Importance of Referral Marketing for Ecommerce

How often do you get a text like “Hey, how is this dress, should I buy it?” from your friend. Or how often do you suggest a good deal to your friends or family?
Pretty often, correct?
So, referral marketing is not new, and we do it all the time and every time. Instead, a significant amount of our Ecommerce purchases are through referral marketing.
Today, most Ecommerce businesses are utilizing referral marketing in the mainstream. And they have all the reasons to do so:

  • 84% of shoppers trust recommendations from people they know over an advertisement.
  • 77% of shoppers are most likely to purchase a new product when a friend recommends it.
  • A referral marketing campaign can earn 3x to 5x more sales than other campaigns.

PayPal, Airbnb, Lyft are some of the early adopters of referral marketing strategy. However, still, only 30% of companies have an established referral marketing program.
So, here is an insightful guide on everything you need to know about referral marketing. Read on to learn how you can employ referral marketing for your Ecommerce business.
Moving forward, we will learn:

  • What is Referral Marketing?
  • Importance of Referral Marketing for Ecommerce
  • Tips to Get Referrals for Ecommerce
  • Best Referral Marketing Software to Boost Ecommerce Sales
  • Some Successful Ecommerce Referral Programs
  • Referral Program for Ecommerce FAQs

What is Referral Marketing?

Referral marketing is a tactic to prompt your past customers to recommend your offerings.
It can be spontaneous through word of mouth or a message. But, to cash upon the benefits of this tactic, Ecommerce marketers use planned referral programs.
These include several types of referral strategies to encourage customers to share maximum referrals.
Referral strategy works on the principle that your customers are your actual social proof. And you can convert them into your brand advocates. Referrals help you earn great reach, qualified traffic, and a high conversion rate.

Importance of Referral Marketing for Ecommerce

1. Pull Qualified Leads

Referral marketing depends on your existing customers. And as your customers grow, more of them will opt for the referral program. Thus, the strategy is capable of producing independently.
Moreover, the referrers generally recommend to someone whom they know well. And they are easily capable of convincing them to make a purchase.
It works as the referral benefit is shared only once the referred consumer converts. This precise recommendation targeting makes referral marketing highly productive.
Usually, referral benefits are two-way, where the referred customer also gets some benefit. And so, shoppers like to reach out to their friends to ask if they have any referral codes. This practice further improves the conversion rate.
Leads from referral marketing offer 30% more conversions than leads from other methods. And the referred customers offer a 16% higher lifetime value.

2. Get High Conversion Rate and High Reach

Ecommerce referral programs blend the benefits like trust and incentives to increase the conversion.
A landing page’s conversion rate that attracts leads via search or paid ads is 2-3%. In contrast, the landing page that attracts leads through referrals offers a conversion rate of up to 14%.
The referred leads usually have a higher buying intent the minute they land on the page. And so, the conversions from these leads are quicker than other methods. Moreover, the urge to earn incentives further accelerates the conversion process.
In some cases, celebrities or influencers happen to be your customers. And if they recommend your brand or offerings using their referral code, you get a stellar reach. 49% of consumers make their purchase decisions based on recommendations from influencers.

3. Gain Trust - ‘Trust’ is the Winning Factor

With the increased use of clickbait ads and frequent offers, consumers mistrust ads. And so, the conversion rate of paid advertisements is lower than referral campaigns.
A consumer is four times more likely to make a purchase based on a recommendation.
Consumers trust recommendations from friends and family the most. Now, when you recommend a product to a friend, you have most probably tried it. And your experience with that product is good. Everyone wishes to gain an appreciation for their recommendations. And no one would intentionally wish to recommend a wrong product to their friends.
Referral marketing is a winning strategy as it is more trustworthy than other strategies. It works the best for Ecommerce as you can’t check the physical product before the purchase.

4. Earn Loyal Customers

The leads you gain through referrals do not just offer higher conversions but are loyal. According to statistics, the referred customers on an average:

  • Have a 16% higher lifetime value; and
  • They display a 37% higher retention rate.

