We live in a connected world. This is the reason why retail businesses are taking their businesses online. Global retail e-commerce sales are expected to reach $4.5 Trillion by 2021. But you will not get a slice of that unless you have a solid marketing strategy.

Word of mouth marketing affects 50% of purchasing decisions with 28% claiming that they will not buy a product or service unless a friend approves it. This is where referral marketing comes in. This is where you utilize the power of your customers to bring more sales to your business.

Here are the ten steps you need to follow to launch the most amazing referral program in the world- one that improves your revenue and adds value to your customers over and over again.

  1. Understand Why You Need A Referral Program

    Before you can launch a referral program, you must first understand why you need it. A referral program is a system where you allow your customers to refer their family members and friends to your website. It has 4 elements: the online form, the reward, the referrer, and the referral. It works because it allows your existing customers to refer new customers to you. They do this by filling an online form with the contact details of their family and friends.

    A referral program can help a business gain more prospects in a shorter period of time. It leverages your existing customers by asking them to refer the people that they know to your website. This is better than you promoting yourself.

    When you promote your site, you usually do it to cold prospects. These are prospects that don’t know you and don’t have a relationship with you. As a result, conversions are often low.

    But when your customer promotes your site, they do it to the people that they know. These are people who have a relationship with them. This makes it easier to convert them into a customer.

    This power of trust is the reason why you should have a referral program on your website. It allows you to get more customers in a shorter period of time.

    Companies such as Belt Sander Lab and optinmonster.com  have reported a 40% increase in sales after starting a referral program.

  2. Explore Examples Of Referral Programs

    Before you can create your own referral program, you should first explore existing referral programs. Some of the most notable ones are not only able to drive new customers to the brand.

    One of the referral programs that stood out from the crowd is Uber’s.

    Uber started as an app for drivers who want to get paid by carpooling. Its main goal was to help drivers find individuals who would like to join them for a carpool. Back then, drivers were still quite apprehensive in joining the app.

    That’s when Uber implemented a reward system.

    First, they rewarded any driver who was able to offer a certain number of rides. This reward was not low- they give away a considerable amount of money just to ensure loyalty. Next, they rewarded the driver for referring other drivers to the app. This is the brand’s referral program and it worked really well.

    Aside from drivers, Uber also rewards riders. First-time riders often get a discount. Then they also reward the rider for referring new riders to the app.

    As you can see, Uber’s referral program served as the core of the app’s success, a viral loop of sorts that led to growth without any active involvement from the company’s end. Without it, no one would have been encouraged to adopt its service.

  3. Decide On Your Referral Incentive

    Once you have decided that you really want to implement a referral program, it is time to get down to the specifics. First, you must decide on the referral incentive. This is also known as the reward. It is what you give away in exchange for referral contact details. But before choosing a reward, you must first note that there are different types of rewards that you can give away.

    These are cash rewards, discount rewards, and item rewards. Cash rewards are (of course) in cash. This means that you give away X amount of money for every referral your customers give you. One of the referral programs in this model is PayPal. This is how PayPal has grown to a billion subscribers. It started with a referral program that gives away $50 for every referral. The investment may be big but it worked.

    Next are discount rewards. These are the most common rewards from e-commerce websites. This is where you give your customer an exclusive discount code that can be used on your online store for every referral they bring. It makes sense to give this away as part of an e-commerce marketing strategy for it will encourage more customers to buy from you.

    Lastly, there are item rewards. Instead of cash and discount codes, you give away samples or freebies with every order. This works if you have new products that you want your customers to try. It can also work if you are having some trouble with your inventory turnover. You can give away some items that are not selling while also encouraging the customers to try it.

    From here, you may be wondering about what incentive should you choose.

    Well, that depends on the types of products that you are selling and their prices. High-priced items are often better with percentage discounts. But if these items are only bought on a one-time basis, then a cash incentive may be ideal.

    After all, your customer will not be able to use a discount code if they will not be buying again anytime soon. Freebies work if the item you are selling is worth the trial. This is good for makeup, skincare and food items. Generally, freebies work better for consumables.

    Ultimately, the reward that you choose can affect the success of your referral program. So choose wisely.

    October 2018-05

  4. Decide Who To Reward

    If you think that your choices end with your incentive, think again. You also need to think about who to reward.

    This is because the act of rewarding can be done in 3 ways: rewarding the referrer, rewarding the friend and rewarding both. Rewarding the referrer is important to encourage your customers to refer people to your site.

    No one likes to do anything if they will not get anything out of it. That’s just human nature. By rewarding the referrer, you are compelling them to promote your site for you. Rewarding the friend, on the other hand, encourages the friend to sign up to your site. While their close relationship with the referrer is often enough to get them to sign up, getting no reward often leads them to second guess if they should join.

    In extreme cases, you may find the friend creating a new account but not doing it under the referrer. To solve this problem, you can reward the friend. Given the situation of both stakeholders, the ideal path is to reward both. This is where you reward both the referrer and the friend. This is ideal but you may not be able to do this. Why? Well, there are some resource constraints.

    If you don’t have the rewards to give away for both or if it can greatly impact your bottom line, you may have to forego rewarding both and just choose one to reward. Who you will choose will then depend on who has the most impact on your business.

  5. Decide How The Reward Will Be Given

    So you got your reward ideas in place? Good. Have you also decided on who to reward? That’s great!

    Now, you need to figure out how you are going to administer the reward. For this, there are different ways: direct download, email rewards, account credits, and item delivery.

    Direct download is ideal for digital freebies. This can be a discount code or a digital item. This is delivered right after referral. When someone submits the contact details of their family and friends, they are immediately redirected to the download area where the rewards can be accessed.

    Email reward offers a little tweak from the direct download system. It is because it delivers items via email instead. Right after referral, the referrer is redirected to a page stating that he should check his email. His email will then contain the reward. Again, this is ideal for digital items and discount codes. These are the only items that can be successfully delivered via email.

    Next are account credits. This is more common for cash incentives. But instead of giving your customers actual cash, you can give them credits instead. This is what PayPal has done. Instead of sending money to their customers, they just fill their account with credits.

    Lastly, there’s item delivery. This works for item rewards because you have to deliver them directly to your customer. Just be sure to note the delivery fee and let your customer shoulder it for you. These referrals are almost outdated today, unless the product is truly aspirational.

  6. Launch Your Referral Program

    Now that you have sorted out all the specifics of your referral program, it is time to launch your program. To do this, you’ll need a referral program software that you can easily fill up and launch. What makes referral software special is their ability to help you to launch a referral program without you having to deal with coding. Just fill up the details of your program reward and receiver and you are ready to go.

  7. Make Your Referral Program Prominent

    Having a referral program by itself is not enough. You also need to promote it.

    One of the ways you can do this is by posting a link to your program at the top of your page. You can put it in the announcement bar of your site so that your customers can easily see it.

    Another way to encourage customers to join your referral program is to provide a link to it upon checkout. This is where your customers can see that they have a chance to get a discount code if they just refer some friends to your site. This can encourage prospects who are on the verge of buying to refer some people before proceeding with the purchase.

    Another way is exit intent. Ask your customers to refer other people who may be interested in your website through a pop-up that is triggered upon exit. Use this for promoting your referral program as well, and offer two benefits in one go with a discount.

  8. Inform Existing Customers

    A faster way to get more customers to join your referral program is to inform them about it. You can do this via email. You should have a list of the email addresses of your existing customers. A simple broadcast email from your autoresponder will do. Since existing customers have already experienced your product, they are more likely to refer you to friends, especially when an incentive is involved.

  9. Inform Influencers

    Another way to get more people into your referral program is to get help from influencers. You need influencers for a reason. It is because they have a list of followers who are willing to do what they say.

    However, influencers will not promote you just because they like you. You need to give them a good reason to do that. For this, you can send them your items and ask them to review it. Then, you can set up exclusive rewards (like exclusive discount codes with their brand name) for them. If they like your product, they will often give their honest feedback on it and promote it to their followers. This is just one of the ways on how influencer marketing can increase your referrals.

  10. Implement Limited-Time Rewards

    One of the techniques I have noticed in e-commerce is the implementation of limited-time rewards. This is the act of giving away item rewards but in limited quantities. Since the item reward is only available for a limited time, it encourages more customers to refer more people to the site in a short time window.

    This works because it leverages two things: time and rewards. There is a reward for doing the action and there is also a fear of missing out that come into play here.

So that’s how you launch a successful referral program for your retail business. Remember- customer interactions are often centered around the product you sell. A referral program is a way to get more people to gather around the product experience and lead to more conversions. In today’s marketing scenario, a good referral program can earn you customers in droves and make a real impact on your bottom line.


Author Bio: Arlen Robinson is the co-founder and VP of Business Development at OSI Affiliate Software.

He is also the host of The E-commerce Marketing Podcast where he discusses marketing strategies with experts from all over the world.