Marketing can be very powerful if it isn’t obvious that you are doing anything.

This strategy is more effective than any other. Referrals are a great way to acquire new customers.

Customers who are satisfied will recommend the product or service they are happy with to their friends and family. Consumers trust their friends.

A friend who has used the product and can tell you how it works for them is the best person to share their knowledge.

Nielsen conducted a specific study that found recommendations from family and friends to be the most trustworthy form of advertising.

There is one problem. Texas Tech’s research showed that 83% of consumers might be satisfied enough to recommend the product, but only 29% do.

Even if your product is great, you will miss out on potential referrals if they don’t come to you organically.

Referral marketing programs are the best option.

Referral marketing allows you to be proactive by encouraging happy customers to recommend your products or services to others.

This article will show you how to create and manage a referral program. First, let’s answer some common questions about referral marketing.

Let’s get started.

Referral Marketing – How is it different from Affiliate Marketing?

Referral marketing refers to any promotion that encourages past or current customers to refer new customers to your company.

Affiliate marketing can be compared in several ways, but your affiliates don’t have to be your customers. Affiliates promote your products or services just to make a buck. Referral marketing is natural, but it is artificial.

Although you can encourage customers to refer others, this doesn’t change the trustworthiness and reliability of the referral.

Both are effective, but it is best to choose one.

Referral marketing is a good idea for eCommerce businesses

Referral programs are a concept that you will see when you first start to look at. You’ll see brands such as Uber, Dropbox and PayPal.

However, this does not negate the profitability of e-commerce businesses that use referral marketing.

It’s the same principle. The principle is the same. Consumers trust recommendations from friends and family more than any other source.

How do you know when to opt for referral marketing?

Why not focus on referral marketing instead of paid advertising, content marketing or affiliate marketing?

Referral marketing can offer unique and amazing benefits that could make it an excellent choice for your company, depending on your goals.

When you think about setting up a referral system, it is important to look at the bigger picture.

A referral program that is successful has four main benefits:

• Trust is the foundation of recommendations: Referral programs allow customers to recommend your company. Plus, happy customers are 5x as likely to recommend your company. Most often, the referrals are made by customers whom the prospect trusts and knows.

• Low Initial and Long-term costs: Building or purchasing a referral system can be very cost-effective. Once it’s designed, the only cost is the incentive you give your advocates (customers who recommend your products or services).

• Increased Attention on Existing Customers: Referral marketing allows you to spend more money to make customers happy, which in turn leads to more referrals. Other marketing strategies require that you invest in advertising or pay affiliates.

• Your Customers Are Often Connected to Prospects Already: It can be difficult to identify your target market and present your products or services there. Most audiences are connected to one another, so your customers can have direct access to the prospects you want.

How can I overcome the disadvantages of referral marketing programs?

Referral marketing is not a perfect marketing strategy. Referral programs can have some disadvantages.

There are always solutions.

Let’s take a look at some perceived disadvantages and learn how to overcome them.

Your brand promotion is out of your control

Referral programs allow customers to share their experiences with your brand through their own words. You won’t have the ability to craft a specific message or story. This can be great but it can also misrepresent your business.

How to overcome the limitation

You have many options to control the way your brand is promoted among your supporters.

First, choose customers who are interested in sharing your business with others.

To do this, you can use an NPS survey to segment customers so that you can promote your business to those who are most interested and those who are not.

You can rest assured that your advocate will recommend your product or service.

You can create written recommendations messages for advocates that they will simply need to enter their details. This allows you to have complete control over the content they use to promote your company to their friends and family.

They simply need to fill in the name and email address of the prospect they wish to send the message.

The size of your customer base will limit the amount you can charge.

You might believe you don’t have enough customers who can refer new customers to your low-volume business.

How to overcome the limitation

Many small businesses have successfully implemented successful referral programmes.

This is possible by building your referral network quickly. You will need to convert your advocates into referrers as soon as they have tested your product.

Start by giving both the advocate as well as the referral an incentive. After the referral conversion, make an advocacy request. Have them bring in more customers.

In no time, your small customer base will have grown into an army of advocates.

You can also reach out to cold audiences to get more referrals. You’ll need to find a way for them to be incentivised while also building trust that your product/service is worth sharing. You can use company directories or company email lists if you have difficulty finding cold contacts. To make the greatest impact, reach out to these contacts using the right pitch. Hunter has a list of cold email templates that you can use as inspiration.

It can be difficult to track.

Referral marketing is different from paid advertising campaigns. You can easily see and analyze the results of your campaign without the right approach. If you don’t understand what you are doing, referral marketing can make it difficult to see the big picture. It can be difficult to determine the motivation of the referral and to optimize the program accordingly.

How to overcome the limitation

Make sure you choose a platform or software that allows you to track the referrals you create. You can track how each referral arrived at your brand, and then optimize your program to match such journeys.

How to design and run a successful referral program

You’ve decided to start a referral program. Now what?

There are four main steps you need to take. These are a combination of planning and taking action.

