A referral program pays an existing customer for bringing in a new one. Done well, it is the cheapest customer acquisition a small store has: you pay only when a real first order arrives. Done carelessly, it pays people to refer themselves.
Decide what a new customer is worth
Start with numbers you already have. If your average first order is $60 with a 40% margin, that order makes you $24 before you count repeat purchases. If a typical customer orders three times a year, a referred customer is worth far more than $24. Spending $5 to $10 per successful referral is usually comfortable.
Reward both sides
Two-sided rewards convert better than one-sided ones, because the friend has a reason to act and the referrer doesn't feel like they're selling. A common split:
- Referrer: points worth about $5 once the friend's first order is complete.
- Friend: points worth about $2.50, or a first-order discount.
Points work better than cash credit here. They bring both customers back to spend them, and they cost you nothing until they're redeemed.
Pay on the completed first order, not the sign-up
Rewarding sign-ups invites fake accounts. Reward only when the friend's first order is completed, and take the reward back if that order is refunded or cancelled. A minimum order value (for example $25) stops people buying the cheapest item to unlock the reward.
The abuse rules that matter
- No self-referrals. Block rewards when the friend's account or billing email matches the referrer's.
- New customers only. If the friend has ordered before, under their account or as a guest with the same email, it isn't a referral.
- One reward per friend. A friend can only be referred once, however many links they click.
- Reverse on refunds. When the qualifying order is refunded, both rewards come back out.
- A sensible link window. 30 days between the click and the first order is a common default.
Keep a log of blocked referrals with the reason. When a customer asks why they weren't rewarded, you can answer in one line.
Make the link easy to find
Most referral programs fail because nobody sees them. Put the customer's personal link on their account page, mention it in the order-complete email, and remind customers after their second order, when they're most likely to recommend you.
How Wren Loyalty Pro handles referrals
Each customer gets a personal link on their My Account rewards page. By default the referrer earns 500 points and the friend 250 when the friend's first order completes. Both amounts, the minimum order and the link window are settings. Self-referrals, repeat customers and duplicate rewards are blocked automatically, with the reason saved on the order, and refunds reverse the rewards.