With over-the-top influencer fees, overburdened and costly media ads, dry consumer response to direct marketing, and cut-throat competition, the current marketing atmosphere is shrinking, especially for eCommerce startups.
Today, people are more likely to believe and rely on endorsements from friends and family over commercial ads from a brand that’s alien to them. So, instead of increasing your ad spend, cash the mutual trust and personal connection your existing customers have with the potential audience through referral marketing programs.
A good word of mouth from your loyal customer about your product/service, can change the whole perception around your brand, compelling prospects to purchase. With virtually zero operational costs and expansive outreach, referral programs are becoming the go-to customer acquisition strategy for eCommerce businesses.
Still, referrals don’t happen on their own. A systemic structure and a little incentive push are needed to drive leads. Learn to create an eCommerce referral program that is cost-effective and scalable to propel your brand growth.
What is an eCommerce Referral Program?
In essence, a referral program relies on word-of-mouth marketing - sharing positive words about a brand and its products within targeted audience groups. As more people learn about a product through existing customers of a brand, their chances of purchasing from it multiply, resulting in higher sales and a growing customer base.
For an eCommerce brand, referral marketing is all about convincing loyal customers of a company to share their positive experiences within their social networks. It’s like leaving a satisfactory testimonial about a brand, except in a friend’s inbox to convince them to purchase too.
But the process doesn’t end there. To motivate current customers to refer your products and spread awareness about the brand, marketers often entice them with special incentives. Based on what the program’s terms and conditions dictate, referrers are awarded cashback, discounts, and freebies, as long as the lead they referred:
- Registers their email address
- Signs up for the company’s newsletter
- Purchase a product or service package
- Complete a specific number of purchases
- Share it with others in their contact list
Upon signing up, the program participants are allotted unique referral links or codes meant to be shared with others. Every incoming lead that signs up or makes a purchase using that link is counted as a successful referral.
How Does a Referral Marketing Strategy Impact E-commerce Businesses?
E-commerce businesses are always in a bind, searching for ways to fuel their customer base and increase revenue. Customers today aren’t inclined to trust paid adverts but prefer to ask around for opinions before purchasing online, setting the stage for referral programs.
Prompting customers to prove their loyalty by bringing fresh leads to your company is an effective way to build your customer base. As a way to appreciate their support and ensure long-term loyalty, referrers are offered rewards in return, creating a win-win for both parties.
It’s no secret that referral programs are loaded with benefits for any business that operates online. Here’s what building an eCommerce referral program can do for your business:
Attract Customers with an Intent to Purchase
If your product provides the value you claim, customers will be naturally driven to recommend it to people who are in need of the product. Believe it or not, customers know well about your products, how it’s different from the competitors, and the audience it’s driven towards.
A friendly recommendation will not only target customers with an intent to purchase but also guarantee a positive response thanks to the trust factor.
Develop Trust for Prospects
Over 46% of consumers consult with their dearest before buying a product or service. The Nielsen report clearly outlines that people are 4x times more likely to purchase from a brand if it's referred by a friend or family member.
Not to mention, seeing a majority of people buying something or participating in a program associated with it builds social proof, encouraging others to take action with confidence.
Maximize Brand Awareness
A positive image around your brand will reach wide audiences where your traditional adverts or products may not reach. Since most of these referrals are based on trust, they have the power to influence over 90% of purchases.
When advocates are rewarded with every new lead they generate, they’re motivated to keep spreading the word about you in their surrounding networks. Apart from their immediate friend's circle, referrers tend to share your offerings on social media in search of new leads and in turn, add to your popularity.
Retain Customers Long-term
Retaining existing customers costs five to seven times less than acquiring new ones, and referral programs are the best tool to accomplish that. Recurrent customers allow companies to direct their capital resources on other more important tasks.
Businesses that reward incoming customers not only cash one-time purchases but are 18% more likely to drive repeat purchases for years to come. As a marketer, if you manage to retain even 5% of your current customers, it will contribute to a 25% increase in the company’s profit overall.
Laying the Groundwork for an E-commerce Referral Program
Marketing strategies aren’t easy to design and implement, especially a referral program. Carrying out detailed market research, learning key audience motivations, and instating a referral structure that keeps them engaged, demands teamwork planning.
But if you’re starting an eCommerce referral program for the first time, make sure you have the following factors checked out.
A High-Value Product
No marketing strategy holds true in attracting new customers unless backed by a high-value product that is loved by existing customers. No one is going to recommend a bad product even if it’s bound by a lucrative reward.
