How referral programmes work: a guide for customers and brands

A referral programme rewards existing customers for bringing in new ones. The brand gives each customer a unique link or code, tracks who signs up with it, checks that the new customer meets the conditions and then pays a reward, usually as credit, a discount or cash. For you as a customer, it is a way to get a better price. For the brand, it is a way to grow without paying as much for advertising.

Why brands run referral programmes

There are three main reasons:

• Trust. People believe recommendations from people they know far more than they believe adverts.
• Cost control. A reward is usually only paid when a real new customer arrives, whereas advertising is paid for whether or not it works.
• Better customers. People who arrive through a recommendation often understand the product already, which can mean fewer cancellations.

In effect, the brand moves part of its advertising budget into your pocket.

How a referral is tracked

Every customer gets a unique identifier. When a new person uses it, the system records who referred them. Common methods include:

• A link with an identifier in the web address
• A code typed in on sign up or at checkout
• Cookies that remember the visit on the device you used
• Account matching, where details such as email, phone number or payment card are compared to check the new customer really is new

This is why starting from a clean browser session and using the link before you create your account matters so much.

Common reward structures

The reward itself can be account credit, a percentage discount, a free month, cash, gift vouchers or points.

The conditions you will usually see

Brands protect themselves from abuse with rules such as:

• New customers only
• One reward per person or household
• A minimum spend, deposit or booking length
• An expiry date for the offer or the reward
• Limits on how many referrals one customer can make
• Countries or products that are excluded
• A hold period before the reward is released

If you break a condition, the reward can be refused or taken back, which is known as a clawback. Our glossary of referral terms explains each of these words.

How brands stop fraud

Referral rewards attract abuse, such as people creating fake accounts to refer themselves. Brands respond with identity checks, limits on rewards, device and payment matching, hold periods and the right to cancel rewards. That is why honest use matters: using several accounts to collect rewards can lead to everything being closed.

What this means if you are using a code

You benefit from the brand's marketing budget, usually with a discount or credit on your first purchase. To make sure you receive it, follow the steps in our guide on how to use a referral code.

What this means if you are sharing a code

You are being rewarded for a recommendation, so share it honestly, recommend only what you use and follow the programme's rules. In the UK you should also be clear that you may be rewarded. Our guide to sharing your referral code covers the rules.

Why programmes change

Brands change rewards to manage costs, copy competitors and test what brings in the best customers. A programme can be improved, reduced or withdrawn at any time. That is why we show the date each offer was last verified and encourage you to confirm the current terms with the brand before you sign up.

The bottom line

Referral programmes are a trade: the brand pays a reward to win a customer through a trusted recommendation. Use them when you genuinely want the product, read the terms and keep the evidence of what you did.