A referral is a participant in a loyalty program who joined it upon the invitation of another participant. For example, a person gave a promotional code or a link to their acquaintance, who used it during registration. Thus, the registered user becomes a referral. Referral programs are often found in online stores, marketplaces, educational platforms, and other places where there is a large flow of customers.
The goal of referral marketing is to attract referrals. Referrals have higher trust in the company than regular new customers. The reason is a personal recommendation from a person you trust. Usually, referrals are attracted by their acquaintances or friends, and they will not risk their own reputation by recommending something bad. Therefore, to attract referrals, it is desirable to have a ready audience of loyal customers.
It is beneficial for the company's existing customers to look for referrals, as they receive a reward for successful invitations. This type of referral marketing scheme is called one-sided. If the company uses a two-sided approach in referral marketing, the referral also receives a reward for joining the loyalty program. The reward for the referral and the inviter does not always have to be the same. The main thing is that the reward is valuable and stimulates the person to perform the necessary action - register on the website, make a purchase, etc.