How to Set Up a Referral Program for Your Ecommerce Store in 6 Steps
Setting up a referral program should not be hard. Here's how you can do it in six steps and start getting referrals!
We've been talking about the dos and don'ts of referral marketing in the past couple of articles. And as most marketers/founders know, attribution is an extremely important part of running a business. Without knowing where your traffic is coming from or who those people are, you could easily be marketing to someone who would never be a customer. And that's not where you'd want to spend your resources on!
With referral marketing, referral tracking is a way of quantifying the impact your referrals have on the business. It's not just a simple metric or number; it's also a way to understand how well your referral marketing is working and what tactics are most effective at converting brand loyalists into advocates and getting them to refer more. That means that with some solid analytics on your referral tracking efforts, you can improve them over time, resulting in better referral rates and referral sales!
Follow us through this article to learn more about referral tracking.
Referral tracking is essential to gain valuable insights into your referral process and identify areas where improvements can be made. It simply involves collecting data at every stage of the referral process, which can then be analyzed for maximum efficiency. Here are the various touchpoints:
Monitoring your referral program can provide clearer insight into whether customers are satisfied with your product or service.
If you are getting referral sales, and people are sharing about your brand or product via word-of-mouth, it’s an indication that they are satisfied with your brand, product, or service.
On the other hand, if your referral rates and sales are not performing at the industry average, it could be a sign of an underlying operational or product issue that needs to be addressed.
Attribution can be a huge headache for ecommerce brands. Let's say you’ve seen a dramatic increase in sales recently. But you don’t know what’s causing it. Could it be the new product you launched? What about the digital marketing campaign that you pulled off not too long ago?
You might have an inkling that it’s the newly launched referral program, but you have no way to prove that assumption. A proper referral tracking system can solve that issue for you. And if the spike in sales does indeed come from your referral program, a referral tracking system will also let you know who your best advocates are. This gives you opportunities to further segment your customers and show appreciation to brand loyalists.
Essentially, you’ll need to double down on the channels that work best for your brand and tracking makes it much easier for that final judgment.
Knowing your referral conversion rates can be valuable for several reasons.
First, it can help you understand the effectiveness of your referral program and identify areas for improvement. For example, if your referral conversion rate is low, you may need to make changes to your referral reward to make it more appealing to customers. Or maybe it’s because you aren’t making your referral program visible enough.
Based on the conversion data, you can determine if you need to tweak things around and do more A/B testing to increase overall customer engagement.
Additionally, knowing your referral conversion rate can help you measure the success of your referral program and compare it to other marketing efforts. This can help you determine which efforts are most effective at driving new customers to your business.
With any referral program, the last thing you’d want to encounter is referral fraud.
Referral fraud comes in various forms:
Self-referrals happen when customers would refer themselves to get both a discount for a new purchase and a reward for referring someone. And duplicated referrals just mean referring the same person twice.
Sharing on coupon sites happens when instead of sharing their referral link and code with their friends, some would post them on coupon sites, discount sites, or forums.
Return abuse refers to when customers get their friends to use their referral link and code. But once they receive the reward for “referring”, their friends would return the product and request a refund.
If your brand is offering cash payouts as a referral incentive, it’s even more important to have a proper tracking system in place. Users can easily take advantage of your rewards otherwise.
If you're not already A/B testing your referral program, you might want to start. And being able to effectively track this entire process definitely helps. Why so?
Studying the referral data obtained can help you tailor your future messaging, visuals and referral incentives for greater customer appeal. Establishing an effective referral program is key to success as it encourages more people to engage and provides more opportunities for referrals. To put it simply, the more people that register for your referral program, the higher the chance of more referrals and a succesful referral program!
A common way to track referrals is to provide customers with a unique referral code or link that they can use to refer others to your business. When a referred customer uses the code or link to make a purchase, you can easily trace it back to the original advocate.
This referral code/link functions as a unique identifier that relates a referral to a specific advocate, which allows you to track it and collect the necessary information.
For example, you can see how many times the referral code has been used, by who, and for which purchases.
This can give you a very good overview of how active your advocates are and how well word-of-mouth marketing is working for you. It helps you decide how much effort to put into word-of-mouth marketing.
