Skip to Content

Marketing: Stop mistaking your loyalty program for a referral program

Let’s set the scene: you’ve just launched your brand’s referral program.

You’re giving one $5 off coupon for your customer’s next purchase for every friend they refer to your store.

“What’s wrong with that?” Well, you’ve actually created a loyalty program.

A lot of people use loyalty programs and referral programs interchangeably.

But there’s one crucial difference between the two:

Loyalty programs focus on retention and lifetime value (LTV). Essentially, you’re incentivizing your customers to come back for more. Think vouchers and points for every purchase they make, redeemable only at your store.

… While referral programs should focus exclusively on customer acquisition. You want your incentives aligned with that goal and that goal only. Refer a friend and make $5 cash? That’s a referral program.

But what if you want to have a loyalty incentive-based referral program? Then you’re killing two birds with one stone, right?

No, not necessarily.

You’re actually using incentives that are misaligned with the ultimate goals of each individual program, which often causes disappointing results.

The Insight: Keep your referral program cash-based, and your loyalty program store credit-based.

That way, you’re truly maximizing the goals of each program. Besides, who said you had to pick just one?