With that said, you draw a higher conversion value from a referred customer than other traffic.
Moreover, a customer who comes through a referral program also refers to new leads. As per statistics, the referred customers are four times more likely to refer new leads. It means a growth in new sales.
Now, when you attract traffic via word-of-mouth campaigns, conversions are even higher. As per a survey, customers gained through word-of-mouth campaigns:

  • Spend 2 times more than other customers; and
  • They refer 2 times more leads to your website themselves.

Thus, gaining customers from good referral programs can boost your sales by many folds.

5. Thrive Despite the Competition

Ecommerce is an ever-growing and competitive industry. You cannot depend on SEO alone to withstand this huge competition. Moreover, paid Ecommerce ads do not offer high conversion rates unless backed by suitable social proof.
Meanwhile, referral marketing works phenomenally for Ecommerce businesses. It grows the reach of your marketing campaigns and is delivers high conversions. So, it is beneficial to include referral marketing with your other campaigns.
Moreover, referral marketing helps grow the overall traffic and actions on your website. This growth in traffic and increased user metrics also have an impact on your rankings.

Related : Important eCommerce Metrics You Should Track to Ensure Success

Tips to Get Referrals for Ecommerce

1. Referral Incentives as Coupons or Discounts

One of the simplest yet the most effective ways of referral marketing is giving discounts. Businesses generally give two-way discounts for the referrer as well as the referred lead.
These discounts can be in the form of credit points for the first purchase to the new lead. And the referrer also receives the incentive once the referee converts into business.
Therefore, the referrer shares recommendations with people who are likely to convert. With this, he can convince the referred lead to purchase to get the incentives.
Each referrer could share his unique referral code or coupon code with his contacts. When the user signs up or makes a purchase, both the referrer and the customer get incentives.
The two-way incentives can be in various forms:

  • It can be credit points that are redeemed as discounts while buying any product
  • It can be direct discount deals (like 10% or 20% on the first purchase)
  • It can be cashback deals
  • It can be free plans for a limited period or a free delivery offer

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2. Contest and Reward Programs for Great Referral Reach

Another referral marketing program that many businesses use is contest-based referral programs. These programs help you get a great reach and win a vast number of referrals. When a brand promotes contests, most of the existing customers like to take part. And if a contest has a referral incentive attached to it, the participation is even higher. You can create unique and engaging contests like fun quizzes and digital treasure hunts, etc. Businesses also utilize social media platforms to get the right reach for their contests. You can make your contest a hit by offering incentives like:

  • Added points for each referral a participant adds.
  • Bonus entry or extra lifelines to participants for every new referral
  • Added points advantage to participants who join through referral links

You can keep exclusive prizes that attract maximum participation. Now, the final goal is to convert these new participants into customers, for which you can:

  • Offer exclusive discount offers to the winners
  • Offer good discounts to all the participants
  • Allow participants to redeem their content points as discounts on product purchases

3. Encourage your Loyal Customers to Refer your Business and Products

Your loyal customers are already your unpaid brand advocates. They trust your brand and would not mind recommending it spontaneously to their friends. Most of the loyal customers have a positive sentiment attached to your brand. And they might have a natural habit of recommending your products and good deals.
It would be best to convert the loyal customers into enthusiastic brand ambassadors. You can analyze and screen your loyal customers and plan a referral program around them.
The first step is to ask them for favors regarding sharing referrals simply. And most of them will be happy to do it. You can further accelerate and make the process more efficient by:

  • Offering these loyal customers good incentives for the referrals
  • Making them feel appreciated by addressing them as your official ambassadors
  • Planning a referral contest around your loyal customers
  • Creating a referral points journey with various milestones and stages

The above tactics will help you get the right boost for your referral program.

4. Promote Word-of-Mouth Referrals through Events

Word-of-mouth is undoubtedly an effective referral marketing tactic. You can grow its impact on your Ecommerce business by organizing several events. 50% of US consumers would choose word-of-mouth if they could rely on a single source of information.
You can organize digital conferences, summits, or discussions on popular topics. These topics must attract an audience who could turn into your brand advocates. Such events create brand awareness and create a buzz around your brand.
Attendees start talking about your brand and its offerings. Thus, increasing the word-of-mouth referral traffic for your Ecommerce business.
Several Ecommerce brands try to bring influencers into play for word-of-mouth marketing. However, these influencers must be your existing customers. It will help you develop a high trust value for your referral campaigns.