(+) Easy to track
(+) Saves time and money
(-) You have zero control over who signs up
Cookies are text files with data used to track, personalize, and save information about users’ sessions. They allow ecommerce sites to track visits from users, including the pages and products they view, to suggest similar products they may also be interested in. Some may even track their exit pages to retarget these users.
Referral tracking with cookies can be done by placing a unique cookie for each customer who visits your website. This cookie can be used to identify the customer if they return to your site in the future, as well as to track any referrals they make.
Let's say that a customer visits your website and you place a cookie on their computer. They then refer a friend to your site, and their friend clicks on the referral link. When their friend visits your site, the cookie on their computer will be checked to see if it matches the cookie of the referring customer. If it does, it will be recorded that the referred customer was referred by the original customer.
(+) Provides valuable customer insights
(+) Accurate in tracking referrals
(-) Requires more technical knowledge
There are many different types of referral tracking software, like ReferralCandy, available that can help you automate the process of tracking referrals. This software can be integrated with your existing systems and can provide valuable insights into the effectiveness of your referral program.
On top of the perks of being able to see everything at a glance with an insightful dashboard, you get to properly identify where your referral traffic is coming from—which platforms your advocates work best with.
It’s also much easier to take action once you have the big data at your fingertips. You’d know exactly which incentives are working best for your advocates and make those changes immediately.
(+) Referral tracking is faster and easier through automation
(+) More accurate data
(-) Can be pricey for smaller businesses
If referral tracking software isn’t a viable option at this time for your business, keeping track of your referrals on Google Sheets or Excel can be a great alternative.
Spreadsheets are easily customizable which means you can decide on what you want to track and how you want to track it. Plenty of third-party apps are available for you to integrate for an improved tracking process.
The downside is that if you require slightly more elaborate analytics, it’s on you to figure out how that’ll work.
Fret not, we have your bases covered! Read to the bottom for our free referral tracking template.
(+) A cost-effective way to track referrals
(+) Flexible with customization
(-) Manual and tedious
(-) Requires some technical knowledge of building a spreadsheet
You may be wondering how Google Analytics can be used for referral tracking.
Here’s how you can find your referral report:
Acquisition > Overview > All Traffic > Referrals.
On that page, you’ll be able to see the number of users coming onto your site as a referral and identify your referral source.
This gives you a relatively good overview of how much traffic your referral marketing channel is bringing in, and which referrers are your brand loyalists. It also provides additional data that helps you to identify which advocates you should pay more attention to so that you can replicate that process with others.
(+) Relatively accurate referral tracking
(-) Requires pre-existing knowledge of Google Analytics
They're essentially unique short text codes that you add to URLs (or links) to help you track the performance of a campaign—in this case, your referral program.
If we take a look at this example above, the UTM parameter comes after the question mark. And it's easily and automatically generated with this campaign URL builder tool. This means that you can manually generate unique links for each and every one of your advocates. The only thing left is to make sure you're consistently tracking this on a sheet so you don't miss out on any unique links!
(+) A free method
(-) Requires pre-existing knowledge of Google Analytics
(-) Takes up a lot of time
Our referral tracking template comes with a referral tracking sheet as well as a dashboard and insights sheet for a better overview of your existing referral campaign.
There are 4 sheets on the referral tracking template.
Before you fill in the Referral Tracking Sheet, you will be required to fill in some necessary information on the details of your referral program. Click on the Setup & Calculation Page to edit your reward types so that they reflect in the Referral Tracking Sheet.
Once that is done, you can start filling in the following fields on your Referral Tracking Sheet.
After you’ve filled in the Referral Tracking Sheet, you can head over to the Dashboard and Insights page to learn more about how well your referral program is working.
The dashboard shows the following:
You can filter through the graphs by inputting the specific year between 2022 and 2050.
The insights are an indication of whether your referral program is hitting the expectations of your referral marketing strategy.
A low number of referrals could mean that your referral incentives are not enticing enough for people to want to share about them. Or that you aren’t promoting your referral campaign enough and not many people know about it.
If you’re seeing a decent number of referrals but low referral sales, you might be setting the bar too low for your referral eligibility requirements. Eg, if you set the minimum spend for a referred friend too low, it results in an even smaller amount of sales from referrals.
Understanding who your top advocates are could also help you to better target people that are more likely to refer your brand and products. You could take the Top 5 Advocates derived from this template and analyze if the geographical location is a factor, or if their demographics are similar.
