What Is A Referral Link? How Do Referral Links Work?

Without a referral link, it’s very difficult to know who’s sharing your brand and when. Learn what referral links are, why you need them, how to create them, and how they work.
Updated on October 27, 2023
referral link

Table of Contents

Table of Contents

If you’re planning to start a referral program, you may wonder if you need referral links. Can’t you just start a referral program on your own and keep track of sharing manually? Not quite.

Without a referral link, it’s very difficult to know who’s sharing your brand and when. 

But referral links, created with software, let you track referrals in real time and instantly tell when referrals turn to new customers.

Keep reading to find out:

  • What a referral link is
  • Why you need referral links 
  • How to create effective referral links
  • How referral links differ from other types of tracking links
  • How referral links work within a referral program

What is a referral link?

A referral link is a unique URL link to your business’s website or product landing page, used within a referral program. This link is automatically created with referral software. Customers who join a referral program share their referral link with their network of friends, family, and colleagues. 

What makes a referral link different from other links to your website? A referral link contains a unique tracking code, which is embedded in the link. Every referring customer receives their own individual referral link with their own personal code inside.

honey referral link

Thanks to this code, when customers refer a friend or family member through your program, you can trace every purchase made via a referral link back to the person who shared the link.

This makes it easy to track, and instantly reward, every customer whose referrals result in new sales for your business.

In short, a referral link simplifies the entire referral journey. Tracking referral campaign metrics, and instantly rewarding customers whenever their friends purchase, becomes a seamless process.

Why do you need referral links?

Why use referral links? The short answer is to make running your referral program easy. Here are the main reasons why referral links are vital:

They streamline the sharing process

Referral links enable your customers to share your brand and its products anywhere and with anyone – they only need to copy and paste the link. Thus, you’ll be more likely to acquire new users and gain valuable insights.

They let you instantly track referrals and reward the right people

Referral links will automatically trace a purchase back to the customer who made the referral, indicate a successful conversion, and, most importantly, log this data into your referral marketing system.

Thanks to the detailed tracking and attribution features of referral links, you instantly know whose referral resulted in a purchase. This way, you can automatically give referral program rewards to the right customers – and keep them happy.

They make it easy to measure your program’s success

Every marketer or business owner needs to measure the performance of their campaigns. That’s the only way to know how to refine your campaigns and improve the results. Referral links are the number one way to track the overall success of your referral program, and collect the crucial data needed to make informed changes.

Tracking referrals efficiently is nearly impossible without referral links

If you don’t incorporate referral links to track sharing, it is nearly impossible to identify who has made a successful referral and give out referral program rewards appropriately. Frankly, without referral links, you stand to lose out on most of the benefits of a referral program. 

While you could run your program without a referral link, tracking referrals manually is time-consuming, frustrating, and ineffective.

A referral link not only helps to track purchases and automatically distribute referral rewards, but also makes it easy to track and measure the overall success of your referral program.

How to create a referral link?

Using referral program software is the only reliable way to create referral links. 

Referral software automates each step of creating and running a referral program. 

This includes automatically creating a unique personal referral link whenever a new customer enrolls in your referral program, and providing multiple ways to share the link (through email, social media, and/or SMS, in addition to the direct copy and paste).

Let’s face it – tracking the performance of digital advertising campaigns isn’t a walk in the park. But thanks to referral software, this is made easy within your referral program. 

Keep in mind that every referral software program generates unique referral links, as that’s the backbone of referral software. You’ll need to identify the best referral software choice for your business based on your other needs, such as customization, integrations, and the way you’d like to structure rewards.

We’ve compiled a list of some of the best referral program software to help you decide which one suits your business.

Referral link vs. referral code

People often use the terms “referral link” and “referral code” interchangeably, implying that they mean the same thing. However, referral codes aren’t the same as referral links.

How is a referral link different from a referral code? 

A referral code is usually embedded in a referral link, so it’s just one part of the referral link. 

cartloop referral link

In other words, every referral link contains a referral code, which acts as a personal identifier to trace referrals back to the specific customers responsible for them. This referral code is made up of a unique sequence of numbers and letters.

While some referral programs say they distribute such unique referral codes for customers to copy and paste anywhere, these are really referral links since they lead to a URL.

referral link vs referral code

Other referral programs distribute standalone referral codes, but require people to remember and enter the codes to give their friends credit. 

Referral links make things much easier because they’re easily copyable, lead right to a URL, and give credit for referrals automatically.

Referral link vs. affiliate link

Another distinction that we need to make is between a referral link (used in a referral program) and an affiliate link (used in an affiliate program).

