A Comprehensive Guide to Referral Marketing in 2021

A Comprehensive Guide to Referral Marketing in 2021

Posted by Joel Platini on 22 January 2021 in Referral Marketing


Referral marketing is the best way to propel your business by accomplishing new acquisitions and sales through Referrals.

Referral marketing campaign motivates customers to share your business with their peers, which increases your customer base organically.

By offering rewards for sharing your business, you foster loyalty and retain your customers. These are just a few Referral marketing benefits.

Let’s dive into this article to understand the true extent of Referral marketing. We’ll discuss the best Referral marketing strategies, benefits and more in this illustrative Referral marketing guide.

What is Referral Marketing?

Referral marketing is a pre-planned process of using your existing customer base to spread the word about your business or product.

Referral marketing is one of the few organic lead generation mediums and it has proven to be more effective than traditional marketing mediums in terms of sales and conversions.

Best Referral marketing campaigns can help you achieve new customers at a reduced cost.

What is the objective of Referral marketing?

The crucial objective of Referral marketing is to bring in new customers using your existing customers through Word of mouth marketing.

As you offer rewards to your customers for referring their friends, you can increase your customer loyalty and retain them. Retaining your customers will stabilize your revenue.

Acquiring new customers, increasing customer loyalty and retaining existing customers are the main objectives of Referral marketing campaigns.

This is why eCommerce stores employ them in their store. But there is more to it, which we’ll discuss next in this Referral marketing guide.

What are the benefits of a Referral marketing campaign?

Now let’s discuss what an eCommerce store can get by running the best Referral marketing campaign in their store.

Increased sales

When you run a Referral program in your store, you can reward your customers for referring their friends to your store. Offering rewards will help you retain your customers.

Loyal customers are the ones that’ll purchase more so retaining them will help you double your sales.

Also, for new customers, these rewards will motivate them to return to your store and drive repeated sales.

Referred customers generally purchase 10-20% more, that is why Referral marketing is an efficient way to increase your sales and revenue.

Improved exposure

Refer a friend campaign is all about getting the word out to the masses. And it can be done so effortlessly using your existing audience.

Since people trust referrals from their friends, your word of mouth strategy will bring in new leads. If your service is good, the new customers will start recommending your store to their circle.

Thus the process keeps going on and on until you put an end to it, this is why Referral marketing is the most organic medium for lead acquisition.

Saves your expenses

Acquiring new customers is a tiring process and it is very expensive too. This is where Referral marketing can be a great help for you in achieving new customers effortlessly.

Also, Referral marketing provides you a better chance to retain your existing customers and keep your revenue steady.

All you have to do is run a Referral program and reward customers when they complete a successful Referral, they get a reward, you get a lead.

Increase customer loyalty and retention

One of the major reasons for store owners to prefer Referral marketing is its ability to increase customer loyalty in your store.

By offering rewards for successful referrals you gain their trust and in turn, they stay loyal to their store.

At the same time, rewards increase your credibility and encourage your customers to return for more thus boosting your customer retention rate.

Better customer engagement

The longevity of a customer depends on how you engage, Referral marketing campaigns increases your chance of engagement.

It helps you to engage with your customers for Word of mouth marketing, through engagement, you make your customers feel that they are crucial for the success of your store.

You can also give a shout out to them on Social media for helping you acquire new leads. These engagements are key to increasing referrals.

These are some of the major benefits of a Refer a friend campaign, if you aren’t sure whether it’ll work for you, then the next section of this Referral marketing guide is the one you need.

Will a Referral marketing campaign work for you?

The most common question that most store owners ask when we speak about Referral marketing is, Will it work for my store?

So, here are a few reasons why Referral marketing will work for you

Loyal customers

If you are in the eCommerce business for a considerable amount of time, then you would’ve gained a plethora of loyal customers by now.

It’s a fact, isn’t it?

So, if your store has many loyal customers, then a Referral program will definitely work for you. This is because loyal customers will listen to the ideas that you pitch out.

If you want them to take part in a contest, they’ll do it. If you ask your customers to refer their friends to your store, they’ll do it instantly.

Some might’ve already been doing it, now it is your time to acknowledge their efforts and offer them Referral rewards. This will also help you boost your customer retention rate.

Many overseas customers

Referral programs are the best option for your store if there are many overseas customers.

One of the major reasons for cart abandonment is the high shipping rate, so if you offer free shipping as a Referral reward, overseas customers will be encouraged.