5. Offer Instant Cashback Rewards

There is no greater motivation than instant cashback or cash points for referrals. 77% of US consumers would prefer money benefits for referrals over other perks.
PayPal adopted this tactic early in the 2000s to attract initial users to its platform. The company gave cash benefits to its existing customers for each referral. And it was able to draw over 5 million users within a year. Today, it is one of the most productive referral tactics, and many brands employ it.
Instant cash benefits and cash rewards are hard to refuse, and businesses get good reach. Some businesses make these cash rewards highly alluring in the initial growth stage. They may make rewards two-way where the referred user also receives a cashback for a purchase.
Paytm, Dropbox, and many other brands are using this tactic and are growing confidently.

6. Entice with Personalized Experiences

79% of consumers would choose to accept a personalized offer. And so, you need to plan your referral campaigns around your customers’ interests. There are several areas where you can include personalization for your referral strategy.
It is advisable to personalize the message of the referral offer. Moreover, you can personalize the rewards or incentives based on the customers’ choice. One can do it by using tools to analyze the user’s cart and shopping behavior. This data then informs the personalized reward offer that the customer will appreciate.
Except for discount offers, you can also create great digital experiences for your customers. These personalized incentives will boost their loyalty and will increase the referral count.
It would be best to personalize the invitation message for your customers as well. It can include their name and maybe their profile pic, and this will help them convince better. There is a long array of personalization tactics that you can experiment with for your business.

7. Offer Brand-specific or Unique Gifts

Some brands like to go a step ahead of the regular referral programs by offering unique rewards. These unique referral rewards can include:

  • Brand-specific gift hampers and merchandise
  • Free access to various brand-specific events
  • Early access to a sale campaign than other users
  • Access to limited edition products on the platform
  • A good discount on official brand merchandise
  • Early access to new product launches
  • Limited free subscription to a partner platform

Many loyal customers would find these brand-specific perks highly lucrative. They would feel motivated enough to submit various high-quality referrals to the brand. A planned brand-specific reward program delivers results comparable to cash rewards.
Essential Tips to Increase the Efficiency of your Referral Programs

  • Make your referral program noticeable with the use of interactive elements and popups.
  • Utilize social platforms and email marketing to promote your referral program.
  • Allow customers to share referral invitation links on social platforms and messages.
  • Keep your referral offer clear and personalized without any hidden terms & conditions.
  • Use analytics and customer data to prepare the right referral program for your customers.
  • Do not hit & try your referral offers, and instead research well before execution.
  • Clearly state the steps to use the referral program and redeem its benefits.
  • Pitch your referral offers at the right time. You can pitch a referral discount for a product in the cart just before a purchase. It will encourage the customer to refer a friend and get a discount on the cart product.
  • Make sure you track the returns from your referral campaigns and optimize them regularly.

Best Referral Marketing Software to Boost Ecommerce Sales

1. Referral Factory

Referral Factor is an intuitive and comprehensive referral software. It enables marketers to create a fully functional referral program with great ease.
Key Features:

  • Referral Factory offers thousands of templates from which the marketers can choose. They can customize the template and implement their referral offer.
  • Referral Factory allows a step-by-step setup just through a series of clicks.
  • One can create rewards like virtual discount codes, reward points, and cashback.
  • The dashboard allows robust tracking and reporting of the campaign performance.
  • The users can export the campaign data in CSV format from the dashboard.
  • The marketers can also set triggers to notify customers of successful referrals.
  • One can easily make business-specific adjustments to this Ecommerce referral software.
  • The enterprise-level plan of Referral Factory offers outstanding excellence.

Best Fit For : It works efficiently for mid-size and enterprise-level Ecommerce businesses.
Pricing : Referral Factory offers a 15-day free trial, and the paid package starts at $75/month.

