What is Referral Marketing?
To put it simply, referral marketing is a type of marketing where businesses encourage customers to refer new customers.
You may also have heard it as refer-a-friend or affiliate programs.
It is a word-of-mouth marketing strategy where you rely on satisfied customers to advocate for your brand. In return, you offer gifts or other incentives.
Why Does Referral Marketing Work in E-commerce?
There are several reasons why referral marketing is beneficial and works for an e-commerce business. Let's go over them one by one.
A. Referral Marketing is Easy
One of the most important things to remember about referral marketing is that it's easy to implement.
It doesn't have to be complex or take up much of your time.
One of the most common mistakes people make when they first start using referral marketing is they try to do too much all at once—they want to create a whole campaign and get thousands of people involved.
But it's important to remember that it's not about quantity but quality.
Start small and work your way up—once you have a few key customers willing to promote you, you can ask them if they know anyone else who might be interested in hearing about your product or service.
That way, you'll be able to focus on making sure those links are practical instead of getting distracted by trying to reach thousands of people at once.
Plus, you can always get assistance from referral software tools if you need a little help on the way.
B. Social Media is at Your Service
Social media is a great way to build relationships with your customers and get them to talk about you, which is crucial for referral marketing.
By sharing posts and comments that are engaging and personal, you can increase the likelihood of your followers becoming advocates for your company.
Additionally, social media allows you to share content that informs people about your services. This type of content is often shared by people who aren't even customers yet but are interested in what you have to say about a subject.
Accounts with so many followers on social media can also benefit you at this point. A happy "influencer" can make your brand exposed to their audience and benefit your business without you putting in additional effort.
It is also essential to have a social media moderation tool in place to manage your social media activity and ensure that your online presence remains professional.
Plus, Forbes’s article on the effects of social media on customer purchase decisions show that friends' social media posts influence the purchase decisions of 83% of US online shoppers. That's huge!
C. Referral Marketing is a Low-Cost
Referral marketing is cost-effective for sure. You don't have to pay for all types of advertising.
When your customers tell their friends about your business, there are no ads to pay for—and, in fact, the more those friends tell others about you, the better!
This information helps you to focus your efforts on the customers who are most effective at generating sales.
When you add a return incentive, you will have your customers back at a low cost.
D. It Helps You Get Better Feedback
Referral marketing can grow itself and collect positive feedback about your business.
When you encourage customers to refer friends, you immediately incentivize them to share their experiences with you.
Referral marketing can also help you build relationships with customers who have never done business with you. When customers refer others to your business, they often feel part of something special and unique.
They want the person they refer to feel like they've made a good decision by choosing your business, so they'll often go out of their way to ensure their friend has a great experience with your company.
This creates a win-win situation where both parties benefit from the relationship: You get more customers, and your current customers become more invested in ensuring those new customers have a great experience as well!
The best part about referral marketing is that it helps with retention as well as acquisition—if someone wants their friend to try out your business, then chances are good that person will stick around for a while!
E. E-commerce Referral Marketing Builds Trust
When you ask your customers to refer you to friends and family, they're sharing their experiences with you and recommending you to people they love.
That's something that no advertisement or social media strategy will ever be able to do!
When someone refers to you, they say, "I trust this person enough to share them with my friends and family."
And that's precisely what you want your customers to feel about you: that you're trustworthy and reliable.
F. Focuses on the Right Audience
When someone refers to your brand, there is no doubt that they will tell their circle about how satisfied they are with your business.
So the person they informed about you will already know what you are about. This situation makes them the perfect target audience because they will have a high intent to buy your products or services.
In fact, consumers referred by a friend are four times more likely to buy, according to referral marketing statistics.
That makes e-commerce referral marketing work so well with minimum cost and effort.
6 Effective E-commerce Referral Marketing Strategies
You can't just start offering gifts and discounts when doing e-commerce referral marketing.
It would help if you created a strategy that suits your business the best. Now let's see some steps that you might apply.
1. Do Research Before Creating Your Referral Strategy
One of the most critical parts of your referral campaign is ensuring you have the proper research.
It would be best if you always started by doing a little research into what your customers are looking for and how they want to be communicated with.
Once you have this information, you can craft your strategy.
For example, if they're interested in hearing about new products or services from you, you can use that information to create content that appeals to their interests and ask for referrals via these.
For the steps of your strategy, you should find the topic, decide on your target audience, determine your channels to send your message.
2. Choose the Right Incentive
Choosing the right motivation or incentive might be the difference between the success and failure of your e-commerce referral campaign.
Here's what you need to know:
The best incentives are ones that are relevant to your customers.
