How to Develop a Profitable Referral Program for Your Store

What if I told you that you can encourage your own customers and empower them to be your very own brand ambassadors?

That’s right. It’s called referral marketing, and it’s amazingly effective for your business. Here are a few statistics that back up this claim:

  • According to Nielsen, 92% of customers trusted referrals from people they knew;
  • According to a study carried by the Wharton School of Business, a referred customer has a 16% higher customer lifetime value. This means that referral leads help you save more on acquisition costs and help you make more as they’ll be more loyal to your brand; and,
  • Referred clients tend to spend 13.2% more than a non-referred customer.

In referral marketing, people will become your clients and will buy your products based on the opinion of someone they trust and respect: a family member, a friend, a loved one, a colleague, a prominent blogger or even a powerful social media influencer.

Now, if referral marketing is intensely powerful to propel the growth of your business, why is it that not all companies employ this strategy?

It’s because in the past, referral marketing needed direct monitoring and hands-on activities from your sales and marketing team. It’s an on-going program, after all.

The great news about being an Ecommerce store owner is you can now start implementing a referral program that is convenient and practical.

You just need to put a system in place to get the wheels going.

In this post, you will learn a 5-step process you can follow so you can develop and successfully launch an effective referral program for your Ecommerce store.

##Step #1: Deliver exceptional products and a superior customer buying experience

At the heart of every successful referral campaigns are great quality products that may be the main reason why you’re doing decent in terms of sales.

If the product you’re selling is a highly valuable problem-solver to your customers, then they will have an easier time recommending it to their trusted network.

A major part of providing excellent customer service is the art of your company’s authenticity.

Take Zappos’ example and instead of spending money on paid advertising, invest your resources in customer service and you can reap satisfied customers who would do “word-of-mouse” marketing for you.

To give you another example, Trunk Club makes it easy to share their products because of their amazing product packaging.

referral program

Additionally, it was found that almost 4 in 10 consumers are most likely to share a photo of a delivery via social media if it came in a unique package.

Also, 83% of those shoppers may share via Facebook.

Look at your company the way an external customer would.

Now answer honestly, what are the top three things that you think are worth sharing with your friends and loved ones?

Write everything down, because you’re going to use it later.

Step #2: Evaluate your brand’s customers and your personal contacts, then, segment accordingly

Start by sending a newsletter to your email list, and directly ask your customers if they’d be interested in becoming a part of your upcoming referral program.

Give them the power to make their own choices: you’ll be different than other businesses in your industry by empowering them!

This way, you can also selectively send who will receive your marketing spiel and who are most likely to engage with you, as compared to those who are not.

On the other hand, segmentation is vital in a startup, because you want to make sure that the best of your efforts are targeted to your customers.

You can segment your customers in many different ways, such as:ƒ

  • their customer lifetime value,
  • their social media following,
  • their support ticket volume,
  • their engagement level and location.

Here’s a helpful picture from KISSmetrics to help you visualize your customer segmentation:

referral program segmentation

Finally, your customers aren’t the only one who can be a part of your referral program.

Anybody you’ve made significant contact with in the past can be included as well: bloggers you’ve interacted with, other companies you’ve done business with and even influencers such as celebrities who love your product.

This definitive guide to influencer targeting by KISSmetrics may help you delve deeper into this topic.

##Step #3: Create awareness of your referral program

Once you’ve properly segmented your contacts, you have several options to tell your users about your brand new referral campaign:

1. Program placement on your website: In this example from Prize Candle, the awareness is created in their homepage so everyone can see that they can refer a friend and get a reward for every successful referral.

It’s also a great move on their part because of the heat map – the upper left portion of the homepage is considered a valuable location because we read from top to bottom, left to right.

referral program

2. Email signature: This can be a subtle message to your customers, and you can use this method when responding to their emails personally or you can also include this in your support team’s email signatures.

This way, you can immediately reach your customers at the time when they specifically had their issue addressed or their problem solved.

3. Dedicated email blasts: Send an email newsletter with no extra promotion of other products and services that you have.

Simply send a dedicated email blast with a single call-to-action, which is for your email subscribers to take part in your referral campaign.

