Referral programs are one of the lowest-cost ways to grow. Potential customers trust word-of-mouth more than any other form of marketing. But most referral programs are lazy. Give £10, get £10. It's easy to implement and easy to ignore.
When I was at Nude, we wanted to build something that actually worked for our customers, not just something we could copy from a playbook.
Nude is a savings app for first-time home buyers. Our customers save thousands of pounds over several years. A £10 referral bonus is meaningless in that context. It's a rounding error on a deposit.
So we built something different. We created a monthly £1,000 cash giveaway towards a customer's first home deposit. Every customer gets entries, but the more referrals you make, the more chances you have of winning each month. It aligned with what our customers actually cared about: getting closer to their goal of buying a home.
There are three things to consider when designing a referral program that fits your business.
First, it has to work for your customers' specific goals. What are they actually trying to achieve? For an e-commerce brand, a discount on a future purchase makes sense. For a savings product, a long-term incentive works better. Don't just default to cash. Think about what your customers value.
Second, it has to work with your business model. If your model relies on long-term retention, your referral program should reinforce that. The giveaway structure at Nude gave customers a reason to stay engaged month after month. Each new draw was another chance to win, which kept them active on the platform.
Third, it has to fit your target CAC. Growth businesses need short payback periods to reinvest revenue. If your CAC target is £20, giving away £50 per referral will burn through cash faster than you can grow revenue. The monthly giveaway amount became a lever we could pull. Need more growth? Increase the prize. Need to reduce CAC? Dial it back.
If you're not sure where to start, start with the customer. Everything else should fall in line behind that.