First, it’s important to note that both referral and affiliate links track word-of-mouth marketing. Consequently, they both attribute a purchase back to the person responsible for motivating it, since they have a unique identifier for each person.

Plus, they both automatically initiate rewards in real-time for the link owners whenever someone uses their link to purchase.

But here’s where the differences come in. While referral links are meant for your customers to share, affiliate links are used by content creators that a business partners with. These content creators (affiliates) share the links on their website, blog, or social platforms. 

Anyone who visits those channels can follow the affiliate link, and most of these visitors don’t know the affiliate personally. 

When someone clicks on an affiliate link and makes a purchase, the affiliate who owns the link is rewarded with a commission.

Unlike in an affiliate program, a referral link is intended to be shared by your existing customers to the people they know, such as friends and family. 

How do referral links work?

To start and run an effective referral program with a referral link, you need to understand how a referral link works. Below are the key steps you should know to make the most of your referral links: 

Customers join the referral program and get a referral link: Thanks to referral software, a personal referral link is automatically generated for every new customer who enrolls in your referral program. 

You encourage customers to share the referral link: Motivate your customers to share their link widely via referral incentives. 

The customers share the referral link with their friends, in the way they choose: With the right referral software, customers can instantly share the referral link through email, text message, or social media. Remember that is in addition to directly copying and pasting the link anywhere.

You present a referral message to the referred friend, to increase your conversions: Now that the referral link is in the friend’s hands, you need to convince the referred friend to click the referral link and make a purchase. A referral message should explain why the friend needs to click the link. You could include a discount on their first purchase, your value proposition, or details on what makes your product unique. 

The referred friend clicks on the referral link: With a well-crafted referral message (and possibly a reward for their first purchase), you increase the chances of people clicking on the link. 

The tracking features of the link stay active as the friend browses on your website: With every page they visit on your site, the referral link follows the friend across your site. The link is always active as long as the friend continues their browsing session. So, it will attribute a purchase to a referral regardless of the friend’s browsing behavior or sequence. 

The friend makes a purchase, which automatically gets credited to the person who made the referral: While browsing your site via the referral link, the referred friend chooses to purchase your products or services. The referral software identifies a successful conversion and attributes the sale to the person responsible for the referral.

The person who made the referral gets a reward right away: The customer responsible for the successful referral is instantly rewarded, thanks to the referral link’s tracking. 

If you’ve chosen to reward the referred friend, they also receive their reward: Whether it’s cash back or a coupon for their next purchase, you may also decide to reward the new users referred by your customers. They’ll automatically get their rewards while making their first purchase.

An example of how referral links work

How do the above steps work in practice? Check out what happens when advocate Anna shares Omsom, one of her current favorite brands, with her friend Rex.

Ever since she got some as Christmas gifts, Anna has loved Omsom’s bold flavor packets for authentic Asian home-cooked meals. She figures that her friend Rex would enjoy the packets as well, because he has a similar taste in food and loves to cook. 

So, she joins the company’s referral program to share Omsom with Rex. The rewards on offer – $5 towards Omsom for each of them if Rex makes a purchase – provide extra motivation to join.

omsom referral link 1

She immediately gets a unique referral link. Right after joining, she sends the referral link to Rex via email, to tell him about Omsom. 

Rex sees the referral link that Anna has sent him. He notices that he’ll get $5 off his first Omsom packets if he follows the link Anna sent and makes a purchase. 

He’s intrigued by Omsom’s promises of bold flavors – and the discount – so he clicks the link and starts browsing the site. 

omsom referral link 2

As he browses, the referral link’s tracking is active. It’s ready to tie any purchase he makes back to Anna thanks to the unique tracking code embedded inside.

Eventually, Rex sees the Korean Spicy Bulgogi packets and his mouth starts to water. He purchases a set of the bulgogi packets and receives the discount.

omsom referral link 3

When he purchases, the referral link’s tracking feature communicates with the referral software Omsom is using, and gives Anna the credit for bringing in new customer Rex. This immediately triggers an email to Anna, containing a $5 off reward good for her next purchase of Omsom. 

It’s a win-win-win! While the two friends get discounts, Omsom gets a new customer – and was easily able to identify Anna as the source of the new customer thanks to the referral link.

Wrapping it up

A referral link is an integral component of your referral program. Referral links not only allow easy sharing and tracking, but they also streamline the entire referral process for your business as well as for the customers. This allows you to seamlessly reward your loyal customers, make more conversions, and build lasting relationships with your customer base.