Take the example of Pura Vida’s email blasts and consider it as a benchmark in producing your own template:

referral program

You can also use email so that you can filter and move your referral contacts through the whole process:

4. Invitation email: Everyone in your list will receive an email introducing the referral program to them and asking them if they’d like to participate in the campaign. Your customers can:

  • Say yes: Send them a “welcome email” so that you can give them all the vital information about the campaign. This includes your company information, product details and different ways on how they can invite their network to try out the services that you’re offering.In here, you can also put in email and social media templates for sharing so that your users can simply click to share. This reduces the friction and decreases referral abandonment as well.

    Another component you can include in your welcome email is their specific referral links along with their unique user id.

    They can use this link and send this to their family and friends, and you can tag these referrals back to them.

    Here’s HuckBerry’s stand-alone referral page:

referral program page

  • Opt-out of the program: Remove them from the contacts of your referral campaign list.
  • Or not take any other action: Send them a “reminder email” which contains details like customer testimonials of those who already took part in your referral campaign and emphasizing the benefits that they can receive for every successful referral.

    From here, they can choose to opt-out altogether, or join the campaign.

5. Transactional emails: Instead of including a discount coupon in your email confirmation of their order, why don’t you use that valuable piece of real estate to promote your on-going referral campaign?

You can use a service like Conversio to inform your customers that they can get a discount or a gift certificate for every successful referral.

Step #4: Choose the appropriate “Referral Rewards” that your customers find highly valuable to them

Sometimes your advocates may need a simple nudge to get things going, so a referral campaign with a reward is suggested.

After all, in marketing, it’s about “give so you can get”. As such, you need to give out valuable rewards that are personally valuable to your users.

Since non-cash incentives are 24% more effective at boosting performance than cash incentives, you can choose from among a variety of rewards:

  • Double-sided rewards: Reward both the sender of the referral and the receiver of the referral. This way, both parties win, and you also win by giving them goodwill and experiencing a boost in revenue.
  • Discounts: Take a look at Made.com’s example of allowing both parties to share on the reward.

referral program rewards

  • Freebies: If they successfully manage to refer a friend, they both get a free month of monitoring, courtesy of Frontpoint security.

referral program freebies

If you’d also like to dabble in giving out cash incentives, this DapperTime’s referral program may be a good example to take as inspiration in your campaign:

referral program rewards

  • Charity donations: If you think that your brand advocates will be more motivated by you giving back to the community, then you can also use this reward in your referral campaign: offer to reward their friends and reward the charity of their choice.

referral program charity donations

##Step #5: Automate your referral program by incorporating apps that can help you streamline the process

Finally, in order to simplify your whole referral program development process, you can use automatic tools that will do most of the hard work for you.

Here are several referral campaign or loyalty program apps that you can include in your Ecommerce website to start and streamline the whole process:

  • ReferralCandy: You can use this to boost your Ecommerce website sales whenever a product is purchased from your store via referrals. By using ReferralCandy, your referral campaign users get a personal reward link that they can share with their friends and loved ones.
  • LoyaltyLion: If your Ecommerce site runs on a different language such as Spanish, French, Italian or German, you can use this app to boost your profit via referrals.
    It also includes the ability to recognize your top spenders, most engaged users and even your most active brand advocates so you can use that information to maximize the campaign.

Here are other third-party apps that can meet your every referral need, found in the Shopify store.

##Conclusion

For your Ecommerce site to put an effective referral program into place, you need to invest the necessary time, effort and monetary requirements in order for your referral campaign to run smoothly like a well-oiled machine.

Aside from providing high quality products and equally high quality customer experience, you also need a dedicated marketing team to be able to view substantial results.

As other marketing efforts, referral marketing also takes time, so spend a few of it segmenting and targeting your communication to your users.

And by implementing the above referral program tips in your Ecommerce business, you can develop a campaign which is worth both your effort and your advocate’s.

As always, proper planning is vital. But a plan without execution means nothing, in the end, so once you’re done planning, get to launching.


What specific referral campaign tip are you most interested to try out? Let us know in the comments and we’ll help you out!

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