Referrals are nothing new to the world.
Back in the day, villagers would tell their neighbors about the best cobbler down the street. They’d say, “Just tell the cobbler my name, and he’ll take care of you.” Trade businesses relied on business from referrals, and now ecommerce stores are using this classic method to drive sales.
Fast-forward to the early 2000s when PayPal adapted this old tactic and brought it up to date for online businesses. The company used to pay people to invite their friends. In their first year, they had one million users by March 2000 and five million by summer 2000. This inspired companies like Dropbox to create similar programs.
And the rest is history. Today, marketers lean on referral marketing to acquire new customers using this tried and true strategy.
Why is referral marketing so successful?
In part, it’s because marketers struggle to gain trust. In fact, 92% of consumers trust a recommendation from friends or family over an advertisement.
With the almost limitless amounts of information on products and services, it can be difficult to tell facts from fiction. So, consumers turn to the people they trust for a recommendation. These recommendations often happen naturally, but there are steps marketers can take to formalize and leverage referrals.
Every ecommerce professional needs to have a deep understanding of referral marketing in order to drive more sales and stand out from the competition. Let’s dive into the details surrounding referral marketing so you can start earning more customers today.
What is Referral Marketing?
Referral marketing is a strategy that encourages past customers to naturally tell others to buy your products or services. Usually, referral marketing is done by word of mouth, text, and spontaneously, but there are ways marketers can effectively build a program around referrals.
For ecommerce marketers, referral marketing is a great way to also raise awareness about your product or service. Because there are so many competitors, using SEO best practices might not be enough to rank high on search engines. Referral marketing brings traffic to your website and thus will increase your ranking.
Referral Marketing vs. Affiliate Marketing
So you know what referral marketing is, but it often gets confused with affiliate marketing.
Affiliate marketing is when people who aren’t customers give an artificial recommendation, while referral marketing is when an actual customer gives a genuine recommendation.
An example of affiliate marketing can be companies that send out products on the contingency that product recipients write a review. Companies use affiliate marketing to boost numbers of reviews, as that’s an important factor for shoppers when comparing products.
Both methods of marketing are effective, but companies usually choose to use one or the other.
Why Is Referral Marketing So Powerful?
Referral marketing is the secret strength that fuels some of the most successful startups. Lyft and Airbnb grew their customer base on referral marketing strategies and as a result, are two of the most well-known startups to date.
1. Precision targeting.
The people who refer someone to your business are called referrers. Once you ask your current customers to refer someone, they know who they will tell and how to convince them to buy your product or service better than you do. That’s why referral marketing is so beneficial.
Because referrals are becoming more common, sometimes the shopper reaches out asking if their friends or family have a referral code for a particular product or service that they want. That’s about as precise as you can get.
2. Trust factor.
According to Nielsen, people are four times more likely to buy if they are referred to by a friend. This fact isn’t anything shocking. Advertisers and marketers are mistrusted, and in the age of information, it is difficult to determine what’s true and what’s false.
When a friend or family member recommends something, it means that they’ve tried it and had a positive experience with the product or service. People don’t recommend things they hate. In fact, if your company has a bad reputation, people make sure no one they know buys from you.
You never want to be the person that gives a bad recommendation, that’s human nature. The most trusted marketing campaign is, therefore, a referral program.
3. Reach and acceleration.
Conversion rates from a landing page are usually around 2-3%, and that’s if you’re doing well. When visitors reach a referral page, a shocking 14% take an action according to Saasquatch.
With referral marketing campaigns, your reach increases quickly. Current customers must do the work for you by reaching out to their friends and family in order to get the incentive.
The point of an ecommerce referral program is to reach people and convert them into customers quickly. Because of the nature of this strategy, when done right, businesses see success with the rate at which they acquire new customers.
The best kind of referral is when a celebrity or influencer naturally recommends your product or service. If that happens, the reach is extensive.
8 Ecommerce Referral Marketing Strategies
There are many examples of SaaS referral marketing programs, but when it comes to ecommerce businesses, there are not as many companies using this strategy when every online store should be investing in this marketing strategy.
These seven examples show different ways to create a referral marketing program.
1. Gillette On Demand
Gillette On Demand is a delivery service for razors, shaving cream, and other shaving needs.
It incentivizes current customers to share by offering a two-way discount. Two-way discounts are a way to incentivize the customer to refer and incentivize the person receiving the referral to buy.
The landing page gives customers the ability to refer using email, Facebook, and Messenger, which gives shoppers no excuse but to share.
2. Hincapie Sportswear
Hincapie is a cycling apparel ecommerce shop that specializes in making customer gear for riders.
The referral offer provided by Hincapie Sportswear is unique to the company itself, which can lead to higher engagement since it’s a more targeted incentive. Hincapie offers a custom cycling jersey if your friend or family member spends a certain amount of money. Customization is a great gift to offer because it’s one-of-a-kind and unique to your customer. It really thanks the customer for their referral.
They also have an ambassador program that connects cyclers around the United States who use their gear and share their love for it.
3. Hyphen Sleep
Hyphen Sleep is an ecommerce sleep solution company that sells anything from mattresses to storage bases for beds.
Hyphen Sleep remains true to its brand with this referral program landing page. The copy here is engaging, casual, and fun. When reading it, you feel like they’re genuinely grateful for the referral you’re going to give.
Hyphen calls those who refer people to their mattresses an ambassador, which is a unique way to use the referral campaign. By calling customers ambassadors, they’re walking the fine line between affiliate marketing and referral marketing.
4. Pink Lily
Pink Lily is an online boutique that sells women’s clothing. On the Pink Lily website there’s an entire page dedicated to their program called Pink Perks.