At the end of the day, referral tracking is an important way to measure the success of your referral program. By tracking referrals, you can identify your best advocates, determine which channels are generating the most referrals, and see which offers are motivating people to refer your brand.
Our Referral Tracking Template is meant to be a stepping stone for you to get started on properly evaluating your referral campaigns. However, there are important factors to consider as well. Things like referral fraud are extremely difficult to identify through manual tracking sheets and that’s why referral tracking software can be a better option once you have more traffic on your referral campaigns.
It’s happening. Recent global events like inflated prices and multiple layoffs have led to conversations about a possible recession. Some even say we’re already in the middle of it.
Because of these events, agency owners are looking for new strategies to “recession-proof” their businesses. Ultimately, it’s more crucial than ever to continue providing value to your clients.
What happens when you create value for your clients?
Here’s the truth. When an agency is able to help its clients grow their brands, the clients will stay. This will then increase the agency’s customer retention rate, enabling them to thrive amidst a recession.
So take the time to dig deep and discover how you can continue adding value to your clients’ brands. Once you figure this out, offer it. You will immediately increase your perceived value because you’ve offered something more than what your clients signed up for.
So how can you add value to your clients? Answer: Think of ways to increase your clients’ profits. This will show them you genuinely care about setting them up for success.
Next, recommending referral marketing is the up-and-coming way for agencies to improve their clients’ net profits—and here’s everything you need to back this up.
There are so many reasons why agencies need to add referral marketing to their list of services.
But to keep things simple for your clients, here’s a very quick overview of some of the best benefits of referral marketing that are specifically connected to profit increase.
Did you know that it costs 5 times more to acquire a new customer compared to retaining an existing one?
Additionally, numbers from Business Insider show that the increase in both ad costs and ad spending over the past year has been crazy:
This is where referral marketing can step in, hitting two birds with one solution:
So in a nutshell, referral marketing can lower your clients’ marketing spend while increasing conversions. Win-win!
Referral programs involve rewarding existing customers who successfully influence other online shoppers to purchase from a brand. Rewarding already existing customers will encourage them to purchase again and even spread the word about the brands.
Because of this, your clients can easily identify their loyal customers and advocates, allowing them to create personalized campaigns or exclusive benefits.
This will strengthen the relationships and engagement levels between your clients and their existing customers.
Online shoppers are present on a variety of online platforms. Some of them have their own personal websites, YouTube accounts, and TikTok handles among other channels.
Now, more than 70% of online users go to social media to research products.
What does this mean?
If a brand has a prominent online presence on the platforms where its target customers are, then that’s a really big win right there. After all, around 71% of consumers are more likely to buy a product if they discovered it via a recommendation on social media.
When your clients invest in referral marketing, their customers can help bring their brand closer to where potential customers are.
Instead of spending more on brand awareness campaigns, your clients can just let their customers do the job via word-of-mouth on different platforms.
At this point in time, brands are already very much aware of the benefits that UGC can bring to their business. For starters:
Because referral marketing gives incentives to customers, they are encouraged to create UGC that they can use to share about brands or products. This will help your clients lower their marketing spend and get new customers because content creation is essentially free.
Getting access to the content created by customers is also a huge bonus because you can use these for your other services, whether you’re offering email marketing, performance marketing, and others.
Check out some examples here of how you can use UGC in your marketing plan.
It’s easy to add referral marketing as a service through the use of ReferralCandy—a Shopify Plus-certified software. So if any of your clients want to jump in, you can get started immediately.
When your customers get started with referral marketing, they may have some difficulty navigating it at first. Here are five strategies to help their referral marketing program find its footing.
If your clients don’t have existing customer loyalty programs yet, now is the best time to start. After all, their customers are probably waiting for it already. As much as 84% of online consumers are more likely to continue supporting a brand with a loyalty program.
Some steps for conceptualizing and implementing brand-new loyalty programs:
Now, for your clients with existing loyalty programs, it may be worthwhile to revisit the rewards and incentives.
Rewards are proven to increase referrals. A discount, a freebie, or any other benefit can give shoppers good reasons to promote ecommerce brands. Here are some popular examples of referral incentives your clients may want to explore:
Feel free to also check out this in-depth guide on choosing the best incentives for referral programs.
