Humans have a natural tendency to share their personal experiences with those in their close social circles. Whether it is the frustration of delayed delivery or the delight of discovering a new product they like, people pass on their experiences to friends and family in casual conversations.
What might seem like a simple chat can hold immense significance for E-commerce businesses like yours. Every time a customer recommends your online store, they are essentially providing you with valuable, trusted marketing for free. And this is the whole idea of Referral Marketing.
In this post, we will understand the ins and outs of Referral Marketing, including its definition, benefits, examples, and some best practises you can follow if you plan to adopt it for your online store.
What Is Referral Marketing, And How Does It Work?
Referral Marketing is a marketing strategy that encourages happy customers to advocate your brand to others in exchange for incentives. This word-of-mouth marketing tactic is more commonly known as a refer-a-friend program. Referral Marketing has been the go-to marketing method for all those E-commerce businesses looking to grow their sales without spending thousands of rupees on marketing. Overall, it’s a win-win situation for all parties involved.
The working of Referral Marketing is pretty straightforward.
You first create a Referral Program for your business, wherein you decide the incentive (type and amount) to give for every successful referral. Types of incentives could be coupons, discounts, gift cards, or cash rewards. The referrer is rewarded only if the referred person completes an order with the store. You also need to provide the existing customers with a unique link or a code that they can share with their friends and family. This step is essential to link the referrer, referred, and the incentive and complete a successful referral.
Types Of Referral Programs
There are several types of Referral Programs:
Standard Referral Program: In this, your loyal customers are encouraged to refer others to your E-commerce store. When a referred friend makes a purchase, the referrer receives an incentive. This is the most common type of referral program.
Double-Sided Referral Programs: In this, you reward both the referrer and the referred customer. This type of referral program is more capital-intensive but encourages customers to refer others more actively.
Tiered Referral Programs: In this, your customers earn increasing rewards as they refer more and more people. For example, a customer might receive a 5% discount for their first referral, 10% for the second, and so on. This can gamify the referral process and motivate customers to continue referring over time.
Points-Based Referral Programs: In this, instead of offering immediate incentives to customers, you let them earn points for each successful referral. These points can then be redeemed for products or discounts. This type of referral program can create a sense of achievement and encourage ongoing referrals.
How Is Referral Marketing Beneficial For E-commerce businesses?
Here are some key benefits you will enjoy by adopting referral marketing for your E-commerce business:
Build Trust Towards The Brand
When an existing customer refers your store or your product to someone else, it carries a strong endorsement. In other words, since these recommendations are coming from someone they know, it automatically builds trust in the minds of potential customers. Ultimately, trust is a key component of the customer journey in an industry like E-commerce, where customers cannot touch or feel the product before they buy.
Improved Sales With Targeted Marketing
When satisfied customers refer your products to their contacts, they are essentially matching your products with individuals who are likely to have similar needs or interests. This targeted approach increases the likelihood of converting leads into sales. Think of Referral Marketing as having your own brand advocates working on your behalf to identify and attract potential customers who are genuinely interested in your offerings.
Recommended Reads: How to measure your online sales success
Increase Reach And Brand Awareness
Referral Marketing is all about gaining access to new audiences who may not have otherwise heard about your E-commerce store. As these referrals continue from one known person to another, it creates a cascading effect where your brand’s presence multiplies organically, creating a broader customer base. Moreover, since referrals often come from trusted sources, your potential customers are more likely to pay attention to your brand, leading to heightened awareness and recognition in the market.
Cost-Effective And Low Risk
Referral Marketing is one of the most cost-effective marketing strategies currently available. Traditional advertising and marketing can be expensive and uncertain when it comes to ROI. However, Referral Marketing revolves around the concept of rewarding customers only when their referrals result in actual sales. This means it is a “pay-for-performance” model where you spend marketing rupees only when you see actual results.
Easy To Track & Manage
There are several Referral Marketing tools available today that can accurately track the performance of your Referral Program. For instance, you will know who referred whom, which referrals converted into sales, and what incentives were delivered. Such visibility allows you to constantly refine your referral program for the best results. Additionally, the simplicity of managing Referral Programs means you can focus your time on other aspects of your store while your Referral Program continues to generate leads automatically.
E-commerce Referral Program Examples
Here are some examples of brands that have crafted some of the most successful referral programs today:
Source: Nykaa website
Nykaa, a leading beauty and wellness E-commerce business, has a highly successful Referral Program. With a dedicated landing page that talks about the benefits of referring a friend along with the incentives, Nykaa has got all their basics right.
Nykaa follows a double-sided Referral Program where both the referrer and the referred person get incentives. Both parties get cashback on their wallets, ensuring that they make their next purchase in Nykaa. The referral process is very easy, too. All you need to do is share the link to your favourite product with friends & family who have to shop using the same link.