They’ll refer their friends to earn free shipping rewards, which eventually increases your sales and you can acquire new customers too.

Retainful is one of the very few Referral plugins that offer Free shipping as a Referral reward.


New customers

If you’ve just launched your store or if your store is not getting enough sales then the Referral program will work for you.

Referral program is one of the cost-effective ways to acquire new customers through WOM marketing.

Offering Referral rewards will help you drive repeated sales as customers will keep referring their friends again and again to receive the rewards.

So, simultaneously you can acquire new customers and boost your sales.

Good products and service

This logic is pretty simple.

Word of mouth is possible only when there is something amazing to talk about. If your product isn’t good, then Referral marketing won’t work for you.

But if you offer some of the best products in the market and provide great service then people will vouch for you.

So, the key to good Referrals is having the best products and services.

Social Proof

Customers trust the words from other customers, that trust cannot be broken.

So, if your customers have shared good testimonials and stories about your product then share it on your website and social media.

This will motivate other customers to participate in your program and refer their friends. You can also give a shoutout for their efforts and boost your engagement with your customers.

Build your credibility

If you are new to the eCommerce business and looking to build credibility for your store then a Refer a friend campaign is a great way to start.

It is easy to build credibility with the Referral program because customers only vouch for good products and stores.

Good products will amplify word of mouth which in turn boosts your credibility.

So, Referral marketing will work for you, if you are looking to increase your credibility and social proof.

Alright, these are some of the reasons to prove that Referral marketing will work for you. As a store owner, some of these reasons might be relevant to you, so it is time for you to initiate a Referral program.

Best Referral marketing campaign strategies

Alright, now you know whether a Referral marketing campaign will work for you. So, let’s get to the campaign itself.

Before you initiate a Referral campaign in your eCommerce store, there are a few things to keep in mind.

These are more like a Referral marketing strategy that are followed by eCommerce stores around the world before they set up a Referral program.

Offer rewards

The first Referral marketing strategy that you must follow to make your Referral program successful is offering rewards.

There are many Referral programs out there that don’t offer Referral rewards, don’t be one of them.

Offering rewards is a way of acknowledging or thanking your customer’s efforts for bringing in new customers. Also offering rewards will increase your WOM and credibility.

More customers will take part in your program without you even promoting it. Offering rewards save promotional expenses.

Surprise your customers

Surprising your customers doesn’t mean launching a Referral program at midnight.

What we’re trying to say here is to exceed their expectations.

Yes, customers are smart, once they get to know that there are many people who purchase from your store, they’ll be expecting a Referral program from you.

Customers know that, so a Referral program is not a surprise to them anymore. But what they don’t know is the reward they’ll be earning,

Customers will not be expecting lucrative rewards, so go ahead and surprise them with rewards that they weren’t expecting.

To do this, you must know what your customers like and what are their interests. So, build a buyer persona before you decide your rewards.

Only then your rewards will be able to resonate with them. Always go beyond your customer’s expectations to keep them satisfied.

Easy referring process

The most crucial Referral marketing strategy is making the process simple.

Many stores run a Referral program but wonder why it is not converting enough. The reason is the complex Referral process.

When you make costumes navigate to multiple pages just to refer their friends, they’ll probably quit.

Here is a Referral program example from Airbnb, you can see how easy the Referring process is. All a customer has to do is enter their friend’s email and they are good to go.

If you want to run a successful Referral program, then make the process simple.

Referral emails

Another hard to skip Referral marketing strategy that every store owner must follow is sending Referral emails.

This is often overlooked. Store owners ask why is it necessary to send Referral emails? Well, the answer is, to increase engagement.

Not every time will a customer be entering your website and look for a Referral program. Sometimes you’ve got to take it to them, so the best medium to use here is emails.

Send Referral emails to your customers and inform them about the Referral program that you are running.

Explain to your customer about the program and what they can earn from it, but instead of redirecting them to the website, place a CTA button in the email to convert them right away.

This will save a lot of time to your customers. Look what Bombas has done here.

They’ve explained their program and the rewards carefully. They’ve also placed a ‘Refer a friend’ CTA to convert the customers easily.

This is why it is crucial to send Referral emails, you can engage and convert your customers effortlessly.

Credibility

Leveraging your credibility is one of the best Referral marketing strategies used by store owners.

If you want to increase the rate of Referrals then you must showcase how credible your store and products are.

