How to Use Referral Gift Cards [Reward Your Customers]

We all know rewards can influence behavior. But it can be easy to forget that the anticipation and perceived value of the reward can be just as motivating as the reward itself.

Trying to decide on the best incentives for your referral marketing program? One of the most popular options is to give out gift cards.

Referral gift cards don’t require you to pay out cash directly — but they’re just as valuable since they give customers (and sometimes employees) “free money” to shop at a business they enjoy. Here’s everything you need to know about starting a gift card referral program.

What are referral gift cards?

Referral gift cards are any gift cards used in a referral program. They could be rewarded to the advocate who successfully refers a friend, the referred friend who becomes a new customer, or both. As a referral reward, they’re one way to encourage word-of-mouth sharing from existing customers or employees, and/or motivate newly referred customers to purchase from you. Here’s an example from Weed Man: 

Benefits of gift card referral rewards

Gift cards provide a lot of benefits when used as a referral incentive: 

• They’re easy to reward and manage, especially if your referral software integrates with a gift card provider like Tango
• You can award gift cards immediately, since they’re a digital reward
• They feel like free money (and they practically are free money, since the awardee would likely have spent their own money anyway on something they love)
• They’re more secure, and easier to send, than cash
• If you use a gift card menu like Tango’s, customers have the freedom to choose the third-party gift card reward they like the most

Types of referral gift cards

There are two types of referral gift cards: your own company’s gift cards and third-party gift cards. 

Your own gift cards award store credits to your own business; basically, they’re coupons for a future purchase. Using your own gift cards ties the reward back to your business and encourages people to purchase from you.

Third-party gift cards (external gift cards) are gift cards to other, non-competing businesses that you know your customers enjoy. Using third-party gift cards lets referrers pick out their own rewards for a personalized experience.

When to use referral gift cards

Referral gift cards can work well in any type of referral program. Here at Referral Rock, we looked at anonymized data from 500+ referral programs and found that gift cards were the most common reward type! 

Along with cash, gift cards are also the best-performing rewards, as the recipient can choose how they want to use the reward. Plus, with Referral Rock’s third-party gift card option, customers can choose their preferred type of gift card from Tango’s menu based on their country.

But here’s the real question – should you use your own gift cards or third-party gift cards as a referral reward?

Each have different cases that they work best for.

When to use your own gift cards?

Your own gift cards work best if:

• Your business expects advocates to purchase frequently
• You’d like to tie the reward back to your business to inspire customer loyalty
• You want to incentivize the referred friend, so they’re motivated to make their first purchase

If you’re in the apparel or beauty industry, run another ecommerce business where purchases are frequent, or are a small business, your own gift cards will work well as a referral reward. 

When to use third-party gift cards?

Gift cards to other businesses work best if:

• You don’t expect the advocate to purchase from you again in the near future (say, you sell something that people won’t purchase again for several years), so giving money towards your own products doesn’t make sense
• You’re running a B2B referral program and you want to reward the individual making the referral – but they aren’t the one paying for your product, so discounts on your product may not work as well
• You want to give customers a choice of rewards, in a way that’s easy for you to maintain
• You’re planning on running an employee referral program, and you’d like a way to reward employees for referrals 

Industries that third-party gift cards work well for include SaaS, car dealerships, mattress sales, insurance, travel, education, solar, home services, and furniture. They also work well for other businesses where purchases are large and infrequent, and most B2Bs that want to reward individual stakeholders.

In our experience, the industries that use third-party gift cards most often are B2B and SaaS. Financial services, insurance, home services and education are other industries that often use third-party gift cards. 

Referral software and gift cards

Referral software makes it super-easy to use gift cards as rewards. It creates unique referral links for every customer or employee that they can send to friends. Whenever a referred friend follows the link and makes a purchase, the link credits the purchase to the person who made the successful referral. Then, it instantly issues the gift card reward (or any reward you choose) to the advocate, referred friend, or both. 

Most referral software will let you reward advocates and their friends with your own gift cards. But only select referral software options can handle external gift cards, and give program participants the choice of gift cards from a menu.

Referral Rock integrates with Tango to let you offer external gift cards, and allows you to personalize the experience by giving customers and employees an instant choice of gift cards. Plus, easily set up your own gift cards if you prefer this option.

Awarding referral gift cards with Referral Rock

Use Referral Rock’s Reward Builder to easily set up the referral gift cards of your choice. 

For gift cards to your own business:

• Choose “Coupons” and then select “Fixed Amount.”
• Enter the value of the gift card you want to give out. 
• Decide when the gift card gets awarded (when the referral is qualified or approved?)

For third-party gift cards:

(You’ll need the Tango integration and a Professional+ or Engage+ plan for this option; more info in the next section.)

• Select “Gift Cards” and “Fixed Amount.”
• Enter the amount of the gift card you’d like to award.
• Decide when the gift card gets awarded (when the referral is qualified or approved?)

Referral Rock and Tango: Referral gift cards made easy

Referral Rock’s Tango integration lets you instantly award third-party referral gift cards, for a seamless process. With the Tango integration, it’s easy to let customers choose their own referral gift card.

Here’s an overview of how it works:

Purchase our Professional+ or Engage+ plan, and create a Tango account inside of Referral Rock.

• Prepay for any types of gift cards, all at once, by funding your account.
• This way, customers can choose and access a gift card instantly when the referral reward is earned.
• There’s no additional fee to use Tango – just pay for the gift cards you want to award.

Pick the different gift cards you want customers to be able to select from through Tango.

• There are over 100 gift card options in industries like food, apparel, beauty, entertainment, and more.
• Many different currencies are available, to best serve businesses and customers in several countries. 
• Plus, Tango offers cash-equivalent gift cards from Visa and MasterCard, as well as charitable donation options for businesses that want to give back.

When Referral Rock detects that a customer’s referral is successful, the customer will get a Tango Reward Link via email.

• Using the Reward Link, they can select their gift card.
• Then, they’ll instantly receive their selected reward via email.
• They can redeem the reward instantly. 

Tips for using gift cards as referral rewards

We’ve helped 1000+ companies grow through referral programs, and many of these companies have used referral gift cards. We’d like to share some of our insider tips for using referral gift cards.

• If you’re running a program where the referred friend gets a reward for purchasing, give the friend a digital gift card to your own business to motivate that first purchase.
  • Tying the friend reward back to your business is an optimum way to encourage referral sales.
  • And most businesses that reward the referred friend give money towards that first purchase. 
• Third-party gift cards work best for rewarding the advocate (the referring customer) – most clients who use third-party gift cards use them for advocate rewards.
• If you’re using third-party gift cards, consider a tiered gift card referral program.
  • This type of program lets existing customers earn gift cards of increasing value as they hit different referral milestones.
  • For instance, you might pay out a $10 Amazon gift card for one referral, a $25 Amazon gift card for three referrals, and a $50 Amazon gift card for 10 referrals. 
• You might also set up a gift card referral program where advocates can earn different values of gift cards depending on the value of the referred friend’s purchase – say, $50 for a single HVAC system install or $100 for a full system install. 

Start motivating your customers to share

Referral gift cards are a super-versatile referral reward that work well for many different industries. Plus, third-party gift cards give your customers a choice in how they get rewarded, leading to a greater chance of customer referrals. 

Be sure to use the gift card type that works best for your industry and business size. And if you want to let customers choose from third-party gift cards, select Referral Rock software, and integrate with Tango for a smooth referral gift card experience.