Referral programme for small businesses: how to reward customers who bring a friend

Referral programme for small businesses: what it is and when it suits a local business

A referral programme, often called a refer-a-friend scheme, is a rule by which a business rewards customers who bring in new customers: the person who invites gets something when the friend arrives, and the friend often gets something on their first visit too. It is ordinary word of mouth, with a stated reward and the same rule for everyone.

Italy’s data protection authority, the Garante, describes «viral» marketing in its guidelines of 4 July 2013 as an evolution of word of mouth that differs from it because the promoter’s intention to start a promotional campaign is clear from the outset. A refer-a-friend scheme is exactly that: the customer carries the invitation, but the campaign is yours, which is why it needs clear rules.

It suits businesses customers choose on someone’s recommendation, such as hair salons, barbers, beauty salons, gyms and dog groomers, and places people tend to visit in company, such as cafés, pizzerias and ice cream shops. It suits less a clientele that is just passing through, as in a tourist area, or a business that is already full and would have nowhere to put one more customer. The guides for hair salons and gyms start from the same question: what is a visit worth?

How a referral programme works in a shop, step by step

A referral programme in a shop works in five steps, and the fourth matters most: the reward unlocks only when the friend actually walks in. For a local business what counts is the visit, not the click.

1. Decide the two rewards

   Choose what the person who invites gets and what the friend gets, and the most rewards one person can receive in a month. Write it in a single sentence your staff can repeat at the counter.

2. Give every customer their own invitation

   Each signed-up customer has a personal link or code to send to whoever they like, with a short message you prepare. That way you always know who brought whom.

3. The friend signs up on their own

   The friend opens the invitation and takes the card with their own details, after reading your privacy notice. You never receive their number from the person who invited them.

4. The reward arrives on the first visit

   When the friend comes to the counter and a member of staff records their first visit or first purchase, both of them get the reward.

5. Check and correct

   Once a month look at how many friends arrived, how many came back a second time and what each new customer cost you. A reward given by mistake can be cancelled.

Which reward to give the customer who refers a friend, and the friend

The right reward for a refer-a-friend scheme is small compared with the value of a customer who keeps coming back, easy to explain at the counter and of the same kind as what you sell. Two rewards, one for the person who invites and one for the friend, make the invitation easier to send: the customer is giving a present, not asking a favour.

The table compares the most common types of reward with hypothetical examples: replace them with your own and work out what the reward costs with the reward cost calculator. For the card’s main reward there are the loyalty card reward ideas.

Avoid cash rewards: for prize operations, Article 4 of Italy’s Presidential Decree 430/2001 allows goods, services, price discounts and vouchers, but excludes money. And never tie the reward to a review: Google bans incentives for reviews, as the guide on how to promote a loyalty card explains.

When to give the reward: on the friend’s first visit, not at sign-up

The reward in a refer-a-friend scheme should be given when the friend makes their first real visit, confirmed by whoever is working at the counter, not when they sign up. Signing up costs nothing: if that is enough, someone will invite themselves from a second phone, or sign up friends who will never come in. Iterum also allows an optional reward, in stamps or points, when the friend adds the card; it is best kept smaller than the visit reward, because the main reward stays at the visit: only the visit at the counter proves the friend really came in.

Two limits are also needed: the reward is only for people who were not already customers, and one person cannot receive more than a set number of rewards a month. The table collects the cases that come up most often, with a possible rule for each.

Refer-a-friend rules: what to write before you start

The rules of a refer-a-friend scheme fit in a few lines, but write them before the first invitation goes out, because sooner or later a customer will ask at the counter why their friend did not get the reward. Put them on a sign near the QR code or on a page linked to the card, and explain them to the staff on every shift.

If the scheme counts as a prize operation under Italian law, the legal rules with their minimum contents are added to your shop’s terms: the guide to loyalty card rules in Italy explains them, and the section below says when the question arises.

• Who can invite: every customer with the card, or only those who have already made at least one visit.
• Who counts as a friend: someone who did not have the card and signs up with the personal invitation.
• When the reward arrives: on the friend’s first visit or first purchase recorded at the counter.
• What each person gets, and by when the reward can be used.
• How many rewards a month the person who invites can receive.
• What happens if the scheme closes, and how a reward given by mistake is cancelled.
• Where customers can read the full rules.

Is a refer-a-friend scheme a prize operation in Italy?

A refer-a-friend scheme can count as a prize operation under Italy’s Presidential Decree no. 430 of 26 October 2001, and the decree says so almost word for word: Article 3 treats as prize operations offers of rewards to buyers «even if the recipient of the reward is someone other than the buyer». In a referral the person who receives the reward is precisely the one who invites, while the buyer is the friend.

Much depends on the type of reward, because Article 6 excludes certain promotions. The table summarises the letters closest to a refer-a-friend scheme, each with a question to take to your accountant: they are questions, not conclusions. This guide is not legal or tax advice.

A gift that is neither a discount nor a voucher, such as a mug with your logo, falls outside letters c and c-bis: ask your accountant whether it counts as of minimal value under letter d, or whether the prize-operation formalities described in the guide to loyalty card rules in Italy apply.

Word of mouth and privacy: why a personal link beats the friend’s number

The safest way to run word of mouth is for the customer to send their own invitation and for the friend to sign up on their own: that way you never collect data about people you have never met. The Garante’s guidelines of 4 July 2013 say that someone who forwards an offer in a personal capacity, recommending a product to their friends, is not subject to the Italian Privacy Code; in the part on social spam they add that a business wanting to send promotional messages to a user’s «contacts» or «friends» must first have obtained specific consent from each of them.