There is a term that you must remember, Reputation risk. It is where a customer refers his friend to your store but the friend dislikes your store for various reasons.

Customer care about their reputation, so if you want them to refer your store then you must prove that you are credible.

This illustration will show you how to make your website credible. Like we said earlier, credibility is key to Referrals so don’t lose it.

Showcase your testimonials, reviews, trust badges on your website, this will encourage both your existing and new customers to develop trust in your store.

These are some of the best Referral marketing strategies to follow before you set up your Referral program.

Referral marketing best practices

So far in this Referral marketing guide, we’ve seen some of the best Referral marketing strategies used by eCommerce stores. Now let’s see how to use those strategies and initiate a Referral program in your store.

We’ll be listing the Referral marketing best practices to help you initiate a Referral program.

Identify target customers

Identifying your target customers before launching a Referral program is one of the Referral marketing best practices.

Why should I do that?

Not every customer in your store will be willing to join your Referral program, so a little audience research will help you find suitable customers for your task.

You’ve got to identify customers that can bring you conversions effortlessly aka your loyal customers.

To get those data you must define buyer personas beforehand.

This audience research will help you segregate your customers based on their engagement, purchase history and behaviors so that you can tailor the contents precisely.

Creating buyer personas will help you fish out your loyal customers and target your Referral program to them.

Choose the Referral rewards

Once you’ve defined your loyal customers it is time to step up your game, you have to choose your Referral rewards.

We’ve already discussed choosing the Referral rewards here. Here is a quick recap of what to expect.

Popular Referral programs around the world offer 5 types of Referral rewards.

Flat amount - Customer will be earning a cash amount of 10$, 20$, etc. as a reward. Probably it’ll be sent through Paypal.

Cash discount - Instead of flat cash, customers will earn a cash discount like $10 Off, $20 Off, etc from their order total.

Percentage discount - Most common Referral reward, the customer will earn a percentage off like 15%, 20%, etc from their cart total.

Credit Points - Many prominent eCommerce stores offer this type of reward. Customers will earn credit points for referring their friends.

These credit points can be used for various purposes like to purchase, renew their subscriptions, etc.

Free shipping - As we said earlier, eCommerce stores with overseas customers will offer Free shipping as a reward.

The shipping cost will be free for customers through this reward.

So, these are the types of rewards that you can offer through your Referral program.

Choose who gets the Referral rewards

Don’t get confused, this is where you choose whom you want to offer Referral rewards.

There are three major categories.

  • One sided Referral rewards

  • Double sided Referral rewards

  • No Referral rewards

One sided Referral rewards

Either the Referrer or the Referral gets the reward.

If your only motive is to retain your existing customers by increasing customer loyalty you can reward only your Referrer.

Likewise, if your motive is to acquire new customers only then you can only offer rewards to the Referrals.

Double sided Referral rewards

Both the Referrer and the Referral will be rewarded.

If you want to simultaneously acquire new customers and retain your existing customers you can offer Double sided rewards.

Most eCommerce stores offer this type of reward.

No Referral rewards

Don’t be surprised, there are many eCommerce stores that run Referral programs with no Referral rewards.

You can do this if your store has many loyal customers who’ll refer their friends without expecting anything from you.

But also remember, a non-incentivized Referral program might not motivate the customers to participate in it.

Alright, this is a crucial Referral marketing best practices. Once you select the rewards and choose who should earn them, you can launch your Referral program.

Launch the Referral program

Once you’ve made your decision with the rewards, it is time for you to launch your Referral program.

The simplest way to do it is by using a Referral plugin. These plugins are automated, it can do the work for you and they also have every resource you need pre-installed in these plugins.

So, your work here is to choose the right Referral plugin based on your preference.

To save your time, let us suggest Retainful, an automated Referral plugin that does everything mentioned in this article.

It can offer a cash discount, percentage discount & Free shipping coupon as Referral rewards. It comes with pre-built email templates which you can send to your customers for engagement.

Retainful also lets you track every aspect of your Referral program in real-time through its insightful dashboard.

So, if you are going to launch a Referral program, install a Referral plugin in your store and watch the magic happen.

Display it on your website

Once your Referral program is up and running you’ve got to display it on your website.

Probably, design a separate landing page for your Referral program. This will help you engage with your customers better and also increase your traffic.

Promote your Referral program

Everything is set, you’ve launched your Referral program and now you’ve to take it to your customers.

Promoting your Referral program is a crucial task, you can’t skip it. You need to create various resources and promote it.