They use referral marketing by allowing customers to give a friend $10 off their first purchase. Once the friend makes the purchase, the person who gave the referral can then get $10 off as well.
5. CBDistillery
CBDistillery has a loyalty program with a “refer a friend” incentive. Referrers can give $10 off a first order of $75+ in exchange for 50 points. Every 50 points earned is a $5 discount. This incentivizes referrers to send multiple referrals.
6. Postmates
Postmates is a food delivery service that gives $25 credit every time a friend signs up with a customer referral code. In the food delivery business, customers jump around between different apps looking for discounts.
This incentivizes people to stick with Postmates and share the love with others. That discount goes a long way with food delivery. Plus, they allow you to enter all of the email addresses right on the screen so it’s simple to share and get rewarded.
How Do You Implement Referral Marketing?
Implementing a referral program may seem like a natural fit for certain industries, especially retail. But they’re not the only ones that can benefit from using this targeted marketing campaign. A referral program is a low-cost investment that can help you get better leads and dedicated customers.
In order to best prepare yourself and your team for the launch, it’s crucial to plan ahead. Before deciding to jump in headfirst to a referral program, you’ll need to do your competitive research. Do any of your major competitors offer one? See what they offer and where there’s an opportunity for your brand to exceed the current standard. Don’t try to reinvent the wheel if what’s out there is working already.
Let’s make sure that you’re set up for success with these best practices for referral program implementation.
1. Choose an incentive.
There are many different types of rewards that you can use for a successful referral to your business. You may need to have a testing period where you experiment with different rewards, or you may know off the bat which one you want to move forward with. Regardless of the incentive, be sure to provide referrers with a referral link so they can easily share the incentive with their friends.
Cash
The most obvious reward is to simply offer a cash gift in exchange for a referral. This should come without the need for the existing customer to make an additional purchase.
Plain old cash, however, does not incentivize people to buy more at your store. Instead, offer a gift card to your ecommerce store with money on it so that the customer comes back and maybe even spends more.
Points
If a user completes certain actions or refers new clients, they’ll receive a certain number of points. These points can be redeemed for discounts, free gifts, experiences, or any combination. The point system allows for the greatest flexibility in redemption methods.
More times than not, customers don’t use points — so that’s money saved for your business as well.
Discounts
A popular referral program incentive is to offer discounts both ways. For example, if customer A refers customer B, customer B will receive $X off of their first purchase, and customer A will receive the same $X off of their next purchase once B places theirs. Both parties will feel as if they have a hand in helping out a friend.
A discount offer often incentivizes shoppers to check out faster because they got the discount and someone else is depending on their purchase for a discount as well.
Free gift
Another incentive could be to offer a free gift to referring customers — samples, for example. The more exclusive the product, the better. After all, they should feel as if they’re special after getting a friend to buy from you.
Free gifts are a great way for your shoppers to get hooked on a product as well. It allows them to try something new and perhaps buy it in the future if they enjoy their free gift.
Ecommerce beauty shops use free gifts as part of a referral program and other parts of their marketing strategy.
Experiences
Consider offering an experience as a reward for a certain number of referrals. The higher number of referrals, the more prestigious the gift can be. Find an experience that resonates with your customers, such as a personalized class, and offer it up.
This is a great tactic to use on Instagram because if the experience is good, your loyal customers will recommend your products to others and share it on social media so that they get more referrals.
Custom
Have something in mind that wasn’t listed above? Go ahead and run with it. The more unique your offering is, the better. Just make sure it’s relatable and something your consumers want.
The biggest thing to take into consideration when choosing your incentive is just knowing that if it doesn’t resonate with your audience, you’ll have very little luck. You can survey your audience and find what types of rewards would motivate them. The better you know your audience, the better you can design your program, then the more success you can see.
2. Determine when to introduce your incentive program.
Once you’ve worked out the kinks with your program and you’re ready to go live, you’ll need to spread the word by creating content around it. Simply put, a referral program is just another marketing campaign, so if you don’t promote it, it’s not going to work for you.
Creating an email marketing campaign for your engaged customers is a simple way to get the word out. Create a simple email with an enticing headline, such as “Heard the news?” Explain the program briefly and drive traffic to your landing page. Your repeat customers are probably already spreading the news about you to their friends, so make sure that they know they can get rewards for it now too.
Make sure to promote it via social platforms and your website also. Pop-ups can be used to convert casual shoppers into a conversion. Your employees should also be knowledgeable about the program and spread it to their networks.
3. Track your referrals.
If you aren’t tracking how you’re performing, then none of it matters. Keep close track of your data so you can determine how well your program integrates into your customer base. Are there areas for improvement? Are consumers slow to adapt? Find out where you can improve and go ahead. Question your customers and see where they think you can improve.
Don’t forget to thank your customers. If a referral program is done right, your customers are doing a lot of work for you. Give them the rewards they’ve earned and call out the high achievers. Happy customers can lead to a growing list of customers.
Using Referral Marketing Tools
The implementation of your referral program will be easier if you have the right tools in place to simplify your process. Identify gaps in your marketing tech stack and consider adding a referral marketing software. Also referred to as customer advocacy software, referral marketing software has features that help companies create and manage referral programs, monitor interactions and activity, and personalize communication efforts.
According to G2’s Spring 2020 Grid® Report, the top three software solutions within the customer advocacy category are:
Additionally, a marketing automation tool can come in handy when promoting the launch of your new program.
Executive Summary
Referral marketing is one of the major keys to success for ecommerce companies because people trust family and friends exponentially more than marketers. Through the appropriate incentives, you can accomplish precise targeting and reach a high volume of customers. When done right, referral marketing will transfer your ecommerce business, thus driving sales and increasing awareness of your product or service.
Source: https://www.bigcommerce.com/blog/ecommerce-referral-marketing/
