What do you need to know about the ICO's latest guidance on refer-a-friend schemes?

The Information Commissioner's Office (ICO) has recently published updated guidance for businesses using 'refer-a-friend' marketing schemes. The aim of this guidance is to clarify a number of points raised within the ICO's draft Direct Marketing Code (the Code) which related to refer-a-friend marketing schemes. In this article, we have summarised the key changes which the ICO has made to the Code to enable businesses to continue to use this  popular marketing method.  

What constitutes a refer-a-friend marketing scheme?

Refer-a-friend marketing is a method of direct marketing where businesses request existing customers (referrers) to pass along marketing messages to their family and friends (referees) in exchange for a reward.This type of marketing falls broadly into two types.

Type one

An online retailer asks referrers to send an un-editable marketing communication to referees in return for a reward for the referrer and referee.

Type two

A referrer is asked to send a referral link to a referee, and the referrer is permitted to send their own message with the link. Similarly to type 1, if the referee makes a purchase via that link, the referrer and the referee are rewarded.

What does the new guidance say?

Responsibility for referrer activity

Previously, the Code stated that "actively encouraging" referrers to provide referee contact details for the purposes of direct marketing would be in breach of the Privacy and Electronic Communications Regulations (PECR) and UK GDPR. The guidance now clarifies that "actively encouraging" referrers to send such information will not constitute a breach if the referrer has control over how the message is sent to referees. In practice this could be done by:

  • Using the method described in type 2 above, thereby allowing referrers to control the messages sent to referees.
  • Advising referrers to ensure that they are sending promotional links and/or any other information on to referees who would have a genuine interest in receiving them.

The rules of consent for referrers and referees

The general rule is that businesses must obtain valid consent from individuals before sending them direct marketing communications. However, this can be difficult to ensure when using a refer a friend scheme, as 'friends' will be acting as intermediaries between the business and the potential customer, so it is difficult to know whether those individuals have obtained the requisite consents from their friends and family.

As such, the recently published updates have attempted to clarify the position by explaining that refer-a-friend marketing schemes which follow the format outlined in type 2 above are less likely to put businesses in breach of consent rules, as it would be the referrer instigating the direct marketing activity, not the business (which would more likely be the case in type 1). This is because in type 2, it is the referrer who controls what is said to referees, and they are advised only to send the relevant materials to people who would have a genuine interest in receiving such communications.   

Benefits of referral marketing

The relevance filter

People you know are usually in a better position to judge which marketing messages you would like to see.

The trust filter

Friends are less likely to share marketing messages which are untrustworthy.

The cost

Refer-a-friend schemes allow businesses to get access to a new customer database at relatively low cost.

Considering methods of direct marketing?

We are keeping an eye on the developments made to clarify direct marketing in the UK. If you would like to know more about the legalities around the refer-a-friend scheme or believe you would benefit from a discussion around other direct marketing tactics for your business, please get in touch with the team below.