Referral marketing rewards brands’ already existing customers and recognizes their influence in their respective circles. If your clients notice huge volumes of referrals from a few customers, it might be a viable option to work with them as official brand influencers or ambassadors.
After all, eight out of ten consumers have bought something after seeing it recommended by an influencer. The power of influencer marketing is undeniable—but instead of spending millions on celebrities, your clients can invest in referral marketing and let their loyal customers be influencers in their own right.
Yes, referrals can happen organically, especially if customers are really satisfied with their purchase. With a referral marketing software, each and every successful referral can be tracked and referrers will automatically be rewarded.
Having a dedicated software for referral marketing will provide your clients an additional revenue source without too much of a hassle. It’s definitely a way to help them increase their net profits.
Customer loyalty program—check. Referral marketing software—check! First few affiliates, referrers, influencers—check.
Your clients can technically sit back and let their customers start promoting their brand whenever and however they want to.
But why not help your clients provide their customers with ammunition?
This can come in the form of ready-made assets, or even ideas and prompts. Brands can even be more active on their social media channels and post surveys, relatable articles, quizzes, or even memes—anything that is easily shareable. That way, existing customers will have plenty of opportunities to refer the brand.
Your clients can also consider creating an exclusive community for members of the program. Then the brand can broadcast announcements, assets, ideas, and even seasonal promos to market.
Offering referral marketing as a service to your clients will help them increase their net profits and overall business bottom line.
Additionally, this will also increase their lifetime value as your customer. You won’t be just another agency—instead, you’ll be the agency that just keeps adding value.
Join our Partner Program to get your referral marketing service up and running in no time and start transforming your clients’ businesses.
You've read dozens of articles, tried hundreds of tactics, and promoted many sales, but your customer retention rate isn't where you want it to be.
Tip: Before trying nine other strategies, start with building the right foundations.
As much as we wish we could replicate the success of one brand on our own, customer retention requires way more work. There's truly no general strategy.
"You should always be aware and mindful of Unit Economics and how you're structured to make money. Then map your customer journey, audit how you collect data and what you collect, find out where your biggest issues lie and prioritize what you will address," explains Juliana Jackson, Digital Analytics Architect at Media.Monks.
She also suggests collecting qualitative research (through surveys, NPS scores, and interviews) to craft a complete story. This data will be more valuable than anything else.
Your retention strategies depend on your brand, your offerings, and your customer's needs. What works for some businesses won't work for others.
We'll dive into a few common factors that impact customer retention. Plus, share tactics that work for some of the top-growing DTC brands, hopefully inspiring your own creativity.
First, let's dig into some basics.
Customer retention rate is a metric that measures a customer's loyalty over a given time. This metric is how you understand how impactful your customer retention strategies are.
Customer retention aims to extract as much value from your current customer base by providing memorable, exciting, and seamless shopping experiences. A high customer retention rate means shoppers continue returning to your store to buy more of your products without considering competitors.
To measure your retention rate, you need
Once you have these numbers, you can follow the calculation below.
However, this metric alone doesn’t give you all the necessary answers. Customer retention is finicky, so you need to create your own playbook.
"There is no 'perfect' metric. You need to look at different ones in pairs. For example, CAC/LTC is critical in combination because they determine your net contributional margin over various payback periods. We focus on LTV over a period: one month, three months, six months, etc… And the most important of those is the month one retention. Focus there first, and watch your 6-month LTV skyrocket," explained Steve O'Dell, Founder of Tenzo Tea.
“My TLDR: increasing retention rate is hard, and it rarely has anything to do with the smarts of your marketing team.” - Juliana Jackson, Digital Analytics Architect at Media.Monks
You can send all the emails promoting new products that you want, but if you have poor business practices, your retention is doomed anyway. Here are seven factors to consider:
If you check these boxes, it's time to consider what experiences you can create to improve brand loyalty and drive repeat purchases.
“Oftentimes, I think marketers forget that it starts with a product. The best retention strategy in the world cannot keep customers returning if they’re not happy with your product offering. If your customer retention rate is looking grim for a specific product, look into reviews, feedback, and customer service inquiries. Compare that product’s retention with another product’s retention rate.” - Julia Perez, CMO at OWYN
Even though your retention strategy will be unique to your brand, it helps to get inspiration from others who are doing a good job. Here are nine examples from several growing brands.