Boat, a popular electronics and lifestyle brand, has implemented a Referral Program that benefits both its existing customers and their friends. When an existing customer refers a friend to Boat, both the referrer and the referred friend receive a discount of 100 rupees that can be redeemed on their next purchase. The discount is usually shared with the referrer via email 15 days after the referee completes their first purchase. This Referral Program reflects Boat’s commitment to providing value to its customers and strengthening its community of loyal customers.
Lenskart, the eyewear brand has one of the most user-friendly Referral Programs. Users can seamlessly refer their friends by either syncing their contacts through the Android or iOS app or by sharing a unique referral code. When contacts are synced, there’s no need for the friend to input a referral code during sign-up; the system automatically recognizes the connection.
After a successful purchase, both parties stand to gain ₹50 LK CASH+, which can be utilized on their eyewear purchases. It is a great example of a double-sided Referral Program.
Things You Need To Do Before You Start Your Referral Marketing Program
Here are some prerequisites you must fulfill before kickstarting your Referral Marketing Program. Following them will ensure that your Referral Marketing efforts bear fruits in the long run –
Focus On Building Your Brand
Let’s face it – your brand is the heart and soul of your business. It’s the impression that your customers will carry forward when interacting with your brand. To lay a strong foundation for Referral Marketing, it is important to strengthen your brand identity. After all, a well-defined brand that customers remember easily and believe in is more likely to be referred to, than the one they can’t recall. Also, a strong brand will generate a sense of pride and affiliation among your customers. When they refer your brand to their friends and relatives, they are indirectly quoting, “I am proud to be associated with this brand.”
Here are some tips to build your brand successfully:
- Ensure consistency in your branding. Right from your logo to your website colours, everything should create a cohesive and memorable image in the customers’ minds.
- Develop a distinctive brand voice that aligns with your brand’s personality, resonates with your audience, and is memorable for a long time.
- Share your brand’s story, including its origins, challenges, and successes, on your website. A compelling narrative can create an emotional connection with customers.
- Create a content marketing strategy that provides a lot of value to your audience. Constantly share informative, entertaining, or inspiring content that your customers will consume and have a positive experience with.
Make Sure Your Customers Like Your Product
No matter how big your incentive is, your customers are not going to recommend you if they don’t like your product. You must provide your customers with high-quality products that they love and use. This is an important step before asking for any referrals. If they like your product after using it, they will recommend your brand to others because they will believe that you will offer quality products to every customer.
Now, how do you know whether your customers like your products or not? Simple! Go online and find out if your brand is mentioned in social media posts or any review portals. You can even check customer reviews on your own website. If the reviews are largely positive, you can go ahead and ask for referrals from your customers.
Provide Exceptional Customer Service
Along with good branding and great products, you must also offer exceptional customer service. For instance, providing 24/7 live chat support for instant assistance, hassle-free return and refund process, safe and timely delivery, faster or free shipping, etc.
This is important because when issues about your product’s quality arise, excellent customer service can counter the negative situation. Customers who experience quick and effective resolution for their problems or get faster than usual services, often become more loyal and enthusiastic referrers.
By providing exceptional customer service, you are essentially creating positive experiences that customers want others to enjoy. Outstanding customer service also builds trust and reliability in your brand, both of which are key ingredients for referrals.
By successfully completing these steps, you will be able to build a loyal customer base that will be more than happy to refer your brand to their friends and family.
6 Effective Referral Marketing Strategies For E-commerce Businesses
When done right, Referral Marketing can harness the power of word-of-mouth marketing to acquire new customers and boost sales for your E-commerce store. Let us explore six effective Referral Marketing strategies that can help you achieve this:
Choose The Right Incentive For Referral Marketing
Your entire Referral Marketing Program revolves around incentives. Incentives give your customers a compelling reason to refer your products to others. So you need to carefully pick an incentive that is valuable enough to motivate your customers to take action. Here are some different types of incentives you can adopt for your Referral Marketing program:
- Discounts and coupons: It offers the referrers a discount on their next order. It can be a percentage off the total purchase or a fixed amount of discount. Besides incentivizing customers to refer their friends, this incentive can drive repeat purchases from your existing customers. This type of incentive is suitable for all types of E-commerce businesses. Looking for inspiration? Checkout the best discount marketing examples from E-commerce businesses.
- Points: These can be awarded for referrals, which can then be redeemed for discount coupons, gifts, or exclusive perks. Customers love the idea of accumulating points and getting rewarded for their loyalty. This is an ideal incentive for those stores where repeat business is common. For example, grocery.
- Exclusive access: This type of incentive gives your customers a unique opportunity to be among the first to experience a new product after a successful referral. This incentive taps into the desire for novelty and exclusivity and is effective for businesses selling tech gadgets or entertainment products.