It can be promoted by,

  • Featuring it on the website

  • Creating a separate landing page for the Referral program.

  • Creating and sending Referral emails

  • Create blog posts related to your Referral program.

  • Advertising(PPC) on the search engines.

  • Through guest posts.

  • Invite your email list.

  • Run a Facebook ad campaign.

  • Call to action in blog posts.

These are some of the resources you can use to promote your Referral program. Create these resources beforehand and start promoting it once you launch your Refe a friend campaign.

Successful Referral marketing examples

Hope you now know what are the best Referral marketing strategies and how to implement a Referral program in your store using the Referral marketing best practices.

Here are some excellent Referral marketing examples by prominent brands to clear your perspective.

DropBox

Not including Dropbox when talking about the best Referral program examples is a grave mistake.

Dropbox revolutionized Referral programs, they built a unique Referral program that offers different Referral rewards.

Dropbox is a cloud storage platform, so they offered their product(space) as a Referral reward.

Their Referral program is simple, when you refer a friend to Dropbox, they’ll offer 500MB storage as a Referral reward for both the Referrer and the Referral.

Their signups increased to a record 60 per day after they launched this Referral program.

Google

How many of you know that Google has its own Referral program?

Shocking, isn’t it?

Yes, you can earn up to $7.50 when you refer a friend to Google apps for work and he subscribes to G suite.

You can offer exclusive discounts to your Referrals and when these referrals activate their Google App for work account, the person who bought in the Referral gets rewarded.

Always remember to reward your advocates for their efforts, this will help you increase your engagement with them. It’ll also motivate the advocates to bring in more Referrals.

Airbnb

Airbnb, a popular internet lodging mogul also has a Referral program to grab more customers.

Their Referral program is an enticing one that serves as a two-way incentive program to customers.

The Referrer can upto $25 when their friend finishes his first trip and he can also earn up to $75 when the friend hosts somebody.

We’ve just grazed the surface of the best Referral program examples. Many eCommerce stores have initiated successful Referral marketing campaigns in their store, which you can find here.

Crucial Referral marketing facts to remember

As human beings, we all have exaggerated expectations. But in the eCommerce world, those expectations must be kept in check or you’ll never succeed in your campaign.

Here are a few Referral marketing facts that you must keep in mind.

Don’t expect overnight success

In the previous section, we saw the popular Referral program by Dropbox which became viral.

Don’t be expecting something of that level of virality for your Referral program. Yes, you might have a great program but give it some time to reach the masses.

If you expect too much right from the beginning then you might get disappointed if the results turn out bad.

So, keep your expectations to a minimum until you’ve achieved a considerable amount of success and then you can scale it up.

You might not be the top priority

This is why promoting is the best Referral marketing practice. Remember, just because he is your customer it doesn’t mean that he’ll always be talking about you.

You shouldn't be counting on your potential customers alone. They might forget your Referral at some point in time.

This is why you must keep promoting your program again and again to your loyal customers and also to a targeted audience to keep them in loop.

It cannot run entirely on its own

Yes, almost every Referral plugin is automated. From the point of sending emails, receiving referrals and offering rewards, everything can be automated.

But at some point in your campaign manual effort will be needed. Especially while tracking your Referral performance.

You might need to optimize your promotional strategies again to resonate with your Referral marketing campaigns.

At times you must take over the control of it manually to ensure a smooth process.

Don’t expect constant engagement

When you’ve just launched your Referral program, your engagements will be good. Customers might be actively referring their friends, you might be acquiring new customers.

But all of this buzz will slow down at some point. This is normal, it happens for many stores.

Don’t panic, all you need to do is update and test your resources. Then your Referrals and sales will gradually surge up.

These facts might be hard-hitting for you, but it is the reality. So, keep your expectations in check and keep employing new strategies at regular intervals then you’ll achieve Referral marketing success.

Wrapping Up

Almost every eCommerce store needs a Refer a friend campaign these days to keep their presence in the market. It is not hard, if you follow the right strategies and Referral marketing best practices like the ones discussed here, you can succeed effortlessly.

So, what are you waiting for? We’ve given you the hacks in this Referral marketing guide, now it is time for you to use them and create the best Referral marketing campaign for your store.


Author Bio

Joel Platini is a Content Writer and Graphic Designer with an immaculate experience in writing keyword enriched content for eCommerce websites. Familiar with WooCommerce plugins he has written how-to guides with elegance and finesse.