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Ecommerce Referral Marketing: The Beginners Guide

Ecommerce Referral Marketing: The Beginners Guide

By James Barnes, January 15th 2019

What is referral marketing?

Referral marketing is exactly what it says on the tin – people promoting your company or products and ultimately referring others to your business.

Referral marketing is great, and we think, one of the best strategies out there. Why?

  1. People are singing your praises – awesome job.
  2. Your sales are increasing – hallelujah.
  3. It doesn't have to cost a fortune – even better.
Social Media Today researched several brands' referral programs. They found that, on average, referred customers spend 25% more than customers acquired by other media.

It's possible to encourage more referrals by creating and implementing a referral program. Your customers will need to get something from it, but don't forget, your ecommerce business will too. 

Pros and Cons of a Referral Program

All marketing techniques have pros and cons, and referral marketing isn't any different. These can differ for various businesses but we’ve highlighted the key points below.

Pros

  • Trust is an important part of the buying process, and this is precisely what people have more of from referral marketing. Naturally, people listen to their loved ones' experiences on a product more than they could a salesperson – the person employed to sell that product. If you had a referral program, people could be more inclined to share their experiences with others, and potentially, your sales may increase due to the higher level of trust.
  • A referral marketing program can be better targeted than other marketing techniques. People know of their family and friends needs more – they know when to recommend products. Whereas, with other marketing techniques, marketing to a mass audience is required and potentially, at the wrong time.

Cons

  • Unfortunately, you can’t control what people say about your business. They could undersell your company or products but nonetheless, they’re still promoting your business (which is what you're encouraging by setting up a referral program).
  • Like all marketing campaigns, it may take a while before you start to see results. 
Tip

Nobody will sell your products like you do, but you don't have the level of trust that your customers have with their loved ones.


Pros and Cons 

  • Only existing customers can be incentivised with a referral program. Depending on the number of customers you have, this has its pros and cons. It can be a slow-burning process for businesses with few customers, but for those with more customers, it can be very beneficial.
  • To set up a referral program, the cost can be low. The real cost is the incentive you’re offering the referee and also the new customer (if you choose to give them an incentive too).

How do I set up a referral program?

Okay, so you’d like to set up a referral program, but where do you begin? Follow us, we'll take you through it.

Step 1. Choose an incentive

In order for your referral program to work effectively, you need to decide upon the reward(s).

  • What reward will your customer receive when they refer somebody new to you?
  • Is there an incentive for your new customer (referee) too?
Tip

The reward will be an ongoing incentive for your program so you will have to ensure that you’re able to fulfil your promise without affecting your business financially.

Choose an incentive that will ensure your customers repeat their custom with you. This could be credit in accounts or discounts on your products.

Step 2. When will your customers receive their reward?

Decide when your customer(s) will receive their reward. Make sure that this is clearly stated from the get-go so you don’t get asked numerous questions.

Tip

Issue your reward once the referee has purchased a product from you. This way you’ve made money before you’re rewarding people.

Step 3. Terms and Conditions

As with any program, you will need some terms and conditions – make sure you have everything covered in here so your referral scheme can't be abused, and also that they're readily available for your customers to get access to.

Step 4. Promotion

You know what reward(s) you’re offering, and that it’s worthwhile to your company, but how will your customers know about your referral program? Marketing.

The possibilities to market your referral program are endless, but we've put some pointers below for you.

Emails

  • If you send welcome emails to your new customers, promote your referral program here – make them aware of it from the get-go.
  • When you send marketing emails on an ad-hoc basis, remind your customers of your program – they may have forgotten.

Social Media

  • Social media is very fast-paced and things can easily be forgotten. These platforms give you the perfect opportunity to post frequently about your program.

Website

  • Create a landing page for your referral program so people can get more information – you can include it in the navigation for ease.

Packaging

  • When you ship products to your customers, include a compliment slip in there telling them about the program – after all, you're already posting to them so there isn't that much of an additional cost, see it as an additional marketing platform.

So now you know the ins and outs of a referral program. If you're inspired to create a program, please let us know how you get on. We love hearing your success stories.

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Sources

  1. https://www.socialmediatoday.com/news/3-reason-why-you-should-focus-on-referral-marketing-in-2018/511050/