In practice: do not ask customers for their friends’ phone numbers or email addresses so that you can write to them, and do not use booking numbers for a campaign. The friend who opens the invitation reads your privacy notice and decides alone whether to consent to offers. The guidelines date from 2013, before the GDPR, and some of the Code’s articles they cite were later amended: for your own privacy notice ask whoever advises you on data protection, and read the guide on loyalty cards and the GDPR.

With Iterum the customer’s privacy notice also states where they came from, that is a friend’s invitation or a promoter’s QR code, and lists referral rewards among the purposes. When staff read the card, they see only the short name of the person who invited, for example «Marco R.».

What a customer referred by a friend is worth: what the research says

A study published in the Journal of Marketing found that customers who arrived through a referral programme were worth, on average, at least 16% more than other customers. Philipp Schmitt, Bernd Skiera and Christophe Van den Bulte (January 2011) followed about 10,000 customers of a large German bank for almost three years: the 5,181 who joined through the programme in 2006 and a random sample of 4,633 who joined in other ways the same year.

Referred customers had a higher margin, though the gap narrowed over time, and they stayed customers for longer, with a gap that lasted. Each customer who referred a friend received a 25-euro voucher. The authors warn that the advantage varies from one group of customers to another and recommend using referral selectively.

It is a bank, not a café: the study does not tell you what a friend is worth to your business, and no scheme guarantees new customers. It does suggest that rewarding customers who bring others can pay for itself, as long as the reward stays below the value of a customer who comes back. To estimate that in your case you need your own figures, as the guide on how to retain customers explains.

Refer a friend with Iterum: how to switch it on and what it does

In Iterum, refer a friend is a card feature on every plan, off until you switch it on: you turn it on card by card from Cards → the card → «Card options» → «Bring a friend». Choose the reward for the person who invites and the one for the friend: 1 to 10 stamps on stamp cards, 10 to 5,000 points on points cards, or a gift you hand over at the counter, with the till reminding you at the visit.

The customer finds an «Invite a friend» box on their card page, with an «Invite a friend» button to share their personal link and a «Copy the link» button to copy it (it is also on the back of the pass in their Wallet), and an invitation message you can write yourself, up to 280 characters. The friend opens the link, taps «Add the card» and saves it to their phone’s Wallet, with no app. On their first visit at the counter, that is their first stamp or points confirmed by staff, both of them get the reward. If you like, you can add an optional reward, in stamps or points, for both of them as soon as the friend adds the card from the link (best smaller than the first-visit reward): with «None» only the first visit is rewarded.

The rules against abuse are built in: no reward for inviting yourself or for someone who already had the card, and a monthly cap on rewarded friends for the person who invites, from 1 to 50 (5 is suggested when you first switch it on). Each friend counts once, even if they receive two rewards, one for adding the card and one for the first visit. Over the cap the friend still gets their rewards, and the person who invites gets them again from the next month. Any reward can be cancelled from «Who brings customers» → «Word of mouth», where you also see invitations opened, friends signed up, first visits and who brings the most friends.

In the same section you can add promoters, such as the reception desk, an instructor or a partner shop, each with its own QR code and a PDF poster, to see how many customers each brings: numbers only, no commissions, and a promoter’s QR code never stamps. Iterum pays no cash rewards, sends no text messages to friends and reads nobody’s address book. It is not a rare feature among digital loyalty cards: VeeCard also offers a referral code among its add-ons, according to our comparison of 19 October 2026.

You can try it with the 7-day free trial: you pay €0 today, a payment card is required and the chosen plan continues after the trial unless you cancel. The customer’s journey at the counter is described in how Iterum works.

How to tell whether your referral programme works, and the mistakes to avoid

To tell whether a referral programme works, count each month the friends who reached the counter, how many came back a second time within a month and what each one cost you, adding up the rewards given to both sides. Invitations opened and sign-ups say little: what counts is who comes in, and who comes back.

A hypothetical example: in one month 12 friends arrive and 7 come back a second time; you gave each friend a coffee and each person who invited 2 stamps, that is 24 stamps on 10-coffee cards. If a coffee costs you 0.40 euros, the cost is 4.80 euros in coffee plus 0.96 euros in stamps: 5.76 euros, about 0.48 euros per friend who arrived and 0.82 per friend who came back.

If few customers invite anyone, they usually do not know about it: mention it at the counter when you give a stamp, as in the tips on how to promote a loyalty card. For customers who no longer come at all, the right guide is how to win back lost customers. The most common mistakes are these:

• Giving the reward at sign-up, before the friend comes in.
• A reward so large that people invite only for the reward, or one that costs more than a new customer.
• Asking customers for their friends’ contact details so that you can write to them.
• Cash rewards, or rewards in exchange for reviews.
• No monthly cap: a single customer can cost you more than the rest of the scheme.
• Not telling the staff: if nobody at the counter knows how it works, the friend’s reward gets lost, and with it the trust of the person who invited them.

Sources and method

Sources read on 24 October 2026: Presidential Decree no. 430 of 26 October 2001, Article 3, on Normattiva, and Articles 4 and 6 (in Italian); Garante per la protezione dei dati personali, guidelines on promotional activity and combating spam, 4 July 2013, paragraphs 6.1 and 6.2 (in Italian); Schmitt, Skiera and Van den Bulte, «Referral Programs and Customer Value», Journal of Marketing, vol. 75, January 2011, pp. 46–59.

The summaries of the rules and their English renderings are ours and do not replace the official Italian text; rewards, cases and sums are hypothetical examples, not data from real businesses. This guide is not legal or tax advice; outside Italy, check your own national rules. The information about Iterum describes the product as of 24 October 2026 and does not promise new customers.