2. InviteReferrals

InviteReferrals is an intuitively designed Ecommerce referral marketing software. It allows a holistic referral strategy-building approach and also allows affiliate marketing. The tool has a limitation in that it only offers a web version and has limited design templates.
Key Features :

  • InviteReferrals offers an easy and guided set up process with a user-friendly interface
  • It enables users to set up multiple referral campaigns
  • You can take a look at the detailed analytics of the campaign
  • One can manage the tracking tools via the dashboard
  • InviteReferrals allows users to create referral promotions for social media
  • The users can also create quizzes and referral contests with ease

Best Fit For : One can use it for small to mid-size Ecommerce businesses.
Pricing : You can try its 14-day free trial, and then the basic plan starts from $79 per year.

3. Mention Me

Mention Me functions with a unique process and pricing model. It is available only for companies that meet its minimum sales volume requirements. Pricing : Mention Me charges you according to the purchasers you earn from your referral campaign. On average, they charge you 10-20% of the first purchase order value from every referred purchaser.
They calculate the exact percentage based on your sales volume and average order value. Except for it, there is a one-time integration and launch fee for the referral software.
Key Features :

  • Mention Me assigns a referral marketing manager to your campaign. He is responsible for planning, strategizing, and launching your referral campaigns.
  • You can view several campaigns, KPIs, and detailed reports. However, when you suggest edits, the manager takes the final call.
  • The design templates, customer segments, and referral offer messaging are customizable. But again, every action goes through the dedicated referral campaign manager.
  • Referrers can share their names as referral codes along with the referral links.
  • You have lesser management responsibilities, and this can save your time and resource.
  • As it has a revenue-based payment model, you can expect good campaign performance. However, you have to focus on converting referred customers into lifetime customers.

Best Fit For : Mention Me suits mid-size Ecommerce businesses that have limited resources. It assigns dedicated referral marketing managers for your business itself.

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4. Referral Candy

Referral Candy is a simple, functional, and efficient Ecommerce referral marketing tool. It is an intuitive tool for beginners who have less to no prior experience with such tools.
Key Features :

  • It easily integrates with popular Ecommerce platforms like Shopify and Amazon.
  • One can set up multiple referral campaigns using a series of clicks and edits.
  • It offers pre-made editable offer templates and email templates that you can use directly.
  • Referral Candy’s dashboard displays all the important campaign data. It includes the referrals earned, KPIs, best campaigns, etc.
  • One can manage most of the attributes via the dashboard. One can check the reward offers, contacts, audience targeting, etc.

Best Fit For : Small and mid-size Ecommerce businesses
Pricing : Referral Candy is cost-effective than its competitors. Its starter plan costs $49 per month.

5. Talkable

Talkable is an enterprise-level referral software that works best for big Ecommerce brands.
Key Features :

  • A dedicated team from Talkable helps you set up and manage the software.
  • You can handle multiple campaigns from Talkable and can also run A/B tests.
  • The tool offers detailed analysis and customer segmentation features.
  • The admin panel allows you to track, customize, and manage multiple referral campaigns.
  • The Talkable team acts as a referral marketing partner. They help you analyze the existing customer data and plan the right campaign strategy.
  • The software features advanced fraud prevention to detect any fake referrals.
  • It allows users to share referral links for specific product categories or products directly.
  • Talkable readily integrates with all major Ecommerce platforms (Shopify) and custom sites.

Best Fit For : Talkable is expensive software. It suits large Ecommerce brands with $4 million+ OAR (Online Annual Revenue).
Pricing : It offers Self-serve, Managed, and Enterprise plan options that have custom pricing each.

6. Ambassador

Ambassador is easy to navigate and feature-rich referral marketing tool for Ecommerce. The single tool offers referral marketing, affiliate marketing, and loyalty management options. Probably one of the best combinations! However, you need development team support to set up this software.
Key Features :

  • The tool allows the creation and management of multi-channel campaigns
  • One can categorize the target audience for campaigns via audience segmentation feature
  • There are various in-built incentive options
  • Users can customize the share messages with ease
  • The tool has multi-currency support

Best Fit For : Mid-size Ecommerce firms that wish to use both referral and affiliate marketing programs.
Pricing : The Starter plan costs $9,600, i.e., billed annually. One may also choose the Enterprise package for monthly audit and optimization support.

