Have you ever purchased a product online because a friend told you they couldn’t live without it? If so, you’ve seen the foundational reason why ecommerce referral programs work so well. Customers almost always look to others before deciding what to purchase.
Ecommerce referral programs are one of the best and most cost-effective ways to gather leads and increase your customer base. According to Nielsen, 84% of customers trust recommendations from people they know more than any other form of advertising. People rely on social proof to learn more about why they should choose a specific product or company over another.
In this article, we dive into how an ecommerce referral program can benefit your online store by generating leads and increasing sales. We take a look at:
- What ecommerce referral programs are
- The benefits this marketing strategy can offer your business
- What to do before you start an ecommerce referral marketing program
- The essential steps for a good referral program
- How other ecommerce businesses have used referral programs to great success
What are ecommerce referral programs?
An ecommerce referral program invites your customers to refer friends and family to your online business in exchange for some type of referral reward. These programs are streamlined and automated so you don’t have to do a ton of work to launch and run them – a simple referral code entered online is enough to track all new sales and reward the existing and/or new customer.
In an ecommerce referral program, you offer your customer an incentive like a cash reward, a coupon, a discount, a free benefit or service, or a gift card if they refer new customers to your business.
For them to start referring others, you should also provide them with a unique link or code they can send to friends and family. This makes it easy for them to spread the word and for you to track your conversion rate.
When you use referral software, all new leads and customers are automatically counted and tracked through that referral link. This makes it super easy to see if your referral program is effective and gauge how many people are coming to your site because of a referral.
What are the benefits of an ecommerce referral programs?
There are many benefits of ecommerce referral programs. Not only will you see more sales, you’ll also find your business is growing its base of loyal and dedicated customers in the long run.
Let’s take a look at some of the main benefits referral marketing programs offer ecommerce businesses.
- Referral programs leverage social proof and trust. As mentioned above, a huge majority of consumers read reviews and/or talk to friends before deciding to purchase a product or service. If someone hears about your company from a trusted friend, they’re much more likely to buy with confidence.
- They increase brand awareness. When you offer a bonus to customers who refer you, those customers will be more motivated to do so. They’ll tell their friends and family and may even share on social media to reach a wider audience. The result? Your products and services will get out there and more people will know about your brand in a positive light.
- They are more cost-effective than other advertising techniques. Ads and other campaigns will cost you money and come without guaranteed results. Referral programs, on the other hand, are inexpensive and much more likely to get results. After all, you’re spending your time and money on customers you already have.
- They are low-risk. You have to purchase a referral software to begin, but as soon as you have one in place, the only payment made is when someone makes a purchase. You’re not paying anything if you’re not getting results.
- They create customer loyalty. Thanks to social proof, referred friends aren’t just more likely to make a purchase – they’re also 18% more likely to remain a customer in years to come and make repeat purchases.
- They have the potential for viral growth. When one customer refers a friend to your company, that friend may also be inclined to share with their friends as well. Ultimately, this word-of-mouth marketing can have an exponential growth effect for your business.
- They are easy to track. By attaching some simple KPIs, like how many orders are placed, how many customers are referred, how much money you make on referred orders, etc., you can easily track how well your referral program is working.
As you can see, there are many benefits to referral programs. So, let’s take a look at how to effectively prepare for and create a great ecommerce small business referral program, starting with inspiration from companies that have excelled.
Ecommerce referral program examples
There are thousands of ecommerce companies out there who have succeeded at bringing in lots of customers through referral programs. Let’s take a look at a few of those companies and what they did right.
Outdoor Voices offers a discount reward for customers who refer a friend. They use their hashtag #DoingThings to promote their brand and offer a $25 discount to both the referring customer and the referred customer on their next purchase. In their program, they incentivize their customers to invite friends who will love the company’s products by offering a great discount to both parties.
Customers simply enter their email, and they’ll get a referral link that they can share with friends in any way they choose. Outdoor Voices makes the process simple, rewarding, and effective.
Casper’s referral program invites customers to give before they get, making them feel good about their generosity and excited about their reward. Casper gives new customers a 20% discount on mattresses, while existing customers can earn a $75 gift card for their referral. In this way, the company promotes its brand value and encourages connection among their customers.
By simply entering their email address, customers get a unique link to share with friends and family. They even provide a link to a second referral option (earning $10 for a referral of a different product) on the same page to encourage more sharing options for their customers.
Omsom offers a similar incentive by offering customers a “Give $5, Get $5” reward. Customers simply enter their email address, refer as many friends as they want, and get $5 for each referral. All their friends get $5 off too!
