Referral marketing is one of the most effective marketing strategies for eCommerce businesses. It leverages word of mouth recommendations to get new customers and, therefore, more business.

Statistically, 92% of customers trust recommendations from the people they know more than brands. Referral marketing is, therefore, a worthy choice for small online businesses to build brand awareness.

In this article, we dissect the various referral marketing strategies for eCommerce. You will learn how to effectively use them to better your store’s performance.

Why you should use referral marketing for your online store

Attracts customers faster

Customers trust referrals from peers and family than traditional marketing messages. They become more likely to redeem the referral. Additionally, customers have already established trust with their contacts, which eventually spills over to your brand.

Enhances awareness

Referrals increase brand awareness to potential customers. Customers who have had a good experience tell their friends and family about you. As a result, their friends come to check out your store and could eventually become customers. It is particularly helpful to new little-known businesses.

Automatic marketing

When you run an automated referral program, it becomes an automatic marketing channel. Whether or not you are online to take action, you can still collect leads and earn new customers.

Customer loyalty

Customers referred by other customers are more likely to remain loyal. They often develop a favorable opinion of your brand. As a result, they tend to have a higher lifetime value than those acquired through traditional means.

These trends, therefore, bring about a higher return on investment from referral programs.

How to use referral marketing for eCommerce

1.    Make the product experience shareable

You must first provide superior products and services to customers for them to be willing to refer you. Analyze your offering and guage whether you would be willing to refer that to your close friends.

Furthermore, you must design their experiences to be shareable. Customers may enjoy your product or service, but you might not get the referral if there is no formal avenue for them to share.

Reportedly, over 83% of customers are willing to refer your products buy very few do. It is mainly because of the limited information about your program and the rewards involved.

Therefore, you must set up a dedicated referral page containing all details about joining your program and the rewards involved. The easier and more exciting it is for people to share your products, the more return on investment you’ll get from your referral marketing strategies.

The telecommunications brand, Sprint is an excellent example of using referral marketing even with a large company. Sprint does a great job at communicating their referral program and its benefits all on one page.

In their program, customers can earn $50 for each line their friends activate. There’s a cap of $500 per year; however, it is still a good deal.

2.    Provide exceptional customer service

You must focus on keeping your customers happy. When customers are satisfied with their experience with you, they are more motivated to share and refer you to their contacts.

Excellent customer service is rare. When you go above and beyond to help your customers, they are very likely to become evangelists for your brand.

An example was the famous Chris Hurn story when employees at the Ritz Carlton retrieved his son’s stuffed giraffe. Not only did they send it back, but they also included a bunch of pictures showing the giraffe on “vacation.”

No doubt his article about it made a few referrals for them..”

3. Create viral content

You must create content worth talking about and sharing. This approach may not always be easy as some products are naturally boring.

However, no matter how boring a product may seem, there are always people that want to buy it. Identify content that resonates with the audience and heavily promote it.

A good example is the referral program at Harry’s. It was eventually taken down because it had achieved its purpose.

Harry’s ‘referral program offered new customers massive incremental rewards to refer their friends. Referees got 10% off their first purchase. Customers received shave cream for referring five friends, a free razor for ten, a free shave set for 25, and a year of free blades for referring 50 friends.

The result: Harry’s gained over 100,000 leads.

3.    Implement a referral program

A referral program is a systematic way of getting your customers to refer others to your business. It helps to standardize how you invite and reward people for spreading the word.

For example, a software program can run a referral program that offers a 10% reward to the referer and a 10% discount on the referred customer’s first purchase.

Referral programs are an excellent way to get new customers at a low cost.

You can choose to use an automated solution like Referral Factory and Genius Referrals. Alternatively, you can use a custom-built program.

Best practices in referral marketing

1.    Offer incentives

The incentive to your referrers is an essential part of your program. Since it is them spreading the word, you must compensate them well to motivate them.

It may be tricky to identify the sweet spot. So it helps to experiment with different incentives and see what works best. Incentives vary and include cash, coupons, discounts, etc.

As a rule of thumb, offer incentives depending on the nature of goods and purchase frequency. For instance, high-value, high-involvement purchases like software might warrant cash incentives. Meanwhile, low-value, low-involvement purchases like clothes could use discounts and vouchers.

Pink Lily, for example, is an online boutique for women’s clothing. On their referrals page called Pink Perks, they offer discounts. They allow customers to offer a friend $10 off their first purchase. If the friend buys, the referer also gets $10 off. The win-win scenario they create motivates customers to refer the Pink Lily brand to contacts.

referral marketing

2.    Promotion

You must highly publicize your referral program so that your customers and prospects can know about it and join.

Also, to maximize visibility, add links to critical areas on your platforms like website header, social media descriptions, etc.

You can promote your referral program through:

Email marketing: Send carefully crafted emails to your customers about your programs and the rewards involved.

Social media marketing: You may promote your referral programs on your social media handles. Additionally, you could add social share buttons directly from your website page for customers to spread the word.

Website: You should include a section on your home page about the referral program to pick visitors’ interest. Furthermore, create a dedicated page to your referral program such that consumers can easily find the information in one place.

3.    Track the results

It is crucial to track your referral data to know how well your program is working. Doing so enables you to determine what the customers resonate with, needs improvement, etc.

Other examples of referral marketing done well.

Hyphen Sleep

Hyphen Sleep is an eCommerce company dealing with all things sleep-related.

The company maintains an engaging and fun approach to its referrals. They consider referrers as ambassadors, which is an interesting approach.

referral marketing

Ztylus

Ztylus is a series of phone and car-related accessories. Zytlus’s referral program is similar to an affiliate program. They provide a code through which referring users can earn a 10% commission when their contacts buy. The commission increases with more referrals.

The referred customers also get 25% off their first purchase.

Zytlus’s referral program greatly appeals to influencers, who can easily promote their products, thus generating more leads.

Referral marketing in dropshipping

Like any eCommerce store, referral marketing can significantly help generate leads and increase sales for your dropshipping store.

You must implement an effective referral program using the software available.

Then, derive the right incentives to encourage your users to participate in your referral programs.

It is essential to maintain top-notch customer service and provide exceptional products to encourage people to share your brand with their contacts.

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