What is Referral programme?
A referral programme, often run as a refer-a-friend scheme, settles what would otherwise be left to chance: who is asked for a referral and when, how the referral is passed on, for example by link, code or contact card, what counts as a successful referral, such as a signed job, and what the thank-you looks like. The reward is only one component. It can go one way, to the person making the referral, or both ways, to the new customer as well.
A study from Frankfurt shows how well such a programme can work. A large German bank paid a 25-euro voucher for every retail customer referred. Over six years, referred customers were worth at least 16 per cent more than comparable others, and the authors put the return on the reward at around 60 per cent. They do, however, advise a selective approach, because the difference varied between customer segments, and they list the known objections themselves: someone paid for a referral may seem less trustworthy, and rewards attract abuse. In the cashback app data analysed by Gershon and Jiang in 2024, around 3.8 per cent of accounts were flagged as fraudulent.
Legally, a programme has two limits that are often overlooked. First, not every profession may reward referrals: in Germany, § 49b(3) BRAO prohibits lawyers and § 9 StBerG prohibits tax advisers from granting benefits for the referral of work. Second, a recommendation email sent to third parties via a function on your website counts as your own advertising and needs their consent (Federal Court of Justice, judgment of 12 September 2013, I ZR 208/12). A clean programme therefore passes on your contact details rather than collecting those of the people being referred.
Why does Referral programme matter?
A referral programme turns chance into a routine, but the reward is the smallest part of it. In the bank study by Schmitt, Skiera and Van den Bulte (2011), the extra value of referred customers came from a higher contribution margin and longer retention, not from the size of the 25-euro voucher. And Gershon and Jiang (2024) show that referred customers refer more often themselves: 11.9 against 7.6 per cent made at least one successful referral.
Referral programme in practice
- 01A bank pays a 25-euro voucher for every retail customer referred, with opening an account as the only condition. That was the programme in the 2011 Frankfurt study.
- 02A painting and decorating firm hands over two cards after every completed job, with one sentence about the firm, the link to the matching reference page and its own phone number. It does not collect the details of the people referred.
- 03A tax practice forgoes any reward because § 9 StBerG prohibits benefits for the referral of work, and instead thanks every client who recommended it in person.