This simple referral program invites customers to share Omsom with people who will love their products and be excited by a discount on their first purchase. With a headline that says “Share the Omsom Love,” the brand is maintaining its identity as a friendly, inclusive, and customer-focused company.
Omsom also makes their referral link easy to find by placing it right in the footer menu of their website. This easy access encourages customers to view and use the referral program link.
Lokai follows the successful pattern of giving out an identical, double-sided reward to both a referrer and their friend. But instead of store credit, they offer 20% off of an order. This is a significant discount, and one that likely convinces many customers to share, since Lokai very rarely offers other coupons or sales.
Using a pop-up, the brand smartly advertises its referral program right after someone purchases a Lokai bracelet – in other words, when the brand is top-of-mind, Lokai presents an opportunity to save money on their next order by thinking of a friend. That’s not the only place Lokai promotes its program, though. The referral program page is easy to find in the bottom menu, as well as via a callout featured on other pages on the brand website.
Hydro Flask takes an interesting approach to its referral program reward. Customers can tell that, when a friend they refer makes their first purchase, both they and their friend will receive “a little something” related to Hydro Flask. But what that reward is remains a mystery, so it entices customers to share and find out. (We’ve heard that the reward is a valuable discount on a Hydro Flask purchase, but we don’t know for sure!)
To refer their friends, all customers need to do is enter their email address, then choose between multiple convenient options for sharing: email, Facebook, Twitter, Messenger, or a click-to-copy referral link. We also appreciate that customers can write their own message to their friends, but can also opt for a prefilled message to save time.
What to do before starting an ecommerce referral program?
Think you’re ready to start an ecommerce referral program? Don’t dive in just yet. For the highest-performing referral program, make sure the following factors are in place first:
- A well-loved product or service: No customer is going to recommend a bad company, no matter how great the referral incentive. Provide your customers with quality products and great customer service before asking for any referrals. Once they know you’re a great brand, they’ll be happy to share you with their friends because they believe you offer quality products to every customer.
- Happy customers who are willing to promote you: You can check this by going online to see if your brand is being mentioned in comments, reviews, social media posts. You can also use NPS surveys to see which customers are most willing to promote you. And if you hear from new customers that they were referred by a friend, then it’s definitely time to consider starting an official referral program.
- Strong knowledge of current customers: What do they love about your brand and services? Why would they be willing to share you? Learn more by sending surveys or talking to customers in person. When you know what motivates them, you can better determine how to attract more people with the same kinds of value and benefits.
- Knowledge of your ideal new customers: Likely, they’re not very different from your current customers, which is why referrals work so well. Your customers will know who in their network will want and actually use your services, so you’re almost guaranteed to get more valuable customers by encouraging customer referrals.
Once you have all these in place, you can start your referral marketing campaign.
How do I set up an ecommerce referral program?
To create an effective ecommerce referral program that gets results, there are a few essentials to keep in mind. For example, you should provide a desirable reward and offer customers plenty of options to engage with their friends.
Let’s take a look at how you can set up a high-performing ecommerce referral program, inspired by nine key elements that the most successful referral programs have in common.
1. Pick motivating and brand-centered rewards
People won’t refer others if they don’t want the reward you’re offering. Aside from choosing attractive rewards, it’s best to choose ones that help promote your brand.
Rewards like coupons, discounts, store credits, free items, or gift cards will encourage more purchases from your ecommerce store. These types of rewards are much more cost-effective because they draw customers back to your website.
2. Utilize double-sided rewards
To increase the number of referrals, it’s best to reward both the existing customer giving a referral and the potential customer being referred. For example, you can offer a discount to encourage the referred customer’s first-time purchase. And, of course, offer a discount or similar reward for your existing customer to encourage them to buy from you again and stay loyal to your ecommerce store.
3. Promote your ecommerce referral program
You’re not going to get any referrals if people don’t know what you’re offering. Make sure that you promote your referral rewards program by:
- Highlighting it on the homepage of your ecommerce site, using eye-catching images
- Putting a link in your website menu so customers have easy access to it
- Placing the information on a thank-you page, so customers see it as soon as they make a purchase
- Posting about it on social media platforms
- Leveraging email marketing – email campaigns specifically about your referral program, and even emails unrelated to your program (like receipt emails and sale emails)
- Using texts to seek out referrals (if SMS updates are already something your brand uses)
4. Make the sharing process simple and convenient
It should be easy for your customers to find your ecommerce referral program. Make sure they can find and share it with as few clicks as possible.