How often do you buy anything without a purpose? Sure, everyone has guilty pleasure purchases, but most of the time, we make purchases to solve a problem.
You can tell… Most purchases are driven by a specific pain point.
And if you want customers to return to your store and continue purchasing your products, your brand needs to be the best option for solving that pain point.
How? First, understand what the pain point is.
Let's look at KURU Footwear as an example. This comfortable footwear brand centers its messaging on how its shoes will eliminate foot pain, which you can find across Google Searches, its website, its email content, and more.
Check out what shows up when you search KURU Footwear in Google:
When you click on the website, the same "pain relief" and "comfortable" messaging is on the homepage.
"This is built into our reason for existing. Our technology eliminates foot pain (solving the customer's real pain point). When your product eliminates a REAL pain point for your customers, they will naturally come back asking for more of the same," explained Sean McGinnis, President at KURU Footwear. "We validate this with every NPS survey we send to customers post-purchase, and also use our customer product reviews to validate each style."
You wouldn't purchase a new software product and not expect a tutorial, right? Retail products must meet the same standard.
Plain and simple: a customer needs to use your product correctly to see successful results. When that happens, they will purchase from you again.
Let's say you purchased a serum to improve hair growth. For a product like that, you're not going to see results after one use. So you need to know
But if the brand doesn't provide any of that information upfront, there's a high chance customers misuse the product, see poor results, and never purchase from it again.
This is why customer education is so important. In fact, 68% of customers will use a product more if they know how to use it, according to a TSIA study.
As an ecommerce brand, there are many channels you can use to share educational content—from TikTok to a good old-fashioned blog. Emails, however, are essential for sending post-purchase educational flows.
These flows are the best way to hit up new shoppers with valuable tips. Here's a great example from Green Philosophy:
In this email, Green Philosophy is educating shoppers about how to clean their pillows—a great way to ensure product quality. If customers keep the pillows in good shape, the product will last longer, they'll feel satisfied with their purchase and are more likely to purchase from Green Philosophy again.
We all know basic economics around supply and demand, but there's quite a bit more strategy involved in pricing optimization for ecommerce products.
Pricing optimization is when you analyze customer data, product quality, and market data to determine the best price to attract customers, drive enough sales to be profitable, and satisfy quality expectations (for the price the customer paid for your product).
You need to be careful about your pricing strategy because if the cost of a good doesn't match the quality in consumers' eyes, they won't purchase from you again. Yet, you don't want to undervalue your products in a highly competitive marketplace.
That's why pricing optimization is about more than just looking at what your top 1-2 competitors are doing. Instead, you'll look at
The most challenging part is aligning the value customers get from your product with your pricing. Tools like Dexter can help you optimize pricing through A/B tests. Additionally, you can
Pricing optimization is an ongoing task. Market trends always change, which will always impact your cost of goods, operating costs, and product demand.
Thinking back to the days of direct mail, was there a catalog you looked forward to receiving? For me, it was the Sears Christmas Catalog. I'd rip it out of the plastic and sit for hours, flipping through the products and sales.
It was exciting, and I can't say I share the same thrill when I receive an email from a brand.
That's why some brands are revisiting the idea of sending direct mail to current customers. And it’s not just sending a thank you note in the same package the customer is already getting. I'm talking about sending a dedicated postcard, catalog, or letter to bring recent customers back for another purchase.
Julia Perez, CMO at OWYN, recently dabbled in direct mail as a retention tool. "We had the idea to start sending direct mail to spread awareness about our new retail expansion (we are an omnichannel brand). But when I found out about PostPilot, we pivoted and have been using direct mail for DTC initiatives that address churn. We know that customers are inundated with emails from companies, so we thought, 'let's try to reach them and get them to come back in another way—through their physical mailbox.'"
Right now, the OWYN team sends postcards to customers who have churned after a certain number of days. These shoppers get a 30% discount to use. Here’s what it looks like.
According to Julia, these campaigns are seeing a 15X ROAS.
"I think that means they like it! For direct mail, test multiple offers, be mindful (but not granular) about segmenting, and take the advice from the good people at PostPilot because they are experts," she shared. "Marketers need to think beyond email marketing as a retention strategy in 2022 and beyond. