In order to build a successful ecommerce business today, you need to leverage your existing customer base. You can’t build a profitable ecommerce business unless you’re willing and able to build a loyal army of brand and product advocates who can help you spread the word and connect you to new customers.
The problem is, you’re customers are likely not talking to their friends about you as often as you’d like. They might post an update on Facebook or Snapchat right after they purchase a product from you or right after it arrives in the mail, but other than that, it’s unlikely that they are going out of their way to share more updates about your products with their friends on an ongoing basis.
That is, of course, unless there is something in it for them.
In this day and age, if you want your customers to talk more often about you to their friends, family members, and colleagues, you need to present them with an incentive—an attractive offer or reward that you can provide them in exchange for helping you spread the word and connect to more potential customers.
For ecommerce entrepreneurs and business owners, that’s where the customer referral program comes into play.
Customer referral programs are one of the most effective ways to connect with new customers and get your existing customers to buy from you again.
If you’re new to ecommerce though, the thought of setting up and managing a referral program for your ecommerce business can be a bit daunting—it’s not always easy to know where to start, what tools to use, what mistakes to avoid, how much money to spend, etc.
This beginner’s guide will give you the tips and resources you need to start off on the right foot:
The Power of Word of Mouth
Before you start diving head first into building a customer referral program for your ecommerce business, it’s important to first understand why so many companies are spending more time and money on things like customer experience, customer loyalty, and customer engagement.
The answer? Word of mouth plays a huge part in the sustainability and growth of an online-based business. A good reputation and good reviews from customers can lead to more brand awareness, more website traffic, and more sales. A bad reputation and bad reviews, on the other hand, can wreak havoc on an ecommerce business and make growth and sustainability nearly impossible.
Consider these facts:
- “84% of consumers say they either completely or somewhat trust recommendations from family, colleagues, and friends about products and services – making these recommendations the highest ranked source for trustworthiness.” — A Nielsen statistic shared in a blog post by Ambassador
- “67% of people say they’re at least a little more likely to purchase a product after a friend or family member shared it bia social media or email.” — A Harris Poll statistic shared in an article published on Business2Community.
- Americans tell an average of 9 people about good experiences, and tell 16 (nearly two times more) people about poor experiences. — An American Express statistic shared in a Help Scout blog post.
- Online consumers are 4 times more likely to buy when referred by a friend. — Another Nielsen statistic.
- Consumers rely on word-of-mouth 2x to 10x more than paid media. — A Boston Consulting Group statistic.
As an ecommerce business owner, it’s your job to develop and implement strategies that harness the power of word of mouth. Building a referral program for your customers is a great way to influence conversations that are happening between friends and family members online.
What You Need to Know Before You Build Your Customer Referral Program
Before you spend time building and launching a customer referral program for your ecommerce business, make sure you have the following in order to ensure your ultimate success:
- Great Products – first and foremost, you need to have products that people are going to be willing to put their reputation behind. Asking your customers to essentially sell their friends, family members, and social media followers is a big deal. It’s a lot to ask for. Before investing in a customer referral program, make sure your customers would be excited and willing to spread the word about your products.
- The Necessary Budget – you also need to be prepared to spend some money in order to launch and run your customer referral program. There are monthly subscription costs associated with SaaS tools that can help you automate your program, there are graphics, content, and advertising campaigns that will need to be created to promote your program, and there are the costs associated with the rewards and discounts you ultimately offer in exchange for referrals. Before starting, make sure you have the budget available.
- An Existing Base of Loyal Customers – you should also have established relationships with customers who are already loyal to your company and passionate about your products. Knowing that you have loyal customers will help you validate your idea and justify the costs associated with investing in a customer referral program. You can also use your existing base of loyal customers to set initial goals or milestones that you’d like to hit once you go live with your new program.
- A Good Brand Reputation – It goes without saying, but you should also feel confident that you have a good brand reputation before launching your program. If you’ve been dealing with a lot of negative product reviews or activity on social media lately for example, it might not be the best time to launch a customer referral program. You’d be better off repairing relationships, investing more time into creating better experiences for customers, then launching a program when people are more excited about your brand and happy with your products.