On your referral page or pop-up, include an eye-catching referral call to action that invites them to share. For example, you might simply say: “Give $20, Get $20” or “Refer and earn free makeup!” That way, your customers immediately know what they get for their referral.
If you decide to send out some kind of referral messaging in email or text or create a referral landing page, always include an easy-to-find “share” button.
Provide a brief explanation of how the program works in a few easy steps. You can also create an FAQ to explain the program more thoroughly, if you feel that’s necessary.
Finally, make sure your referral program pages are optimized for mobile. At least half of all online shopping and purchasing is completed on mobile, and the numbers are only growing.
5. Provide a variety of sharing options
Consider how your customers usually share things with their friends. Do they usually post on social media? Or send emails? Maybe they prefer to shoot a text. Integrate the ways customers naturally share information with friends into your referral program.
Then, provide customers with a referral link they can easily copy and paste anywhere. A referral link is usually the best way customers can share your brand without any extra hassle.
No matter what sharing options you choose, keep a special focus on social media in your referral program. This is the most common way people communicate about what they love, and it offers you a huge opportunity for outreach since so many people are regularly active on social platforms. Social media referrals are also easily shared with many friends at once, creating the opportunity for potential viral growth.
6. Invite your customers to do the talking
While you can and should provide customers a brief message to share with others, make sure it’s easily customizable. You want referrals to sound genuine, not like they’re coming from a corporate body. Include space for customers to input their friend’s names and sign off in their preferred manner.
If you don’t want to write a template message to avoid sounding robotic, simply offer a few suggestions or options for customers to build their own messages.
7. Show your appreciation
Make sure you always thank your customers for their referrals. As an added bonus, you might also consider running an “advocate of the month” spotlight to post on your social media pages. Customers will love the recognition!
Another great option is to create a leaderboard of all your top-referring advocates and continually update it to encourage customers to send more referrals.
8. Track your referral program success
With referral program software, it’s easy and simple to track the metrics of your program. In an instant, you can view the software to see how many referrals you earn per month, what percentage of customers refer others, and what percentage of referrals end in sales. You can also track the total revenue you make from referrals and the average value of an order made through a referral link versus the value of overall orders.
These metrics will help you evaluate the cost-effectiveness of your referral program and determine what strategies work the best for increasing your company’s sales.
9. Automate your program with the right referral software
Another benefit of referral software is it can automatically track all the steps in your program, create unique referral links, and instantly issue rewards to your customers.
Some key features to look for in referral software are the ability to integrate seamlessly with your existing ecommerce store, and how it fits the program you plan to run (i.e., Can it issue the rewards you want to offer? Does it charge you extra for every referral?)
Ecommerce referral program mistakes to avoid
Just as important as covering the ecommerce referral program essentials is knowing how to avoid the common pitfalls. Pay attention to these “don’ts” to set your program up for further success:
- Don’t offer a poorly-thought-out incentive – and don’t think you can get away with no rewards at all.
- Referral rewards must be worth the time and energy a customer gives you when they refer a friend.
- If referring isn’t worth it, customers are far less likely to share.
- Don’t overcomplicate your program rewards.
- Many of the best ecommerce referral programs offer the same clear reward for every referral, and a consistent reward for every new customer.
- Tiered reward approaches (rewards that increase in value when someone makes more referrals) can work, but make sure that customers can easily see how many referrals it takes to reach the next reward.
- Points systems overcomplicate the rewards process, so stay away from them.
- Don’t clutter your program page. Customers need to know why and how to share as quickly as possible.
- Don’t leave your program be without promoting. People must know your program exists to use it for sharing.
- Don’t use the DIY approach. Referral software makes designing your program, and tracking referrals, much easier!
- Don’t just set it and forget it. Referral programs need constant testing and refinement to work their best. Regularly check program data to find out what’s working well and what you should improve.
- Don’t create a limited-time program.
- Ongoing referral programs have greater success, because customers will continue to receive rewards for referring and be more motivated.
- And when you’ve put in the effort to set up a program and track referrals, it doesn’t make sense to dismantle the program after a short time and lose out on tracking.
Building your own ecommerce referral program
There are so many benefits to launching your own ecommerce referral program. You’ll find it’s cost-effective, simple, and a proven way to grow your business and spread brand awareness.
To start, get to know your customers, decide on a desirable reward, and create flexible shareable links. Then, get the word out about your program!
With these simple steps, you can increase your loyal customer base and build a strong referral program to get your ecommerce business growing in no time.