers and phrases, you can use QR codes. Besides being more sophisticated, QR codes are also easy to utilise since almost all smartphones have built-in QR scanners.

Present Your Terms and Conditions

The terms and conditions should explain to users how to use your referral codes. Make sure your offers are both attractive to new customers and cost-effective for your business.

Things to Be Aware of When Creating Referral Codes

As you can see, creating referral codes is simple. What's more, your code can look like anything you want. However, in order to create the best possible codes, new affiliates should stick to the following guidelines:

  • Make sure your referral code is easy to read and remember. The ideal referral codes are short and unique.
  • Do not use zeros, O's, uppercase I's, and lowercase L's as they overlap.
  • Do not use your brand name when personalising referral codes. Instead, use the first or last names of your customers.
  • Make sure all your referral codes are in the same format.

How to Distribute Referral Codes

There are several ways to distribute referral codes. Here are some of the most common ones:

  • Use Email Marketing: The easiest way to promote or present your new referral program is to send an email to your customers containing referral codes and other information related to the program.
  • Put Referral Codes on Your Homepage: You can incorporate the codes in banners or images that will be visible on your homepage.
  • Create Referral Landing Pages: This type of page should promote your referral program while explaining how it works and what the rewards are.
  • Use Social Media Campaigns: The most significant benefit of social networks is that you can use them to reach specific target groups. Social media ads will also help you reach more people.

Referral Codes vs Referral Links

While a referral code is a specific set of words or numbers that loyal customers receive for referring your business to their friends, a referral link is a specific URL that users will receive after joining your referral program. In other words, referral codes can be described as a subgroup of referral links since referral links have assigned referral codes.

That said, referral links are more often used in marketing campaigns. However, this doesn't mean that referral codes do not carry significant benefits, given that they will enable you to keep track of referral links.

Conclusion: Why Should You Use Referral Codes in Your Marketing Campaigns?

Referral programs are an important part of marketing strategies as they help retain old users and bring in new consumers. Some companies use referral codes to lead to user-generated content, which means they get advertising for their business without using affiliates.

Nonetheless, it is a fact that combining affiliate marketing and referral codes can boost your business. Hence, new affiliates are encouraged to use this type of marketing alongside their other strategies. Plus, referral codes can help raise brand awareness, establish customer relationships, and, most importantly, save time and money.

Dominik Sova

In my copywriting work, I concentrate on crafting articles that capture attention and align with marketing strategies. I believe in creating content that connects trackdesk with its audience. I aim to produce articles that resonate with readers, encouraging engagement.

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