- Knowledge About Your Customers – To build a referral program that your customers are actually excited to participate in, you need to have a good idea of what they want. What are they motivated by? What incentives would make them more likely to share your ecommerce store with their communities online? Think about these questions, then use the answers you come up with to design and incorporate attractive rewards into your program.
Building a successful customer referral program is all about timing and being prepared. When you take the time to plan ahead of time, you save on resources (time and money), and significantly increase the likelihood that your program will ultimately drive real ROI for your business.
Before getting started, you should also spend some time exploring other resources about building and managing customer referral programs.
Here are a few articles worth reading:
- An Epic List Of 47 Referral Programs from ReferralCandy – a big guide that provides you with real examples of some of the most successful referral programs (what they looked like, what ROI they had, what made them successful).
- How To Fast Track Customer Growth With A Referral Program from Sellbrite – a shorter blog post that offers a handful of actionable tips on how to optimize your referral program and drive more growth.
- 47 Referral Program Examples Listed by Incentive Type from FriendBuy – another good blog post to explore if you’re looking for examples from other ecommerce shops. This list is particularly helpful because it breaks customer referral program examples down by incentive.
By exploring these resources, you can gain valuable insight into what makes programs successful, what kind of success other companies have seen, and what to do to drive the most ROI from your efforts.
When you finally feel ready to build and launch your customer referral program, the first thing you need to do is pick the tool you’ll use to manage everything. There are a lot of great tools out there to choose from, but here are a few that stand out for ecommerce:
- ReferralCandy: ReferralCandy offers a 30-day risk-free trial. Plans start at $25/month after your trial ends. This tool integrates with Shopify, WooCommerce, Magento, BigCommerce, Yahoo!, Celery, Volusion, 3dcart, and custom stores.
- RewardStream: RewardStream offers a plan that starts at $0/month, but asks for 10% commission paid on just the first retail sale each referred customer makes with you. This tool integrates primarily with Shopify, Magento, and WooCommerce, but you can contact them if you’d like to integrate into your custom shop.
- Sweet Tooth: Sweet Tooth offers a plan that starts at $59/month, which will allow for a maximum of 2,000 loyalty members. In addition to offering features and tools related to customer referrals, this tool also helps you build and manage loyalty programs for repeat customers. This tool integrates with Shopify, Magento, and BigCommerce, and also provides enterprise-grade integrations for bigger brands and stores.
- FriendBuy: FriendBuy has a starting plan at $99/month, but also offers a 30-day free trial. Some of the well-known brands they feature on their website as customers include Dollar Shave Club, Warby Parker, Birchbox, MeUndies, and ClassPass.
Most of these tools have similar features and offerings—you can build a great customer referral program with any of them. To decide, spend some time reviewing each of the options, consider your budget, and if needed, reach out to a representative at any of the companies to get answers to any questions you think of along the way.
Tips for Getting Started
After you have selected one of the tools above and you’re ready to go live with your new customer referral program, follow these tips to ensure early success:
- Tip #1: Promote Your Program on Social Media – While you’re building and fine-tuning your program, work with your marketing team members to create graphics, copy, and video that you can use to promote your program once it goes live. Spread the word by sharing organic posts, but also launch Facebook ads that target your customers and followers.
- Tip #2: Add Pages and Sections on Your Website – Help people find information about your new customer referral program by building a new landing page on your website that promotes your program. Link to the page in the header or footer of your website. You can also include copy blurbs and reminders about your referral program on your product pages too.
- Tip #3: Remind Customers in Transactional Emails – Add statements and links to your customer referral program page in the order confirmation and shipping confirmation emails that you send out to customers. These emails typically have very high open rates, so it’s a great opportunity to get your new program in front of the people who are going to be most likely to participate early on.
- Tip #4: Test Variations – Test different incentives, messaging, and visuals in order to determine which variation drives the most participation and engagement. Most of the tools listed above will allow you to launch A/B tests that can give you the type of information needed to optimize your program over time.
Over to You
Do you have an existing customer referral program built out for your ecommerce business? What did you do to make it successful? Tell me in the comments below.