If your customers love your products or services and want more of them, then offering an upgrade or discount is a great idea to increase engagement of your brand.
A great incentive should be easy for you to give away at scale. That means it should be something that doesn't cost much money or time for you and that can be distributed easily—like an email newsletter or social media post with the offer attached!
Also, we should mention that you can offer two-sided (which is more likable by customers) or one-sided incentives. Two-sided means when the referrer gets your discount or gift, their friend gets the same or similar.
One-sided is when you only provide incentives for the customer who refers to a friend.
You can provide varying levels of incentives based on the number of referrals your customers send your way. You will encourage customers to make more referrals to get more rewards.
3. Find the Perfect Time to Ask for Referrals
It's essential to understand what makes a good time to ask for referrals.
Customers like to feel appreciated, so if you've just done something nice for them and they’re happy with the service,then now is probably not the best time for them to refer to someone else!
The same goes for when something has gone wrong.
If a customer is unhappy with something particular about your business, don't expect them to want others to experience the same thing!
Therefore, you might guess that once they've had an amazing experience, then it's time to ask!
4. Try Email Referral Marketing
You can use your email marketing as a referral strategy by creating a referral program and sending out emails to customers who have made purchases as well.
It's advantageous if you're just starting out and don't have a large customer base yet.
As a helpful idea, you can reach out to past customers by sending them an email asking for a referral. In return, they can get a reward to start repurchasing your products.
You can add a link or a button to make the referring process easier for the customers that can also let customers send a message to someone recommending the product.
This will help build your brand awareness and increase sales.
5. Promote Your Referral Program
Once you have created an e-commerce referral program, it is essential to make sure it is easy to see or hear by customers. Don't just bury it in the back of your online store.
You can use social media platforms to spread the word. Put your offers and advantages in the spotlight to attract attention.
Similarly, ensure that the steps for making referrals are clearly visible on your website.
Making use of a popup builder is also an option to show your referral campaign to your visitors. Try creating popups for the success of your referral program quickly.
Don't forget to personalize it for your visitors, as customized messages and offers are more likely to get attention and increase your conversions. using popups
6. Keep Track of the ROI of Your Referral Marketing Campaign
The ultimate goal of every business is to increase revenue, and referral campaigns are a great way to do that.
But in order for them to work, you need to make sure that they're worthwhile.
It's easy for a campaign to go off the rails and end up costing you money instead of making it.
If you don't keep track of your referrals' ROI, there's no way of knowing whether or not they're effectively driving sales—and if they aren't, you may be wasting money on them.
The E-commerce Referral Marketing Strategies in Infographic
We prepared an infographic that includes the best six e-commerce referral marketing strategies that will change the game!
You are welcome to use our infographic to display statistical data on your website.
10 E-commerce Referral Marketing Examples
These 10 e-commerce referral marketing examples are precisely chosen to display very critical referral programs for you.
We hope that they can be helpful when you create your program in terms of inspiration, conditions, and diversity.
1. Fortnite
Fortnite is an online video game developed by Epic Games.
They promoted "Refer a Friend," which is a fun Fortnite event in which you can earn in-game rewards by inviting others to play.
They offer the Fortnite "Xander" in-game cosmetic outfit and other in-game rewards if you connect with your friends.
This way, Fortnite manages to keep its players happy.
After all, who doesn't like playing games with their friends? Plus, you will get rewards for it! This is definitely a win-win for gamers.
They also created a website for refer-a-friend only with a detailed FAQ page to make sure there are no questions about how to join this event.
2. American Express
Next, we have American Express. American Express Company is a corporation based in the United States that specializes in payment card services.
They created a referral program where you can refer your friends via email, social media, or by sharing your personalized referral link.
Then, your friends choose a Card from all available American Express Personal and Business Card offers.
As a result, if your friends are approved, you will get a referral bonus, and they will get a referral welcome offer.
The steps of the referral process are simply explained on the American Express website, which makes it easy to follow.
A two-sided reward policy is applied so that both sides will remain happy about this deal.
3. Fiverr
Fiverr is a global online marketplace for freelance services. They invite you to introduce your friends to "the easiest way to get things done."
For this, you will reach your friends by email or with your link via social sharing.
If your friend signs up to Fiverr, they get 10% off their first purchase. You get 10% off their first order amount, up to $100 as well.
They explained each step clearly and added the "Invite a Friend" section in their footer as well.
4. Payoneer
Payoneer Global Inc. is a financial services company that provides online money transfer and digital payment services.
They crafted a refer-a-friend program under their website's "Partners" section.
