How to Reward Customers Who Recommend Your Magento Store

Personal recommendations are one of the most trusted and effective drivers of e-commerce growth. This article explores how to turn that trust into results by encouraging customers to share your store with friends.

Magento 2 doesn't support referral programs out of the box, so implementing one requires a third-party solution. We'll walk you through the setup using the Rewards Points & Loyalty Program extension and explain how to configure incentives that benefit both sides.

If you're interested in broader loyalty strategies, take a look at our article on how to personalize loyalty programs and create customer value. Here, we focus on a more specific tactic—how to reward customers for spreading the word about your store.

Table of Contents

• Vendor's Side: Setting Up Referral Bonus Rules
• How to Set Rules: Bonuses, Limitations, and Conditions
• Customer Referral Flow: How Invite & Earn Works
• Sharing a Referral Link: Where and How
• User Flow: From Invite to Reward
• Optimizing Your Invite and Earn Program
• Tracking Referral Performance in the Admin
• Best Practices to Boost Referral Effectiveness
• Conclusion

Vendor's Side: Setting Up Referral Bonus Rules

Friend referral programs use loyal customers to attract new ones. When a buyer shares a special link and their friend registers or places an order, both receive a reward. This invite and earn model is one of the most accessible and cost-effective ways to expand your client base through personal recommendations.

Since Magento 2 doesn't include referral features by default, a third-party module is required. The Rewards Points & Loyalty Program extension provides all the tools you need to add a referral component to your customer loyalty strategy.

How to Set Rules: Bonuses, Limitations, and Conditions

After installing the module, the next step is to define who gets rewards and for what actions. These settings are fully manageable from the admin panel and can be adjusted to fit your business goals.

The main parameters and options you'll work with include:

• Conditions: What events qualify customers to receive bonuses.
• Reward: How many points or what bonus (discount) the referrer and referee will get.
• Limitations: Additional conditions that limit earnings. For example, setting a minimum order amount to earn a reward.

You can set conditions that limit how rewards are earned. For example, restrict the number of invitations per day or allow bonuses only for registration or purchase.

The module lets you create as many rules as you need. Each one applies to a specific action performed by the invited person.

The referral system includes several core rule types:

1. Referred customer signs up in store: The referrer gets a reward for registering a friend on the site.
2. Customer signs up in store: The referee (invited customer) receives a bonus for their registration.
3. Customer refers a friend: The sender receives a reward just for sharing a referral link, though this rule is generally not recommended due to the risk of abuse.
4. Order from a referred customer: The referrer receives a bonus for an order placed and completed by their invited friend.
5. Customer places order: The referee gets a commission for their order (if they came via a referral link).

These five main types of rules are the basis. However, the module's functionality is so flexible that it allows you to adapt other types of rules for referrals and referees, thereby maximizing conformance to the business strategy and the store's needs.

Below are the practical examples of the following two rules: "order from a referred customer" and the "customer places order".

In the first case, 100 points are assigned for the first purchase of the referee, whereas the second screenshot demonstrates how to assign 10% points for the first purchase of at least 50 USD.

Be mindful of possible abuse from customers who may try to earn bonuses unfairly, for example by sending invitations to fake addresses or creating multiple accounts. Rest assured, our product features robust built-in fraud protection mechanisms, ensuring a secure platform for you.

For example, our tool will not award bonuses if an invitation is sent to a customer who is already registered in your store, even if they originally came through a referral link. However, it's crucial to remember that the full responsibility for preventing abuse lies with you, as the business owner, and your marketing strategy.

The most reliable way to avoid fraud is to configure your rules so that the main reward is accrued precisely for a purchase made by a real person, and not just for a subscription or registration.

Customer Referral Flow: How Invite & Earn Works

Now, let's look at the experience from the customer's perspective. How does a person with an account see the option to invite a friend on your store's frontend?

By default, a unique referral link appears in the user's profile. It's automatically generated for everyone who registers, no matter how they discovered your store.

In addition to the customer account, our Reward and Referral module lets you place referral widgets on other store pages or create a dedicated CMS page for the program.

This works as a friendly reminder about the option to invite a friend and share with others.

Sharing a Referral Link: Where and How

When it comes to distributing a referral link, we have made the user experience as simple as possible.

The link is available for copying in the client's account, giving them the freedom to share it in any way that suits them best: via email, on social networks such as Facebook or Pinterest if built-in buttons are available, or through messengers like Telegram, WhatsApp, or Viber.

The module can provide built-in 'Share' buttons for some popular platforms (usually Facebook, Pinterest). Even so, due to technical limitations (API), not all of them can be connected in this way. But with your resourcefulness, you can adapt and find alternative methods.

However, the most universal and readily available method is to manually copy the referral link and paste it into any messenger, email, or social network. This process is straightforward and should not pose a problem for the user.

User Flow: From Invite to Reward

Let's describe the whole user flow from the moment of invitation to receiving the reward. For this purpose, we will consider an example where the bonus is accrued for the first purchase made by an invited friend.

