What is a referral code? | Explanation and examples

What referral codes are, how they are different from referral links, and how to create and use them? Everything about referral codes in one article.

Word of mouth marketing and referral codes

It was simpler in the world of referral marketing. You had a great product, your customers loved it, and decided to share their experience with their friends and help your business grow. 

Once businesses realized how important these recommendations were, they started coming up with better ways to inspire their customers to become brand advocates. Refer-a-friend programs started using incentives — special offers for customers who brought businesses, new customers, through referrals. 

A new problem thus appeared; marketers needed a way to know who to reward and which of their existing customers had participated in the program. The solution was to use a referral ID.

What is a referral code?

A referral number or referral code is a special ID assigned to every person who is willing to participate in your refer-a-friend program. Referral codes themselves can differ depending on the referral software you use; a code could be a random set of alphanumeric characters, or even complete words, customers’ names, etc. 

The most important thing you need to know about the meaning of referral code and their part in your referral strategy is that they are used to identify, track, and measure the impact your brand advocates create so that you could provide them with the rewards they’ve earned based on that data. 

Referral code example

Now that we understand what referral codes are and how to create them, let’s take a look at how they get used.

Imagine you have a mobile app for your pizza delivery business. You’ve noticed that many customers have started using your app because their friends told them how great and convenient it was. You decide that you want to get more out of this channel, so you introduce a referral program; you promise one free Margherita pizza anyone who brings you a new customer, and you also give a free pizza to referred customers with their first order. 

Jina is your customer, and she always orders pizza using your app. She’s mentioned your brand to her colleagues before, but now they are ready to try it out. 

Jina goes to her account, copies her referral code, and sends a message to her colleague, Mike, telling him to use her referral code for free pizza.

pizza-referral-code-by-talkable

Mike downloads the app, orders himself a pizza, and uses Jina’s referral code at checkout. 

The software that manages your referral marketing program recognizes Jina’s referral ID and adds free Margherita pizzas to both Mike’s first order and Jina’s next one. 

Referral codes vs Referral links 

Every online entrepreneur knows that the fewer pre-purchase actions required of the customer, the better. That’s why in most cases, online businesses prefer using referral links to codes. 

Essentially, every referral link has a referral code assigned. But neither the brand advocate nor the person using their referral link has to copy their code manually. Instead, the brand advocate just shares their link via their preferred channel of communication with a friend. They could just go to your website or download your app with no additional effort on their side. 

You might therefore wonder why would anyone still use referral codes instead of links. The simple explanation is that sometimes saying a code to a person sitting right next to you is easier than emailing a link. Moreover, codes are a great way to get referrals for businesses that operate both online and physical stores. 

The effectivity of tracking the codes and links depends on software. Due to the variety of tools on the market, the important criteria when choosing affordable referral program software is value for money.

If you are new to referral marketing and want to learn how to create a referral link for your first campaign, read this article next: What is a referral link?