Last Updated: February 2024
“If you want to attract qualified leads that convert fast, a referral program is what you need,” This is a common piece of advice e-commerce stores get from their business advisors and with good reason. The concept of ‘give and get’ is as old as commerce itself.
Referral programs allow customers to keep getting discounts and benefits each time they refer a friend, without limits. Besides, potential customers are 4 times more likely to trust their friends when buying something, increasing the odds of conversion.
So, this is a win-win for both: the referring customer and the person referred. By turning your existing customers into brand advocates, your brand gets increased loyalty while lowering the overall customer acquisition cost.
Things to Consider Before Launching a Referral Program
Unless newly referred customers themselves start bringing in new customers, the ROI of your referral program could suffer. This is why it is important to know what attracts customers the most to your referral program. For example, a fashion brand may offer a flat discount of 10% for every referral while a nutrition and wellness brand may offer a complimentary gift like free protein products.
In deciding the incentives to offer, it is critical to get clear about your goals for the program. If you are a relatively new brand, your target may be increasing brand awareness while a more established brand may want to improve conversion. It is important that you avoid the urge to spend money without first understanding its impact on cash flow.
Next, you will need to do a cost-benefit analysis to understand whether your referral program idea has good conversion potential and whether it can be self-sustaining long term.
Do Referral Programs have any Benchmarks?
Benchmarking is a good practice to measure the overall performance of your referral program. There are several parameters that can be compared to assess ROI. For example, referral rate or the ratio of referred purchases to total purchases is a relevant metric across any niche. By comparing it to the industry average, you can instantly judge whether or not you are on the right track. The other metrics that need to be benchmarked and analyzed constantly include:
Participation rate: the number of customers that refer others.
Referral visits: the number of click-throughs via Facebook, Twitter, and email message.
Share rate: the number of unique shares made by each customer participating in your referral program.
List of Referral Programs Ideas to Try:
The typical e-commerce store may have multiple KPIs for its referral program such as average order value and repeat order rate. So, it is important for you to customize the program structure to suit your business. However, other brands in your niche may have the same goals as you. This is where a bit of competitor research can be of tremendous help. It can help you get fresh ideas based on measurable results.
Here are 5 e-commerce referral program ideas worth considering:
1. Surprise Gifts:
Customers like being rewarded but they love surprise gifts more. If you have segmented your customers well, you will have a good idea about the types of rewards that they prefer. You can also ask a specific question in your NPS survey to identify the most popular rewards. A bit of mystery can make the rewards experience all the more exciting for your customers. Since customers won’t know what gift they are about to get, you can always improvise and surprise.
2. Donating to community welfare and social organizations:
Research shows that millennials and Gen Z prefer to buy from brands that take a firm stand on social and community issues. These customers believe in making a difference by using their referral rewards for raising donations. This is an excellent opportunity for your brand to generate goodwill and positive reviews. While partnering with a welfare institution, ensure that they broadly share the same values as yours.
3. Referral contests:
Having customers compete with each other to refer as many new people as they can reduce your cost per referral. This allows you to be more generous with the reward that you give the best performer.
For example, a flat $1000 pay-out to the winner of a referral contest can help you boost the organic reach of your brand offline as well as online. Ensure to create click-worthy content that can be easily shared via email and social media.
4. Tiered programs
Multi-level referral programs can get quite boring after a while. Adding a fun element can revive customer interest and boost traffic. In a typical tiered reward program, a customer earns a referral credit when they refer to a predefined number of customers. The total adds up and they move to the next level after a while. Finally, the top performers qualify for a special reward such as exclusive sale previews or VIP benefits.
5. Free subscription
If you have a subscription-based e-commerce model like the Dollar Shave Club, for example, you can also offer a free monthly subscription to active participants in your referral program. This is a common strategy adopted by a growing number of ecommerce brands around the world. It is particularly suited to younger customers. For example, if a customer manages to convince 5 of his friends or colleagues to sign up, they get a free monthly subscription.
For your referral program to succeed, you need customers who are happy to advocate your brand to others. If they have had a good experience with you, it will certainly reflect in the way they talk about you, both online and offline. Great customer service can be a key factor in making this happen. As a busy entrepreneur, you probably have to juggle multiple responsibilities.
In case your goals for customer support aren’t being achieved, you need to consider partnering with an expert.
Helplama has been providing end-to-end customer support strategy and execution to businesses, both small and large. Our flexible plans can be customized to suit any need. We have done away with long-term contracts to give you maximum flexibility. What’s more, our Zero-Risk Guarantee has got your back in case things don’t work out between us.
Also, you can try the Saufter– the customer service software that can help you automate and scale your customer support.