How To Set Up A Referral Program on Shopify: A Complete Guide

Word-of-mouth marketing drives 5x more sales than paid advertising, and referred customers have a 37% higher retention rate than non-referred ones. A well-structured referral program on Shopify can be a game-changer. 

With the right setup, you can automate rewards, track referrals, and optimize your program for maximum results. In this guide, we’ll walk you through the benefits of referral programs and a step-by-step approach to setting up one on your Shopify store.

What is referral marketing?

Referral marketing is a strategy where businesses encourage existing customers to refer new customers in exchange for rewards. It leverages word-of-mouth marketing by turning satisfied customers into brand advocates who share their positive experiences with friends, family, or their network. Since people trust personal recommendations more than traditional advertising, referral marketing helps businesses acquire new customers more effectively.

When a customer refers someone, the referred person typically receives an incentive (such as a discount or gift), while the referring customer earns a reward (such as store credit, cashback, or exclusive perks). This creates a win-win situation that benefits both the business and its customers.

For example, a Shopify store selling fashion accessories might offer $10 off for both the referrer and the referred friend when a successful referral leads to a purchase. This encourages more customers to share the brand and brings in new buyers who strongly intend to purchase.

Although referral programs and affiliate programs are both forms of word-of-mouth marketing, they differ in purpose, participants, and reward structures. 

Referral marketing focuses on leveraging existing customers, while affiliate marketing is often driven by content creators, bloggers, and influencers who promote the brand to their audience for commissions.

For Shopify merchants, referral programs are a powerful way to encourage repeat purchases and grow organically, while affiliate programs are better suited for scaling through partnerships with publishers and influencers.

Benefits of referral programs for Shopify stores

Implementing a referral program on your Shopify store offers numerous advantages, making it one of the most cost-effective and impactful marketing strategies

• Cost-effective customer acquisition: Traditional paid advertising can be expensive, with rising customer acquisition costs (CAC). Referral programs, on the other hand, leverage your existing customer base, significantly reducing marketing spend.
• Higher customer loyalty and retention: Referral customers are not just one-time buyers, they tend to stick around. This is because recommendations from friends and family build stronger trust, leading to long-term relationships with your brand.
• Increased brand trust and credibility: People trust recommendations from friends and family more than they trust ads. In fact, 92% of consumers trust referrals from people they know over any other form of marketing. A referral program helps turn word-of-mouth into a structured and scalable growth channel.
• Better conversion rates: Referred customers convert at a higher rate compared to leads from other marketing channels. Because they come with built-in trust, they are more likely to purchase customers acquired through traditional advertising.
• Encourages customer engagement: A well-structured referral program keeps customers engaged with your brand. By rewarding them for referrals, you give them an incentive to interact with your store more frequently, boosting retention and repeat purchases.

By setting up a referral program on Shopify, you can harness the power of word-of-mouth marketing, lower acquisition costs, and foster long-term customer relationships.

How to set up a referral program on Shopify

Launching a referral program on Shopify is one of the best ways to leverage word-of-mouth marketing and turn happy customers into brand advocates. Since Shopify doesn’t have a built-in referral system, you’ll need to use a third-party app. 

Here’s a step-by-step guide to launching a successful referral program for your store.

1. Choose a referral program app

To run a referral program on Shopify, you’ll need a dedicated app that integrates with your store. Shopify’s app marketplace offers several referral program apps, each with different features and pricing. Here are some top choices:

• BixGrow: The best affordable option with features, including multi-tier rewards and automation. Strong at referral marketing & affiliate marketing
• Smile.io: Good for combining referral programs with loyalty rewards.
• Yotpo Loyalty & Referrals: Great for brands already using Yotpo for reviews and SMS marketing.

When choosing the right referral app for Shopify, you should consider some factors:

• Pricing: Look for a plan that fits your budget. You can get the best BixGrow plan with $15/month
• Customization: The ability to brand your referral program to match your store’s design. Some app are focus on customer loyalty while some are optimized for referral links.
• Reward options: Some apps support only discounts, while others allow cashback, store credit, or custom rewards.
• Automation features: Auto-apply discounts, send automated referral emails, and track referrals.
• Integration with Shopify & other tools: Ensure it works well with your existing apps and marketing platforms.

2. Install the app on Shopify

Once you’ve chosen the right referral app, follow these steps to install it: 

• Go to the Shopify App Store and search for your chosen referral app.
• Click “Add app” and follow the installation process.
• Grant the necessary permissions so the app can track referrals and apply rewards.
• Complete the basic onboarding setup within the app’s dashboard.

Most referral apps come with step-by-step tutorials to help you set up quickly and seamlessly. 

3. Set up your referral program rules

The success of your referral program depends on clear and attractive incentives. 

