Many businesses have managed to boost their eCommerce sales with well-designed referral programs. After all, we’re more likely to believe referrals from peers as compared to sponsored ads.
How do referral programs work? To encourage you to jump on the bandwagon, we’ll discuss the perks of having your own referral program.
How referral programs work?
A referral program incentivizes brand advocates to promote your business via word of mouth. A brand advocate who makes a successful referral usually receives perks such as cash, discounts, freebies, and coupons.
Consider Italic’s referral program which gives brand advocates $15 off for every friend that uses their referral link. On top of this, friends can also enjoy $15 off their order upon making their first purchase.
Source: Really Good Emails
How referral programs can boost your eCommerce sales?
Still not convinced about the power of referral programs? Here are a few ways it can help boost sales.
Customers are ideal brand ambassadors
Brand advocates are effective brand ambassadors because they have experience with using your product or service. They are likely loyal customers who patronize your products and services. As a result, they can confidently recommend your products to their peers.
Giving your customers the opportunity to become brand ambassadors also improves customer retention. In fact, 39% of shoppers state that receiving freebies, discounts, or gifts can motivate them to refer their friends to a brand.
Word-of-mouth provides a relevant touchpoint in sales
Prior to purchasing a product, most consumers seek the opinions of people from their network to ensure that their money is well-spent.
Consider the following statistics:
- 49% of consumers cite their friends and family as their primary source of brand awareness.
- 41% of consumers comment and converse about brands in order to get feedback from others which would help them evaluate their purchase decision.
- Only 15% of shoppers state that they believe sponsored posts shared by a brand in their social media accounts.
These statistics prove that referral marketing is one of the most relevant touchpoints in the sales industry. It seems that while brands can create marketing content it’s referrals which seals the deal. Having a referral program will likely lead to more conversions because people willingly engage in brand-related conversations prior to making a purchase.
Referred customers are more loyal
A referred customer is valuable because they have a good impression of your brand due to the influence of their network. Since their peers patronize your business, it seems that they’ll stick around longer and spend more than regular customers.
In fact, Wharton found that referred customers have 16% more lifetime value. They are also more likely to remain loyal to your business, as the speed at which they switch brands is 18% lower compared to a non-referred customer.
Referral programs are a cost-effective marketing strategy
Building a successful social media or email marketing campaign takes a lot of time and effort. Yet, it’s not as cost-effective when compared to word-of-mouth.
A McKinsey study found that word-of-mouth is the primary factor behind 2o% to 50% of purchasing decisions. It has the greatest impact on first-time shoppers who are buying an expensive product or service.
Referral marketing is also one of the most influential marketing strategies. In fact, it is four four to five times more effective than indirect recommendations made via magazines, newspapers, television, and social media.
These statistics prove that customers are more inclined to make a purchase due to the influence of their peers. Hence, a referral program seems to be a worthy investment.
How to Build A Well-Managed Referral Program
How can you build an effective referral program? Consider these tips so you’ll be on the road to success.
1. Determine your referral reward
Rewards are the primary motivator to join a referral program.
Most brands usually implement a double-sided rewards system which offers incentives to both brand advocates and referred friends. With this strategy, brand advocates will be encouraged to make a referral, while referred friends are stimulated to buy from the brand.
Here are the main types of referral incentives:
- Cash: A practical and motivating reward that’s easy to distribute, as well as highly scalable. For instance, if customers get a reward worth $5 if they refer to 1 friend, then they’ll receive $50 for referring 10 friends.
- Discount coupon: Ideal for eCommerce stores where customers will likely make repeat purchases (i.e. fashion, restaurants).
- Free subscription month: Best for eCommerce stores with a subscription-based model. After the free trial, customers may be encouraged to keep subscribing in subsequent months.
- Custom rewards: Recommended for eCommerce stores that want to make brand advocates feel extra special by providing a gift that they won’t find anywhere else.
For example, Equal Parts launched a scalable referral program where customers can earn $50 for referring 5 friends. By referring more people, the prizes can snowball for up to $125 with a limited run tee and knife.
Source: Really Good Emails
2. Get a referral program tool
No need to create a referral program from scratch. With the right tool, you can easily build and launch your own referral program. Plus, it can also automate the rewards process so you can sit back and spend more time improving your products and services.
An example is ReferralCandy which lets users instantly set up and launch a referral program in 10 minutes. Once you’ve connected the tool to your eCommerce store, just specify your rewards. Shortly after, the tool can automate the process by providing members with referral codes and giving out rewards for successful referrals.
3. Create a referral program landing page
Next, create your own referral program landing page.
Think about the details brand advocates should know to join your referral program and get the rewards. Ideally, the landing page should include instructions of your referral program instruction, reward system, and incentives. You should also include a CTA button that customers can click to sign-up to the program.
Thrive Causemetics’ referral program lets brand advocates know that they can refer their friends and get $10 worth of points. Meanwhile, their friends can get $10 off and free shipping on orders worth $50+.
Source: Thrive Causemetics
4. Promote your referral program
Sometimes brand advocates don’t end up joining your referral program simply because they don’t know it exists.
To solve this dilemma, create marketing campaigns to boost awareness.
At the initial launch of your referral program, create a social media campaign or a website banner to encourage current customers to join. Alternatively, you can also launch sponsored social media posts and PPC ads to boost membership, or offer a free webinar using one of these platforms that explains the benefits of the program to your advocates.
For example, this referral program post by Define Hair and Skin lets referred friends and brand advocates know that they can receive $20 off for participating in the program.
On top of this, mention your referral program at the bottom of your email to remind them to refer their friends subtly on a regular basis. Take a look at this example by Brooklinen:
Source: Really Good Emails
Another option would be to reach out to influencers via email. Create a list of suitable people who might be a good fit for your referral program, look up their email addresses and reach out to them. You’ll be surprised how powerful this personal approach can be. Hunter has a directory of email templates you can use in your outreach to increase your positive response rate. Make sure to take a look at them.
Ready to launch your referral program?
A well-managed and well-designed referral program can have a significant impact on your eCommerce sales.
Customers are your ideal brand ambassadors because they’ve already tried and tested your brand. They can easily relate to the worries of first-time customers and effectively encourage them to give your business a chance.
Referral programs also encourage customers to join the customer acquisition process because they can receive incentives. Plus, you can easily build and launch your referral program with the right tool and marketing strategy.