Today’s article on Referral Program Best practices for eCommerce stores is brought to you by Visakan Veerasamy – Content Editor at ReferralCandy.
Let’s welcome Visakan in our blog, and learn from his invaluable experience!
Ecommerce marketing today means monitoring and managing many different channels all at once: Email, content, countless social media platforms, and so on.
Of these, referral programs have been noted to have some of the highest return-on-investment (ROI), going up to 300% or even more. A Nielsen study in 2012 found that 92% of consumers trusted word-of-mouth referrals from peers– higher than any other form of advertising. Other studies still have shown that referred customers spend more and are more loyal.
So it clearly makes a lot of sense to invest in referral programs.
The challenge for busy retailers, though, is that referral programs are particularly complex. There are many moving parts that need setting up. So we’ve put together this post to walk you through the best practices of running a referral program for your ecommerce store.
1) Have a ‘referable’ product to begin with, then plan the referral program experience around it
(Goldieblox is a great example of a highly referable product.)
The most important thing you need before you can have a successful referral program is a great product that people love. There are at least two good ways you can verify this.
The first thing you could do is simply ask your customers. The Net Promoter Score is a well-established system of doing this. If you have a high Net Promoter Score, you can reasonably assume that your referral program should do well.
Another good way is to monitor social media for brand mentions. Twitter is a particularly good place to do this, because most tweets are public and searchable. You can search for mentions of your brand, either directly on Twitter itself, or by using third party tools such as Mention.
(If people are raving about your brand on Twitter, they’ll probably be happy to participate in your referral program!)
2) Set up effective referral incentives that compel your Advocates to refer their friends
(When it comes to designer sneakers, 20% off is a great incentive for both Advocates and the friends they refer.)
People respond to incentives, and referral programs are no different. To get the best results, you’ll want to make sure you use the right ones. If you choose good incentives that suit your product type and your brand, you’ll get more referrals.
As a rule of thumb, we recommend using discounts that are roughly 10-20% the value of the product. You want it to be significant enough that an Advocate would feel good giving it to their friend, and the friend would feel good receiving it.
If you’re selling something that costs tens of thousands of dollars, a smaller percentage can work. For example, Tesla Motors had a highly successful referral program giving out $1,000 discounts as incentives.
There are two parts to referral incentives:
- The Referral Reward, which you pay out to the Advocate (the person who makes the referral) when the referral leads to a successful purchase.
- The Friend Offer, which is the discount the Advocate gifts to his or her friend.
Choosing A Referral Reward: Cash vs Discounts
The important question you need to ask is: Are your Advocates likely to make repeat purchases?
If you’re in fashion or a related industry where customers make regular or repeat purchases, it makes sense to give your Advocates a discount– you’ll incentivize them to make more purchases at your store.
If you’re in an industry where customers don’t typically make repeat purchases – if you’re selling mattresses, for example– then it makes more sense to give a cash reward, so that your advocates aren’t left holding on to discount coupons that they’ll never use.
(If your product has a return period, you should schedule your referral reward to paid out only after the return period is over.)
Rule of 100
Finally, remember to consider the Rule of 100 when deciding how to frame your discount. If your product costs $25 and you’re selling it at $15, it sounds more like a bargain if you frame it as 40% off rather than $10.
On the other hand, if your product costs $2,500 and you’re selling it at $2,250, it sounds more impressive if you frame it as $250 off rather than 10% off.
3) Write effective emails asking for referrals to maximize your conversion rate
(Leonisa’s referral emails are particularly effective.)
There are a lot of things that go into writing a great, high-converting email asking for referrals. Let’s focus on the basics that you should absolutely get right.
- Keep it clear and simple. Your customers don’t want to spend a lot of time reading a long-winded email about something they don’t understand.
- Make the subject line strong. The main job of a subject line is to make sure that the reader opens the email, so make it obvious what it’s about. Don’t confuse them.
- Use strong visuals. People are visual creatures, and having relevant images makes it easier for readers to understand what’s going on.
- Clearly emphasize the call-to-action (CTA). The reader should be able to figure out what to do, and then do it within seconds.
- Emphasize the motivation for purchase. They should know why they’re about to do what they’re going to do. If you’re going to take up space in your customer’s’ inbox, it should be with a promise of a benefit to them.
If you get all the elements right, ideally your customer wouldn’t have to deliberate at all about whether or not to make the referral.
Learn more: How To Write Great Emails Asking For Referrals
4) Get as many people into your referral funnel as possible: invite existing customers and feature referral Calls-to-Action (CTAs) prominently
Once you’ve got good incentives and good emails (both of which increase the odds that a particular individual would refer a friend), the only thing limiting you from getting more referrals is the sheer number of people who signup for your referral program.
There are two main things you can do to get more people to sign up:
- Reach out to your database of existing customers via email
- Place your referral calls-to-action (CTAs) prominently on all your marketing assets
5) Use appropriate reminders to keep your product and referral program top-of-mind for your customers
(You’ll probably want to have a centralized schedule to keep track of all of your brand’s content, to make sure that your customers’ experience is coherent.)
An unfortunate fact that every retailer has to grapple with: while your business is the most important thing to you, it’s just one of many, many things on your customers’ minds. So even people who are willing and able to refer their friends often forget to.
According to an Advisor Impact study, 83% of satisfied customers are willing to make referrals, but only 29% – less than half – actually do so. And we can infer why: most people forget half of what they’ve learnt within 20 minutes, and this can only get worse as we’re bombarded with more information daily.
If you want more referrals, you’re going to have to find a way to cut through the noise. Of course, the most important part of that is having a great product and great messaging that people already remember.
But beyond that, you’ll want to make sure you…
- Send post-purchase emails asking for referrals. Customers are particularly receptive to making referrals after already having made a purchase, so it’s a good time to catch them. It’s even better if you can time it after they’ve received and/or used the product.
- Periodically send reminder emails and post about your referral program on social media. Sometimes Advocates aren’t making referrals because they haven’t encountered anybody who they know would need your product. This can change over time, so you’ll want to reach out to them again.
Of course, you don’t want to come across as needy and bombard your customers endlessly with referral requests. Make sure that you’re always delivering interesting and useful content to them, and ask for the referrals periodically (while emphasizing the benefit to them.)
Learn more: How To Keep Your Referral Program Top-Of-Mind
Referral programs can be really powerful ways to grow your business. They help you identify and reward your best Advocates, as well as reach out to your best possible new customers.
If you’d like to trial a referral program for your ecommerce store, check out ReferralCandy. It’s easy to setup, and allows you to run an automated referral program that’s customized to suit your brand’s needs.
We feel honoured to have Visakan’s insights featured in our blog, and we are incredibly thankful for the knowledge he has shared with us.
Author Bio: Visakan Veerasamy – Content Editor at ReferralCandy – a referral marketing automation platform used by online retailers all over the world. ReferralCandy allows ecommerce retailers to manage, incentivize and analyze customer referrals in a simple, customizable way.