Customer Referral Strategies: How to Get Customer Referrals

Customer referrals happen when an existing customer recommends your brand or product to someone else—typically a friend, family member, or colleague—who then becomes a new customer.

Customer referral programs can be a plank in a customer acquisition strategy. According to a 2024 Impact survey, 86% of consumers consider recommendations and reviews important in their purchase decisions, whereas only 2% of shoppers consider traditional advertisements to be important.

In this article, you’ll learn more about customer referrals, effective ways to get them, and some reliable metrics to track how your customers’ referrals drive business growth.

What are customer referrals?

A customer referral occurs when an existing customer recommends your products or services to someone in their personal or professional network who then makes a purchase. This can happen through word of mouth (known as organic referrals) or via referral marketing where the referrer is rewarded for their brand advocacy (known as incentivized referrals). 

Charlie Bowes-Lyon and Freddy Ward, cofounders of cosmetics brand Wild, say that 25% to 30% of their sales come through referrals. “That’s just such a valuable channel because those people haven’t been sold to by us,” Charlie says on the Shopify Masters podcast. “They haven’t been sold to by an advertisement. They’ve been sold to by their friend who they trust who already wears the product. They’re much more likely to give it a go, and they’re much more open to liking it as well.”

You don’t necessarily need a formal referral marketing program to win new customers, but a well-designed referral program can help to kickstart the referral process and connect your company to more prospective customers in a shorter period of time.

Benefits of attracting customer referrals

• Lower customer acquisition costs
• Higher quality leads
• Increased customer lifetime value

Compared to traditional marketing tactics like paid ads, customer referrals—particularly organic referrals—are a cost-effective way for a small business to reach prospective clients. A customer referral strategy can benefit your business in several ways:

Lower customer acquisition costs 

By leveraging your existing customer base to find new clients, you reduce the amount of money spent on advertising. This helps reduce your overall CAC and improve profit margins. While word-of-mouth marketing from your existing customers is free, incentivized referral programs aren’t necessarily free; formal programs provide customers with referral rewards such as discounts or free gifts to encourage participation.

Higher quality leads

Customers referred by friends and family are likely to have a higher degree of trust and purchase intent than those who come to your brand via other marketing channels. Gartner’s 2024 Customer Acquisition and Growth Primer reveals that referrals bring in 43% more quality leads than other channels.

Increased customer lifetime value

One thing that makes client referrals important is that they don’t just provide you with new customers; they strengthen the customer lifetime value (CLV) of your existing customers. 

Divy Ojha, founder and CEO of produce delivery service Odd Bunch, says on the Shopify Masters podcast that he tracks referrals in a customer’s first four weeks as a “killer metric” that predicts long-term loyalty. 

Through cohort analysis, his team discovered that customers who successfully referred at least one person had retention rates “an order of magnitude higher” at six months than those who did not refer anyone. In short, Odd Bunch found that the customers who referred others were often customers who made repeat purchases themselves.

Strategies for getting more customer referrals

• Start a customer referral program
• Implement automated referral workflows
• Try referral gifting

Here are some specific ways to bring more referrals to your business:

Start a customer referral program

Building a formal customer referral program allows you to incentivize advocacy. Offer incentives and small rewards such as exclusive early access, discounts, or free products. You can use apps from the Shopify App Store to keep the referral process simple for your team. Options like Conjured Referrals or LoyaltyLion handle the tracking of unique referral links and the distribution of rewards. 

Turning referral generation into a game-like experience through apps like Stamped Loyalty & Referrals or LoyaltyLion allows customers to earn points for every successful referral, which can then be redeemed for store credit or exclusive perks. Customers receive a steady stream of incentives to increase referrals and thus ramp up word-of-mouth marketing for your business.

Implement automated referral workflows

Tools like Shopify Flow allow you to automate the entire referral process based on specific customer actions. You can set up triggers to engage customers when they are most satisfied with their purchase. For example, you could trigger an email inviting a customer to refer friends immediately after they leave a five-star review. 

Try referral gifting

This strategy allows loyal customers to give your product as a free gift to others—and it’s one that works particularly well if you offer a digital subscription service. Julianne Fraser, founder of the consultancy Dialogue NYC encourages personalization with this tactic. 

“There’s a lot of value in referral gifting,” Julianne said on a panel at the April 2025 Combating the Creativity Crisis conference presented by Shopify in New York City. “Rather than blasting a thousand people, if you do that really thoughtfully for 50, it builds momentum over time. If you start to build a really strong network of 15 ambassadors that love your brand, and you offer them to gift their friends and their friends, it compounds.”

Tracking and measuring customer referrals

To understand whether your referral strategy is working, KPIs (key performance indicators) include:

• Referral conversion rate, by channel. Which sources (e.g., email, Facebook, Instagram, SMS) are driving the most conversions when existing customers promote your brand to others?

• Average order value. Do referred customers have a higher average order value than non-referred ones?

• Customer lifetime value. Are referred customers more loyal over time? Are those who do the referring more loyal over time? A 2024 Harvard Business Review study indicates that referred customers make more purchases than customers from other channels.

• Referral program ROI. Are the rewards you’re giving justified by the revenue generated?

The insights offered by these metrics, which can all be monitored directly using Shopify Analytics, can help you optimize incentives, identify top-performing channels, and scale what works.