Strategies for High ROI Ecommerce Referral Marketing

Last Updated: February 2024

Satisfied customers show brands their gratitude by telling others about their products. It’s just human nature. Referral marketing tries to leverage this principle to drive sales and engagement. And, it works! Research shows that 92% of customers trust word-of-mouth recommendations more than branded content. So, there could be no better way to promote your brand than letting your customers do it for you.

After all, it creates social proof- a critical factor when it comes to increasing conversion. Secondly, referral programs have a one-of-a-kind ‘win-win’ element: both the customer sharing your referral link and the one clicking on it get rewarded. This dynamic triggers a chain of ongoing referrals that can yield thousands of dollars in revenue for your brand.

There’s another reason why referral programs are so effective. The cost of customer acquisition has been going up steadily. In fact, a recent study by Propellor found that the average Customer Acquisition Cost (CAC) for ecommerce was $45.27.  Compare this to the retail industry which had a CAC of just $10 and the difference is clear. This is where a referral program can do wonders. After all, you do not need to spend any money on commissions before a customer has bought something from you.

What is Referral Program ROI?

All said and done, a referral program is only as successful as the revenue it manages to generate over the long term. In other words, the cost of running a referral program should be less than the returns for it to be profitable. On the other hand, if you are currently spending more by way of referral rewards than the net revenue from it, you have a negative ROI.

Another way of looking at it is how much are you saving in terms of overall CAC. This means you need to look at the total referral traffic and the total revenue generated with each referral link on a monthly or quarterly basis.

Here are some proven strategies to boost the ROI of your referral marketing program:

1. Update your email marketing

Email marketing has got a bad rap recently because of a declining click-through rate. In fact, studies show that the average click rate fell to 2.9% in mid-2019. However, the same report also showed that emails sent in response to certain types of online activity – such as online purchases, customer satisfaction surveys, abandoned cart alerts, etc. – had an open rate of 50.9%. This means that drip email campaigns are effective provided you do it right. For example, use attention-grabbing subject lines. To be sure, a clear headline is likely to work better than a witty one. Next, try to use the second person to give your emails a personal touch. For example, the word ‘you’ is more relatable than ‘we’.

Also, remember to keep the offer simple: start with the offer and end with the benefit in no more than 2-3 lines. Equally important, clearly state the reward that the newly-referred customer stands to get; this one factor alone can boost your conversion rate by a mile.

2. Give Your Referral Program Maximum Visibility

Customers can’t buy what they can’t see. It should be visible right on the home page for existing customers as soon as they log in. In fact, a pop-up window is a good way to get the attention of a first-time customer, even if a bit annoying. Here, it is important to get the timing right. For example, just after a customer has made a purchase. Some brands even use it when a customer tries to leave their website. It is equally important to offer a discount that is relevant to customers. Use a compelling Call-to-Action and outline the referral terms and conditions in a clear and easy-to-understand manner.

Include multiple sharing options for social media, email, or SMS. Keep customers updated about the latest offers and discounts. Popular referral programs like Amazon Prime owe their success to many of the same strategies.

3. Reach out to detractors and passive customers

NPS survey data can be useful in helping you optimize the performance of your referral program. For example, you can use it to ask specific questions about what customers think about referral rewards. However, it can also help you identify customers who have stopped buying from your store or worse switched to a competitor. It is entirely possible that some of them may have simply forgotten about you.

Reengaging with such customers can help you win back their business. Social media and email marketing are ideal for reconnecting with past customers and making them an irresistible offer. Even if they don’t end up buying themselves, they are likely to refer their friends to you.

4. Make redemption easier

Research shows that 41% of customers engage with less than one-quarter of the loyalty programs to which they belong. The basic premise of any loyalty program is this: customers like to be rewarded for choosing to spend with a brand. However, if they need to spend 15 minutes on the sign-up/login page, they are more than likely to skip it entirely. Secondly, does your loyalty program have too many rules? If yes, that could be generating a lot of frustration for your customers. Simple rules explained in a matter-of-fact style work best.

Next, check whether your referral site is “on-brand” in terms of the layout and design. If it is slow to load or does not have the same look and feel as your main store, you could be losing out on a good deal of referrals.

Last Words

A referral program can help you attract more customers however to retain them, you need to focus on the post-purchase customer journey. After all, the key to profits is generating customer loyalty and more referrals over a period of time.  In the post-pandemic environment, 24X7 customer support is critical for your business goals to be met. However, the cost of hiring and training more agents can be prohibitive. This is where outsourcing to a leading customer support provider like Helplama can be an effective alternative. Our team of expert agents is trained using advanced chat/call simulators based on the product/process information you provide. This cuts down deployment time to days instead of weeks.

Of course, you have complete control over the agents that will ultimately serve your customers.  Our plans are flexible to allow on-demand scalability. Besides, our Zero Risk Money Back Guarantee provides you complete peace of mind. Contact us today for more information!

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