- Freebies and Product Samples: In this type of incentive, you offer customers free products or samples in return for referring friends. This is quite appealing to customers because they get to experience your products without cost. This is ideal for stores selling cosmetics and food, where product quality and taste matter more than anything else.
- Cash: It can either be a fixed amount or a percentage of the referee’s order value. The best thing about cash incentives is that even a small value can motivate people. In other words, even ₹50 or ₹100 will motivate people to take action. This is ideal if your product has a long buying cycle, such as furniture, appliances, or luxury items.
Do Research To Understand How Other Brands Are Doing Referral Marketing
Before launching your Referral Program, conduct thorough research and understand how your competitors are implementing Referral Marketing. Study their strategies, their success stories, and learn from their mistakes. This will offer valuable insights and help you fine-tune your own referral marketing program.
Visit the websites and social media profiles of these brands to gather information on their Referral Programs. Learn what worked well in terms of incentives, timing, and targeting.
You can learn about their promotional strategies by keeping an eye on their email marketing campaigns, social media posts, and other marketing efforts related to their Referral Program.
Competitor research can help you assess whether your program is competitive in the industry and make the necessary adjustments to stay competitive.
Ask For Referrals At The Time Of Maximum Conversion
When it comes to Referral Marketing, timing is very important. You need to know when it is a good time to ask for referrals. Your goal must be to pick a timeframe when the chances of conversion are high.
Humans like to feel appreciated. So when your customers feel appreciated due to something nice you have done for them (could be early delivery, quick resolution, or a surprise gift), it is probably the best time to ask for referrals. Do not wait for too long, as by then; your customers will have forgotten about their positive experiences. Similarly, do not ask for referrals from customers who have had a negative experience recently.
To find happy customers, you can closely monitor your website’s review section or your social media handle.
Try Email Referral Marketing
Sending emails can be an effective strategy for Referral Marketing. Once you create a referral program, you could send out emails to all those customers who have made purchases. This strategy is particularly useful if you are new and don’t have a large customer base yet. The key is to make the referral process as easy as possible. Here is Ugaoo, the online gardening store, sending out emails to existing customers to refer their friends and families:
Here are some tips to get your email Referral Marketing right:
- Create an attention-grabbing subject line that motivates customers to open the email.
- Always address the recipient by name. Wherever possible, use dynamic content to personalise the message based on their past interactions with your brand.
- Clearly state what you want the customer to do. In this case, mention you want them to ‘Refer a Friend’. Use persuasive language to encourage action.
- Emphasise the benefits of referring friends and family. That is, talk about the rewards they get and explain how it’s a win-win situation for both the recipient and their friends.
- Include eye-catching visuals, such as images of your products, to make the email visually appealing.
Recommended Read: Abandoned cart email examples you can refer for inspiration
Promote Your Referral Program
Unless and until people know about your Referral Marketing program, they are not going to bring in new customers for your brand. You need to talk about your Referral Program in every possible channel and highlight the benefits of successful referrals.
One common place to promote your referral program is on your own website. You could talk about it on your homepage or add a link in your website menu so that customers can easily access information related to it. You could also talk about it on the order confirmation or thank you page. This will ensure that customers see it as soon as they complete a purchase.
The other option is to talk about it on social media platforms. You can also try WhatsApp marketing or SMS marketing if you have the budget.
Keep Track Of ROI On Your Referral Marketing Efforts
Thanks to modern Referral Marketing software, it’s very easy to track your Referral Program. You will instantly get access to information like how many referrals you have got in a month, what percentage of existing customers referred others, what percentage of referrals ended in sales, and so on. Many businesses also track the total revenue they make from referrals along with the AOV of an order made through a referral link versus the value of overall orders. Besides these metrics, you could also track the following:
- Customer Participation Rate: Number of customers taking part in your referral program.
- Referral Rate: Number of referrals made by each customer
- Website Referral Traffic: Number of people who visited your website after receiving a referral link.
- Conversion: Number of referred people who completed a purchase on your website.
Conclusion: Make Referral Easy With ANS Commerce
Referral Marketing is one of the most effective ways to boost revenue growth and drive customer acquisition in an E-commerce business. Following the tips and strategies highlighted in this post can ensure that your Referral Program becomes successful and helps in fulfilling your business goals.
If you are looking for assistance to create and manage your referral program, you can partner with ANS Commerce. With ANS Commerce by your side, creating and managing your Referral Program becomes a breeze, ensuring that your customers can effortlessly refer your brand to their friends and family.
Besides referral marketing, ANS Commerce can handle other aspects of your E-commerce business, too, such as performance marketing, marketplace management, warehouse, and fulfillment, so that you can focus on more strategic components of your business. To know more about how we can help you, contact us now.