Gaining new customers is one of the primary concerns for any eCommerce business. It’s likely at the core of your marketing strategies, and one of the most significant expenses in your budget. However, acquiring these customers can be costly and involve a lot of hard work.
Referral marketing is one way to simplify the process. This technique encourages customers to promote your brand and products for you, usually in exchange for incentives. These ‘refer-a-friend’ programs allow you to boost sales while minimizing the impact on your existing budget.
In this article, we’ll dive into what referral marketing is and why it’s a great choice for your eCommerce business. Then we’ll explore four tips to help you implement it. Let’s take a look!
What Is Referral Marketing (And How Can It Help Your eCommerce Business)?
Referral marketing encourages customers to promote your products or services to their friends, family, and social networks. You’ll typically offer some form of incentive, such as a discount or free product, in exchange for the referral.
There are several advantages to using referral marketing as part of your eCommerce strategy. For example:
- It’s an inexpensive way to acquire new customers. Referral marketing costs significantly less than other acquisition methods like paid advertising, and it tends to result in high-quality leads.
- People referred by a friend or family member are more likely to be interested in what you’re selling than someone who’s just seen an anonymous ad. For instance, 91% of people in the US report that they would share exclusive offers and good deals with friends and family. This is particularly important if your customers are younger, as they may distrust traditional advertising and prefer more personal sources.
- 82% of small businesses claim referrals as their primary source of new business. That means word-of-mouth is still the most powerful marketing tool you have for increasing brand awareness and conversions.
Best of all, this type of marketing is relatively easy to get started with. While there’s some initial setup involved, after that your existing customers will do most of the legwork for you.
How to Implement Referral Marketing in Your eCommerce Store (4 Tips)
Now that we’ve looked at some of the advantages of referral marketing, let’s discuss how you can implement it as part of your online store.
1. Choose Your Referral Program Incentives Carefully
More than 50% of people are likely to give a referral if offered an incentive. That’s because of something called the ‘principle of reciprocity’. This principle states that we are more likely to do something nice for someone if they first do something nice for us.
So, if you want people to refer your eCommerce store to their friends and family, you’ll need to offer them an incentive that is worth their while. As you can see below, T-Mobile offers cash:
You can use different incentives, relying on anything from simple discounts to more complex gamification systems where users aim to maximize their rewards. You can also provide other incentives, such as cash, discounts, reward points, or gifts.
When choosing an incentive for your referral program, there are a few things you may wish to keep in mind. For example, the incentive should be valuable enough to encourage people to make a referral. Equally, it should fit your brand and image, and be easy to understand and redeem.
2. Use Referral Marketing Tools
While you can set up a referral marketing program manually, the process will be easier with the right tool. If your store is WooCommerce-powered, there are plenty of plugins that can help you set up and manage a referral program.
These tools can automate many tasks associated with running this type of program, such as sending emails to customers and tracking referrals. Using referral marketing software can save you a lot of time and hassle. Still, choosing a platform that’s well-suited to your business is essential.
Some features to look for in referral marketing software include the ability to create unique discount codes, social sharing buttons, and automated email campaigns. There are plenty of options available, such as Refer A Friend for WooCommerce or Referral System for WooCommerce:
Refer a Friend allows you to offer referral coupons for your WooCommerce store. Referral System for WooCommerce, meanwhile, is a complete referral marketing plugin. It’s lightweight, and it integrates with WooCommerce Points and Rewards Extension.
3. Use Analytics to Track Your Referral Marketing Program
When running a referral program for your eCommerce store, tracking your results with analytics is crucial. Analytics is the process of turning data into insights. It will enable you to determine whether or not your referral program is successful, and identify any areas that need improvement.
There are a few different ways to track referral marketing data. One easy solution is to use Google Analytics, a free tool that provides detailed statistics about website traffic:
Another option is to use the tools provided by your existing plugins. While the plugins we mentioned above don’t have a huge range of features, Refferal System for WooCommerce does allow you to track referral rewards on the account page. Other plugins with more extensive analytics are available, including MonsterInsights (which is compatible with Google Analytics).
Whatever solution you use, here are a few metrics you might want to track:
- The number of referrals: This will give you an idea of how many people are using your referral program.
- Referral rate: This measures how many people make a purchase as a result of your referral program.
- Average order value: This tells you how much each person using your referral program spends.
- Referral conversion rate: This measures how many people who use your referral program go on to make a purchase.
Tracking these metrics will help you determine the success of your referral program, and identify any areas that need improvement. Using analytics, you can fine-tune your process to make it more effective and improve your bottom line.
4. Develop a Strong Relationship With Your Referral Marketing Ambassadors
There has to be trust on both sides of the referral marketing relationship for it to work well. Ambassadors have to believe that your product will be valuable and relevant. Equally, they should feel like they are part of your eCommerce store.
To make that happen, you can create personalized experiences for them. Different tiers can also give referral program ambassadors various levels of perks. For example, Robinhood.com offers gift stock as an incentive, giving you a stake in the company:
It’s important to connect with ambassadors who share your brand values. It’s best if you make your branding and style front and center. This will help ensure that they promote your eCommerce store to the right people, and encourage loyalty to your brand.
Finally, it’s important to be transparent about your referral program’s policies. Ambassadors should know precisely how you will compensate them for promoting your eCommerce store. There should be no confusion about how your program works: you’ll want to make clear exactly what they need to do and what they will get in return. In case of any questions or difficulties, it’s also smart to ensure prompt and helpful support.
If you’re looking to cut costs and gain new customers, referral marketing might be for you. By leveraging the power of your existing customers, you can create mutually-beneficial relationships and enlist them to promote your eCommerce business. This can increase brand awareness and bring in new leads and customers.
In this article, we looked at four tips for starting a referral marketing program. To recap, you’ll want to:
- Choose your incentives well.
- Use referral marketing tools.
- Use analytics to track your program.
- Develop a strong relationship with your ambassadors.
Do you have any questions about how to implement referral marketing effectively? Let us know in the comments section below!