Reward structure

You need to determine how referrers (existing customers) and referees (new customers) will be rewarded. Common reward structures include:

• Discounts: E.g., “Give 10%, Get 10%” (both the referrer and the new customer get 10% off).
• Cashback: Offer a fixed cash amount per successful referral, such as “$10 per friend you refer.”
• Store credit: Instead of cash, reward customers with credits they can use on their next purchase.
• Free products or upgrades: If you sell subscription-based products, you can offer a free month or a free upgrade.

Ensure your referral rewards align with your profit margins and encourage repeat purchases.

When will you issue rewards?

• Immediately after a successful referral: Best for small-ticket items.
• After the referee completes their first purchase: Ensure only real customers are rewarded.
• After the return period ends: Help prevent fraud and abuse.

Set limits and conditions

To prevent misuse of the program, set some basic limits such as: 

• Require a minimum order value before a referral discount applies.
• Set a cap on how many rewards a single customer can earn per month.
• Restrict self-referrals (people referring themselves with a different email).

4. Customize the referral flow

A seamless user experience is crucial to making your referral program successful. Make sure the referral program looks like part of your store by customizing the referral page (where customers learn about the program), the referral widget (a floating button on your store), and the email templates for sending referral invites.

How to create referral links in Shopify?

Referral links are unique tracking URLs that allow you to identify which customer referred a new shopper. Most Shopify referral apps automatically generate and assign referral links to each participant.

When a customer joins your referral program, the app generates a personalized referral link.

This link is usually in the format: yourstore.com/?ref=customer123. Customers can then share this link via social media, email, or SMS to invite friends.

Customers can find their referral link or referral code on their account dashboard, or through a floating referral widget. Many Shopify refer-a-friend apps allow you to email referral programs to your customers as well. 

You should optimize your referral landing page. The page should: 

• Clearly explain how the program works.
• Highlight the benefits for both the referrer and the referee.
• Make the Call-to-Action (CTA) stand out (e.g., “Invite Friends & Earn Rewards!”).

Remember the easier it is for customers to make referrals, the more successful your program will be.

5. Promote your referral program

Once your refer a friend program is live, actively promoting it is essential to maximize participation. A well-executed promotion strategy will create a strong referral network. Here are a few suggestions:

• Announce it to your existing customers

Your current customers are the most likely to participate in your referral program, so informing them effectively is crucial. One of the best ways to do this is through an email campaign, where you send a dedicated email announcing the program and explaining the benefits of joining. 

Additionally, SMS notifications can be highly effective, as text messages tend to have higher open rates compared to emails. Another great way to spread the word is through the refer-a-friend button which appears immediately after a customer completes a purchase, encouraging them to refer a friend while their shopping experience is still fresh.

• Promote it on your website

Your Shopify store itself is a prime location to highlight your referral program. You can add a “Refer a Friend” banner to your homepage to grab visitors’ attention or place the program in a prominent menu or footer link for easy access. 

• Leverage social media & Influencers

Social media is a powerful tool for promoting your referral program. You can create engaging social media contests where customers earn extra entries or bonuses for referring friends. Additionally, partnering with micro-influencers can expand your reach, as they can promote your referral program to their niche audience, encouraging more people to participate.

6. Track & optimize performance

Monitoring referral program performance is essential to improving results. Here are key metrics to track:

• Number of referrals generated: How many people are actually sharing?
• Conversion rate: What percentage of referrals turn into paying customers?
• Top referral sources: Are people sharing via email, WhatsApp, or Instagram?
• Customer Lifetime Value (CLV) of referred customers: Are they high-value customers?

Use your referral app’s dashboard and analytics to spot trends and make improvements.

7. Automate payouts & Rewards

To keep customers engaged, rewards need to be delivered quickly and efficiently. Most referral apps allow you to:

• Automatically apply discounts to customers’ accounts.
• Send gift cards or store credits via email.
• Deposit cash rewards via PayPal or Stripe.

Ensure your reward fulfillment rules are clear and well-communicated so customers know when and how they’ll receive their incentives.

By following these steps, you can create a high-converting referral program on Shopify that drives sustainable growth and customer loyalty.

FAQs

Conclusion

A well-designed referral program can be a game-changer for your Shopify store, helping you turn satisfied customers into brand advocates while driving cost-effective sales. By selecting the right referral app, setting clear incentives, and actively promoting your program, you can create a seamless and rewarding experience for both referrers and new customers.

With tools like BixGrow and other Shopify-compatible apps, launching a referral program has never been easier – even for small businesses. The key is to continuously track performance, optimize your rewards, and engage with your customers to keep the momentum going.

Start building your referral program today and watch as word-of-mouth marketing fuels your Shopify store’s growth.