Although we’ve provided as much information as possible, most details are dependent upon the software you choose and the eCommerce website.

The first step: Choose your incentive

You will need an incentive in almost all cases. You can offer any type of reward to an advocate who refers new customers.

Even if your customer is satisfied enough to recommend you, an incentive can motivate them to look for others who will love your products.

Nevertheless, eCommerce referral program incentives typically fall under one of these categories:

• Get samples of our products
• Credit at the store
• Get Discount

These types of incentives are great for your business because they guarantee that the cost returns.

You can give a friend $20 in store credit, and they will have to spend it on your eCommerce shop.

Referral Program for Stitch Fix

This is the main ongoing cost of running a referral programme. You need to be cautious about the incentive that you choose.

Important to remember that extrinsic rewards are not always the best. Your customers will refer your product or service to prospects primarily for the reward.

Customers will often recommend your products or services to others because they want to support your brand and share great experiences. This is intrinsic motivation.

Research has shown that intrinsic motivation is more powerful than extrinsic in almost all situations.

You must decide on distribution, in addition to choosing an affordable incentive.

Are you willing to offer a reward for the new customer or give everything to your supporters?

Second Step: When do you introduce your referral program?

Your success rate will drop if you ask new customers to recommend your product before they have used it.

Wait until the customer has received their order and had enough time to test it.

After this time, you have three main platforms to promote your referral program.

• Social media
• Email
• User accounts for your website

Email marketing software is still the best way to communicate with customers.

However, this doesn’t mean your social media accounts don’t require your attention in terms of distributing the content. However, your customers may not be on social media. They might not log in to their accounts on your platform unless they need to buy something.

Even if they do, it is possible that they will not see the tiny referral menu option.

Referral email offers a different opportunity. You can be sure that your customers will learn that you have a referral program. If they are interested, you can link them to a page that provides clear details.

This step will allow you to choose how direct you want your message to be. Direct communication is best if you send your customers one or more emails about your referral program.

It’s smart to highlight your great referral program results.

You can also mention it in your welcome emails. This approach has the amazing advantage of a high open rate, which averages 50% for welcome emails.

It is possible that you might not be able to ask for a referral. It can be a good introduction, if you follow-up with the customer and discuss your referral program later.

Finally, if your referral program is a small part of your marketing strategy you can be passive and include a short mention under every email you send.

It is a good idea to test each option and then choose the one that you like the most.

Third Step: Track your results

No matter what incentive you offer, it is important to keep track of your results. This is important for both your customers as well as you. Referral tracking can be done via the following: 

• Unique sharing URLs
• Coupon codes

If you want to offer a discount to a new customer, coupon codes can be a great idea.

The most common option, however, is to generate a unique sharing URL.

For each user, you must add a long string (which is usually a username hash). Your eCommerce website stores a cookie that contains the information of shoppers. This cookie is stored and recorded at the point of sale.

This will allow you to identify the advocate who was referred to you. If this seems too complex, don’t worry. We will cover a tool that will simplify the process in the next section.

Referral Marketing Tool to Facilitate the Process

Let’s have a look at the city from a bird’s-eye view for a moment.

These are the steps to create and manage a successful referral program.

• Unique referral URLs can be generated.
• An administration system for users.
• Ability to assign referrals to the right advocates.
• One method to inform customers about your referral programme.
• A landing page that provides more information about your program.

If you build it from scratch, this will take you a lot of time. Your website will make the process much easier.

You will most likely need assistance in letting customers know all about your program and creating referral URLs.

There are many tools available that can help you accomplish this. Here is a quick overview of one of these most popular tools. You can integrate it into any e-commerce website, regardless of which CMS you use.

ReferralCandy is a hands-off method of referral marketing. It is marketed as a single solution that provides everything you need to run a successful referral campaign.

It can be integrated seamlessly into your store instantly, regardless of which platform you use: Shopify, Shopify Plus or Magneto, WooCommerce and BigCommerce.

You can also use the app to boost your email marketing performance by introducing a refer-on to all of your newsletters.

ReferralCandy provides easy-to-understand analytics and dashboards that provide insight into the traffic sources of your users. You’ll also be able to see which referrers are leading.

It also allows you to connect third party apps for tracking such as your Google analytics ID and Google ads ID.

You can automate this process by using the app. Choose when to invite customers to join the program, when rewards should be sent, what reward they should receive, and the triggers that will release the reward.

A landing page is also available as part of the referral solution. This page allows customers to view more information about your program.

A signup form can be embedded to allow customers to join your referral program while shopping online.

Because of the flexibility of the app, all the features mentioned above are easily customizable. Branding is not lost.

Conclusion

This is it! It is not easy to design and run a successful referral program. However, with the right approach and understanding it can be seamless.

You should follow these steps. Choose an incentive that is sustainable over the long-term. This will not shift the customer’s focus from helping a business they love to getting a reward.

It is important to make referral requests at the right time, and track the progress of your program.

As we have seen, you don’t need to start this whole process over again. Referral tools can help you streamline the process by combining all steps into one app.