How to Launch a Referral Program that Will Boost Your Ecommerce Sales

Nothing beats word-of-mouth and customer referrals as the best sources of ecommerce conversions.
But the problem is, they rarely happen by themselves.
Sure, on occasion, a customer will recommend your store to a friend or a family member.
But that’s not enough to rely on it as a marketing strategy, right?

Luckily, there are ways to encourage customers to become brand ambassadors and start promoting your store to their peers.
And in this post, I’ll show you how to launch one of them – a referral program – that will boost your sales, promote your store, and win new customers.
Ready? Then let’s dive right in.

Why Word-of-Mouth is the Most Powerful Marketing Strategy

Look, the data speaks for itself:

  • 82% of Americans say they seek recommendations from friends and family when making purchases (Bussiness2Community)
  • 67% get influenced to purchase if someone they know shares a product via social media or email (Bussiness2Community)
  • 88% of Americans say they’re willing to share information about a product in return for some sort of incentive (money, swag, loyalty points). That number goes to 95% among Americans aged 18-35 (Bussiness2Community)
  • 74% of consumers identify word-of-mouth as a key influencer in their purchasing decision.
  • 10% increase in word-of-mouth (off and online) translated into a sales lifts between 0.2 – 1.5%.

And the above is just the tip of the iceberg of the wealth of research into the effectiveness of referral programs.
It, therefore, goes without saying:
Referrals and word-of-mouth are the best forms of marketing when it comes to increasing sales and conversions.
But specifically, what makes it so powerful?

Trust Factor

For one, word-of-mouth is closely related to trust. We tend to listen to the people we trust, and in turn, pay attention to their recommendations.
Just take a look at the results of this study by Nielsen. It reveals that recommendations from friends and family are the most trusted form of advertising.

More Qualified Reach

In general, people don’t refer products or services to just about anyone.
Such recommendations typically follow conversations on topics relevant to your products, like a friend mentioning seeking specific products, or asking for advice on solving a particular problem.
And as a result, they attract potential buyers from your satisfied customers’ circle of influence.
Sounds great, right?

So how do you launch a referral program for an online store?

Here are a couple of steps you should take:

#1. Define Who You Want to Reach

You can run a referral program in two ways:

  • Promote a specific product, or
  • Reward customers for recommending your store in general.

Both approaches have their pros and cons, with the main difference being the reach.
You see:
Customers who love a particular product are far more likely to want to spread information about it and recommend it to their friends.
On the other hand, targeting a specific product means fewer advocates in your referral program.
And by rewarding customers for recommending your store (i.e. sharing your store’s link on social media, enticing friends to sign up for an account, etc.), you target a wider, however, less engaged audience.
(True&Co runs a referral program for the entire store)
To make a decision, consider the following factors:

  • Do you sell products that are highly-popular (i.e. many people talk about them on social media, or leave positive reviews on your site)? If so, you might want to start by promoting that product.
  • If you sell a large variety of products from different categories, then you might want to focus on reaching as wider audience as possible.
  • Similarly, if your store is relatively new, you might want to use the referral program to increase brand awareness first, before you begin targeting highly-qualified customers.

#2. Select the Incentive Type

Look, I’m sure it goes without saying:
People participate in your referral program to get something.
And their likelihood in wanting to refer you depends on what that something is.
We already know that 88% of Americans say they’re willing to share information about a product in return for some sort of incentive. (And that this number goes to 95% among Americans aged 18-35.)
So, as a next step, you need to figure out what sort of incentive you’re going to offer for a referral.
As Visakan Veerasamy from ReferralCandy, a software allowing online retailers set up referral programs points in this article:
“If you choose good incentives that suit your product type and your brand, you’ll get more referrals.”
So the types of incentives you want to offer include:

  • Cash, typically in forms of discounts or coupon codes,
  • Swag,
  • Loyalty points.

However, as Ambassador discovered after surveying 2000 Americans about their word-of-mouth preferences, most customers prefer cash over other incentives.
(image source)

But Should You Offer Discounts vs. Hand Advocates Cash?

There are two ways to reward customer recommendations with cash – by giving them discounts or handing over the cash.
And, as it turns out, there is a simple way to determine which one is better for your store:
If you sell products that customers purchase regularly (i.e. cosmetics, fashion apparel), then offer discounts.
This way you’re not only growing your customer base but also, give your brand advocates a reason to come back and buy from you again.
However, if you sell products customers don’t buy repeatedly (i.e. bed mattresses, high-end tech equipment), then offer them cash rewards.

#3. Promote the Program

With everything set up, it’s time to let your customers know about the program.
And there are a couple of ways to do that:

Include information about it on your website

Amuze, for example, includes a link to the referral program in their site’s header.
Alternatively, you can also create a dedicated navigation button for the program or a homepage banner.

Display the referral program invitation in a popup

Target your most engaged customers with a popup announcing the referral program.
If you use the referral program to increase brand awareness, rewarding customers for sharing your store’s link on social media, then you could run the entire campaign from the popup.
(image source)
Learn more about the Wisepops—the most powerful popup platform.

Include the program in order confirmation emails

When sending customers their order confirmation, add a line to inform them of the benefits of referring your products to their friends and family.
TIP: Applications like Receiptful allow you to build discounts and referral programs right into order receipts.

Send dedicated email newsletter announcing your referral program

Finally, send an email blast dedicated solely to inviting your subscribers to the referral program. Include no other information but the program, and allow recipients to click a call to action to find out more, or opt out of any further referral program notifications.
You can do the latter by using tags in your email marketing software. For example, tag anyone who clicks on a link opting them out of the referral program with a relevant tag.
Every time you issue a newsletter about the program, send it to everyone except people tagged with the tag.

And, that’s it.

If you’ve followed those steps, you’re ready to start reaping the benefits of your new referral program.
What’s next? Monitoring and optimizing the program’s performance. But that’s a topic for another post.

Pawel Grabowski Pawel is an SEO and content marketing consultant working exclusively with SaaS brands.

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