Referral Programme Basics
A referral programme rewards existing customers for bringing new customers. The referring customer gets a reward when someone they refer makes a purchase. The new customer typically gets an incentive on their first order too.
This double-sided incentive structure (both parties benefit) outperforms one-sided referral schemes significantly. It gives the referrer a reason to share and the referred friend a reason to act on the recommendation.
Choosing an App
The leading referral apps for Shopify are ReferralCandy, Friendbuy, and Smile.io (which includes referrals within its broader loyalty platform). ReferralCandy is the most feature-rich pure referral app and is widely used by UK brands. It starts at around £35/month plus a performance fee.
Smile.io's referral feature is more basic but included in their loyalty plan, making it cost-effective if you are already using Smile for points.
Referral Incentives
The most effective referral incentive is store credit or a discount code for both the referrer and the new customer. Common structures: "Give £10, Get £10" (referrer gets £10 credit when friend places first order, friend gets £10 off their first order).
The incentive must be large enough to motivate action without eliminating your margins. For an average order value of £50, a £10 referral incentive (20% of AOV) is workable. For a £200 AOV, you can offer £20-£30.
Fraud Prevention
Referral fraud (self-referrals, creating fake accounts to earn rewards) is a real problem. Prevent it by: requiring email verification for new accounts, using cookies to detect self-referrals, setting a minimum time between signup and reward trigger, and manually reviewing unusually large referral volumes from single customers.
Email Integration
Integrate your referral app with your email platform (Klaviyo, Mailchimp) to trigger referral invite emails after purchase, send reminders when a referral is close to converting, and notify referrers when they earn a reward. Automated referral emails typically drive 3-4x the referral volume of passive programme exposure.
Tracking ROI
Track: referral link clicks, new customer acquisition via referral, cost per referred acquisition (total incentives paid divided by referred new customers), and lifetime value of referred customers versus other acquisition channels. A well-run referral programme delivers new customer acquisition costs significantly below paid channels.