Make sure your customers are satisfied with your product and the customer service that follows it before asking them to refer new leads.
People are hardwired to recommend products that they themselves had a positive experience with. Top it off with an incentive, and your customers will be happy to oblige and share it with others.
A Customer Fanbase Willing to Promote
Building a close-knit and loyal community of customers is the biggest achievement of any brand. But for companies that are only starting out, you can determine the audience response to your products and services through social media comments and reviews posted on online review sites.
Some companies also conduct NPS surveys to identify and locate key customers who are willing to promote your referral program. If you’re already receiving referred leads, it’s high time to enact an official referral program.
An Insight into Audience’s Motivations
Knowing your customers on a deeper level can offer you insights about your ideal audience. In essence, your target audience won’t be much different from your existing customers.
Once you figure out what your current customers love about your brand or product and why would they be willing to refer you, create a sketch of what your potential customers might be. Based on the information you can craft compelling referral marketing strategies that may encourage them to purchase and motivate others to do the same.
Steps to Create an eCommerce Referral Marketing Program
Building an eCommerce referral program isn’t all about finding the right incentives to lure customers. From setting a referral structure that engages participants to create a promotion strategy for massive outreach and incorporating the right marketing tools to oversee the entire project, there’s so much at play in a referral program.
We’ve broken down the complete process of creating a referral program that takes your eCommerce business to success.
Pick the Right Rewards
Most referral programs introduce double-sided rewards. If the referrer gets the reward for sharing a product, the incoming customer gets it too, triggering reciprocity. Seeing their friend benefit from an act prompts customers to keep sharing for mutual gain.
But to make sure your new incoming customers aren’t only in just for the reward, set a tiered reward structure. Set multiple smaller incentives for each referral your customers bring, while keeping the main reward for the last stage after they hit a certain referral target.
Gamifying rewards will keep customers engaged with your brand and develop a strong affinity over time. Here are some popular rewards employed by eCommerce businesses:
- Percentage Discounts: Offering a percentage discount on products is one of the most common and effective rewards. For example, "Get 20% off your next purchase." For bigger commodities, businesses offer a fixed amount discount, something like “$10 off your next order.”
- Loyalty Points: Loyalty programs allow customers to accumulate points with each purchase, which can later be redeemed for discounts, free products, or exclusive offers.
- Product Bundles: Creating product bundles at a discounted price can incentivize customers to buy more items together. You can also tag them with gift cards which can be cashed in on the next purchase.
- Cashback and Store Credits: Providing cashback rewards or store credits for a percentage of the purchase amount encourages customers to return and use the credits for future purchases.
- Free Shipping: Many e-commerce businesses offer free shipping as a reward for reaching a certain purchase threshold or as part of a loyalty program. This incentive can reduce cart abandonment rates and encourage larger orders.
Know When to Introduce Your Referral Program
Sometimes the success of a referral marketing campaign depends more on the time it is launched than the reward it carries. A major reason why only 29% of customers refer others out of the 83% that originally showed a willingness to, is the timing of your program.
People are driven by emotions, and so should your referral program. Instead of initiating a referral campaign aimlessly, time it with instances when your audience’s emotions are high and in favor of your product. Launch your referral program when your customers:
- Are most engaged with your brand.
- Had a positive experience with your product or service.
- Are already talking about your offerings on social media.
- Are likely to spend more, especially during the holiday season.
- Are anticipating your upcoming product launch - cash the pre-launch hype.
A common reason for reduced consumer participation in a referral program is either a complex referral structure or your reward thresholds are too high. For B2C businesses that have a short buying cycle, introducing the program right after the customer makes a purchase will increase the chances of participation. It will motivate them to earn referral rewards for their first purchase.
But if you’re dealing in high-value products that are bound by a longer sales cycle, consider presenting your referral offers to would-be customers who are yet to hit the ‘buy’ button. Knowing they can catch a discount by sharing it with friends, will motivate them to participate and even make the purchase.
Create a Referral Promotion Strategy
Forget about catching referrals if your customers are oblivious to what you’re offering. In order to tap viral growth through referral marketing, you cannot simply depend on your loyal few to spread your referral message. But promote it to the wider, potential audience who is willing to engage. Once you finalize the referral program structure, implement the following tips to promote it:
- Send targeted, personalized email marketing campaigns to your existing customers, informing them about the referral program's benefits and how to participate.
- Share visually appealing graphics, videos, or posts through your social media handles to announce the referral program.