1. Each registered customer is automatically assigned a unique referral link, which they can share as a referrer; it can be found in their account or on another page of your store where the corresponding widget for this tool is placed.
2. The referrer shares the link by copying it or using the built-in buttons to share it via email, social networks, or messengers with their friends. This is the share with friends stage.
3. The referee follows the link, clicks on it, and is directed to your store's website.
4. The referee interacts with the program and the store. One can view information about possible bonuses if, as a business administrator, you configure this using notification rules or display rules in the customer account.
5. The referee registers: the friend goes through the standard process of registering a new user in Magento. The procedure mirrors a regular registration. Our solution is integrated with Magento's account creation mechanisms and recognizes that this user came via a referral link.
6. The referee makes a purchase: the invited friend selects products, places an order, and pays for it.
7. Our extension monitors order status updates handled by Magento.
8. Rewards are granted automatically when the referee's order reaches the ‘complete' status, as defined in the referral behavior rules. At that point, points are awarded to both the referrer and the referee.
9. Customers receive notifications: the referrer and the referee are informed by email when their bonus balance changes.
10. Balance and transactions are displayed in accounts. Customers can view their current bonus balance and transaction history (including details on when and for what bonuses were accrued) in their accounts. The referrer sees that they received a bonus for the purchase of an invited friend, but does not have access to the details of the friend's order (amount, products) to maintain privacy.

Keep in mind that rewards aren't triggered just by clicking a link or signing up. They depend on the specific actions you configure in the rule settings.

Our module gives you the flexibility to choose which actions earn bonuses, such as:

• Sending a referral link. While this is an option, it is generally advised to avoid it due to the risk of abuse.
• Registration by the invited user.
• First purchase made by the referred person.

You decide which action triggers the reward, depending on your marketing goals. The most reliable option is a completed purchase, since it confirms real interest and helps prevent abuse. Less secure actions, like signing up or just clicking a link, carry more risk. Once the condition is met, for example when the order status changes to "Completed", bonuses are awarded automatically.

Optimizing Your Invite and Earn Program

Once you launch a referral program, it's essential to continually monitor and optimize its performance. The Rewards Points & Loyalty Program module provides all the necessary tools for this.

Tracking Referral Performance in the Admin

As an online store owner, you can track the effectiveness of the referral program using reports and statistics available in the admin panel. This includes the total number of points earned for various actions, like inviting friends and placing orders.

For a more detailed overview, you can check the "Grid" list in the admin, where you'll see:

• The referrer (an existing customer).
• His referees (invited friends).
• Email addresses of invited referees.
• Statuses of invited referees: who signed up, who just received a message, who has already placed an order, and who just followed the link.

This list allows you to track the path taken by an invited customer. Although you won't see all of the invited customers' actions on the site here, you will see their key statuses in the referral program.

Suppose someone receives an invitation but doesn't register or make a purchase. In that case, this may be a signal to marketers that these potential clients need to be further nurtured using alternative methods.

You can go to the profile of a specific invited customer to see their order history. This serves as a database of potential leads generated through the "Invite a Friend" feature.

Best Practices to Boost Referral Effectiveness

Your referral program cannot be classified as a tool that you can set up once and forget about. Like any marketing strategy, this approach requires ongoing analysis and adaptation. As an owner, you should regularly review its effectiveness and update the terms based on the analysis.

General recommendations for improving the effectiveness of your referral program:

1. Use customer segmentation. Use this tool to classify your audience based on their activity. For example, individuals who make numerous purchases or those who frequently leave reviews. This tool allows you to create a tiered system where participants at higher levels will receive more generous rewards for invitations or other actions. This mechanism encourages the most engaged to become the most valuable promoters.
2. Don't turn off email notifications. Automatic balance update emails or point expiration reminders are an effective way to remind customers about their bonuses and bring them back to your store. Such activities encourage people to return to the site and use the accumulated bonuses by making new purchases.
3. Adapt the rules to your strategy. Our extension enables you to cover almost any marketing scenario, thanks to the flexibility of its rule settings. You can adapt rewards not only for invitations, but also for other actions on the site, increasing the bonus for referrals with high activity. This allows you to implement a variety of invite and earn strategies.

Conclusion

Referral marketing is a crucial and effective strategy that leverages high trust in word of mouth and recommendations from friends. Its implementation allows you to not only attract new customers at a much lower cost than through traditional advertising, but also strengthen the loyalty of existing customers.

Although the standard functionality of Magento 2 does not support such initiatives, the Rewards Points & Loyalty Program module provides a wide and adaptable toolkit for their full implementation.

You can create an unlimited number of rules, adapting them to your unique business strategy and defining conditions, rewards, and restrictions. The module also provides a simplified interaction method for referrers and referees, from the simple sharing of links to automatic rewards after performing a targeted action.

Thoughtful setup and continuous monitoring of the initiative's effectiveness are key factors for success. Utilizing customer segmentation, sending timely notifications, and placing widgets in non-obvious locations can significantly enhance the effectiveness of your referral program.