7. Amplifinity

Amplifinity is a comprehensive and insightful referral partner management software. The software allows users to track the entire referral acquisition and conversion journey.
Key Features :

  • The referral marketing software assigns a dedicated success manager for your account. He helps you navigate through the software and manage it.
  • One can run multiple campaigns simultaneously.
  • The software allows access to multiple authorized users.
  • The software allows Salesforce integration, which makes campaign tracking automated. Moreover, it automates the tracking of referral acquisition and follow-up processes.
  • Amplifinity sports accurate reporting and analytics
  • The software allows an advanced level of customization according to specific requirements.
  • It features several incentive options. And one can customize incentives for each campaign.

Best Fit For : Mid-size or large-size Ecommerce firms that require multiple-user access
Pricing : They offer a custom quotation after a free demo.

Some Successful Ecommerce Referral Programs

1. Ulta Turns its Loyal Customers into Brand Advocates

Ulta is a popular beauty Ecommerce brand. The company was able to execute a successful referral marketing campaign in 2015.
Ulta analyzed its loyal customers who had higher average order value and purchased frequently. And the company targeted its loyal customer base as their Ultamate Rewards members. They, as referrers, receive a $10 discount on a $30 order, and so does the referee.
This referral marketing program was a hit in 2015. The brand was able to earn referrals from over 100,000 Ultamate Rewards members. And 27,000 of the new referred leads became loyal customers in some time. These new loyal customers also showcased 50% higher AOV (average order value).

2. Hawkers Turn its Customers into Influencers

Hawkers Co. is a leading Ecommerce brand for sunglasses. The brand employed its customers who had good social media reach as its influencers. It gave away sunglasses to these users who featured the brand’s sunglasses in their posts.
The brand also allowed these users to share their referral codes with their followers. The campaign was a hit on Facebook and Instagram. And the company earned 90% of its sales through social media. The brand today wins over USD 70 million in annual sales.

3. Hanna Andersson Leads with its Exigent Referral Offers

Hanna Andersson is a children’s clothing Ecommerce brand. The company keeps its referral marketing strategy simple, intuitive, and yet attractive. The brand placed referral offers as direct CTAs on various pages of its site. The users can simply get the referral link and claim rewards with much ease.
The brand gave a 20% discount to the referrer and referee on the referee’s first purchase. Hanna Anderson just took two months to achieve 25% of their annual acquisition target.

Referral Program for Ecommerce FAQs

1. How Can I Set up a Winning Referral Program for My Ecommerce Site?

There are several ways in which you can set up a referral program; these include:

  • Offer 2-way incentives (to both the referrer and the referee)
  • Add direct referral offer CTAs to high-traffic pages on your site and even try popups
  • Analyze your local customers and give them rewards for successful referrals
  • Offer direct cashback and cash rewards on first-purchases to referrers and referee
  • Make the referral process seamless with easy referral claim
  • Utilize the power of social media for your referral program
  • Use Ecommerce referral marketing tools to set up referral programs easily

Which Is the Best Referral Marketing Software for My Ecommerce Business?

Some preferred Ecommerce referral marketing software includes:

  • Referral Factory : Comprehensive, thousands of templates, easy rewards set up, quick data export
  • Talkable : Fit for large Ecommerce business, dedicated management team, robust reporting
  • Mention Me : Efficient and quick set up, editable attributes, easy tracking via the dashboard
  • Referral Candy : Revenue-based payment model, fits for mid-size firms, dedicated manager

Are There Some Stats Proving Referral Marketing Works for Ecommerce?

Yes, some statistics include:

  • 84% of consumers like to go with a recommendation from a friend over a paid ad.
  • A good referral campaign can grow sales by 3 to 5 times
  • The conversion rate on referral landing pages is 14% compared to 2-3% on other pages.

Summing Up :

Referral marketing is inevitably one of the most effective Ecommerce marketing tactics. If you are still not leveraging it, use the tips discussed above to implement it today. Further, if you wish to consult more on referral marketing for Ecommerce, connect with us.

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