- Feature the referral program prominently on your website's homepage, or create a dedicated landing page enlisting the program details.
- After a successful purchase, display a thank-you message outlining the credentials of your referral offer and how customers can participate.
- If you have a mobile-friendly eCommerce store, use in-app banner ads, pop-ups, and push notifications to target anyone who opens your website.
Make Sharing Simple and Easy
The popularity and adoption of your referral program depend on sharing. The easier your program is to share and participate, the wider audience it will reach. Not everyone you intend to target would be tech-savvy, in fact, quite the opposite.
Most of your visitors are only there to shop, it's your job to make the referral program just as easy to join and promote. Start by inserting a visible, call-to-action pop-up widget saying something along the lines of “Give $10, Get $10” prompting others to take action.
Make sure you insert an automatic link generator along with some widely used sharing channels including email, social media platforms, and messaging apps. Write a brief overview of how the program works to assist everyday shoppers.
Track Every Step of the Program
For most eCommerce enterprises, the real struggle starts once the referral program goes live. It's important to constantly stay updated with the program mechanics to ensure you're on track to achieve your business goals.
Are customers adapting to your referral program as expected? Are your incentives alluring enough to entice prospects? Out of your widespread audience, how many customers are participating in the program?
Although a referral program can be tracked manually - in theory at least - it's best to enact a referral marketing software to keep things streamlined and transparent. Some key metrics you need to pay attention to are:
- Conversion Rate: Track the percentage of referred visitors who complete a desired action, such as signing up or making a purchase.
- Referral Traffic Volume: Measure the number of visitors coming to your eCommerce site through referral links.
- Referral Link Click-Through Rate (CTR): Measure the percentage of users who click on your referral links.
- Customer Acquisition Cost (CAC): Calculate the cost associated with acquiring customers through your referral program.
- Average Order Value (AOV): Track whether referred customers have a higher AOV than non-referred customers.
3 Successful E-commerce Referral Marketing Examples
Online businesses have been leveraging referral marketing to expand their customer base, increase revenue generation, and fulfill their business goals. Let’s take a look at some of the notable eCommerce referral program examples:
Hussle is a third-party enterprise that assists people in browsing and purchasing passes and membership contracts to thousands of venues including gyms, spas, and swimming pools.
The platform introduces a two-sided referral program, rewarding both existing and new customers with discounts for participating in the program. Referrers can win a £10 discount on their next purchase for themselves and their friends by simply inviting them to use Hussle.
Founded in 2013, Outdoor Voices is a contemporary activewear brand that emphasizes on inclusivity, positivity, and the idea that doing things is more important than winning them. Their referral slogan, "Doing Things is more fun with friends," encapsulates this philosophy.
Outdoor Voices provides a $25 discount reward for customers who refer a friend and encourage them to purchase. Referred customers can also receive a similar discount on their next purchase if it exceeds $100. Interested individuals just need to insert their email to generate a unique referral link.
A popular telecommunication brand founded in 2002, has expanded its services to major European countries and harbors over 13 million subscribers on behalf of its brilliant services and epic marketing strategies.
While the company is engaged in several marketing campaigns, its referral program is worth the mention. Unlike typical referral strategies, Three leaves it upon users to recommend any product they want with friends. From monthly phones and sim-only deals to broadband and tablets, users can make a referral for any product of their liking.
In exchange for referring or answering a referral, customers can win up to £40 - £80 in cash rewards, kicking off consumer relationships on a positive note.
Referral marketing is a scalable, low-cost customer acquisition strategy that’s been working wonders for eCommerce businesses. Besides attracting high-quality leads to a business, it fosters a deeper connection and relationship with customers that extends long-term.
To start a referral campaign for your eCommerce business make sure you have a loyal customer base, a quality product, and an understanding of the audience’s motivations. While the steps to setting up a referral strategy may seem simple, consider signing up with Prefinery.com - an industry leader in this marketing genre.
What is an eCommerce referral program, and why do I need one?
An eCommerce referral marketing program is a strategy where you encourage your existing customers to refer new customers to your online store. You need one because it can significantly boost customer acquisition, lower marketing costs, and increase sales through word-of-mouth recommendations.
What are the right incentives for an eCommerce referral program?
For any referral program, always go with incentives that resonate with your audience and business niche. In the case of an eCommerce business, discounts, cash rewards, free products, or store credit work as a perfect incentive. Make sure to understand your customers' preferences and motivations to determine the most effective incentives.