It is also visible in the website footer to avoid missing any customers because it is a payment platform, and the rewards are monetary.
You get $25 for each friend you bring. Even better, your friends will earn $25 too!
The program works like this: refer your friends using your unique registration link by including it in blog posts, articles, emails, Facebook posts, and tweets.
You'll be compensated for each new friend who joins Payoneer through your link.
It is free and straightforward. They even provide a personalized dashboard to share, monitor, and track your referrals all in one place.
5. PizzaExpress
PizzaExpress is a British multinational restaurant group. In their refer a friend campaign, you invite your friends to join the PizzaExpress Club, and you both get rewarded.
The process is explained with a colorful design that goes well with the brand image, as seen below.
In order to get your reward, your friend needs to dine in the restaurant first; the prize will be unlocked for you both to enjoy your free starter the next time you visit.
This way, PizzaExpress ensures that they increase sales by having new guests try their food.
You can also consider putting similar rules according to your business needs in your referral marketing campaign.
6. Better
Better is a consultancy working exclusively with non-profits and social impact organizations across the world.
Their referral marketing strategy attracts attention to having a gym buddy. They have a different take on why you should refer to your friends.
Instead of material benefits, they stress the fun and motivational elements of working out with a friend.
They invite you to refer a friend, and once they join, you will both be entered into the weekly prize draw to win an annual Better Health UK Membership.
They also have a second offer on the same page. If you refer a friend and they join a course, they will get £15 off.
7. Asos
Asos is a British online fashion and cosmetic retailer. They designed their referral page in line with their brand vision.
Asos presents straightforward directions to get referrals without any doubts.
You just share your unique referral link with your friends, and after they use your link, they'll get 20% off their first order.
When they complete their first purchase, you earn 20% off too!
Using a two-sided referral strategy, Asos hopes to collect referrals while still keeping current customers happy.
8. Tesla
Tesla, Inc. is an automotive and clean energy company. They created many referral programs over the years.
They set their goal to create the best clean energy products and help Tesla owners share their excitement and experiences with others.
In the last referral marketing campaign, owners can earn incentives when friends and family use the referral link to order eligible Tesla products.
You and your friends can earn $300 for Solar Roof or Solar Panels.
Tesla also attracts attention because this reward reduces the reliance on the grid and produces clean solar energy.
9. Uber
Uber is a very famous transportation company that provides drivers for passengers through an app.
When it comes to the referral campaign for Uber, we see that the campaign is for drivers.
The campaign goes as follows: The drivers should refer Uber to other drivers, and it helps the referrers earn more money.
Also, Uber Eats has a similar referral service: If an Uber deliverer refers others to join, the new deliverer completes deliveries, and the referrer earns rewards.
10. Away
Away is a female-supported brand that produces luggage and travel accessories.
Away’s referral campaign starts with a link provided by Away itself. Then, the link is only available for one use.
By using the link, the referred achieves to get a $20 off discount with a referral purchase.
As for the referrers, they will get a referral reward of $100 for the campaign.
In order to prevent the referral campaign from abusing, the referral campaign is only available for five uses at maximum, and the links cannot be redeemed.
Before You Leave…
A reliable process for finding these best practices is much needed.
Therefore, the encouragement of referral marketing strategies has become much more apparent in recent years as e-commerce expands.
That's why we covered some ideas and examples that you can benefit from while creating your e-commerce referral marketing strategy.
Choose the right strategy and get creative. This way, you will have the all-in-one solution to your problems like customer acquisition and engagement at a low-cost thanks to e-commerce referral marketing.
Frequently Asked Questions
While creating a referral marketing campaign might have some rules to learn. However, there is no question that cannot be answered.
What Type of Referrals Are There?
Popular referral types include:
- Direct referrals (word of mouth): Customers recommend your brand in their network directly.
- Email referrals: Referrals you get via your email marketing efforts.
- Referrals from reviews: Referrals who get to know your brand from positive reviews on the internet.
- Social media referrals: Referrals you get when existing customers share their love for your business on their social media accounts.
Is Referral Marketing Inbound or Outbound?
Inbound leads initiate contact with you directly or through referral channels. For example, the cases when someone found out about you through social media or got a direct referral from a friend.
On the other hand, you can develop outbound leads through proactive, direct contact initiated by you.
What are the Top E-commerce Referral Marketing Software Tools?
Some of the best referral marketing software tools are:
- Referral Factory with so many customizable templates, flexible API, and many integrations,
- Ambassador with multi-campaign abilities, different reward payment ways, and fantastic onboarding and customer success,
- Referral Candy with ease of use, low pricing, and ready out-of-the-box service.
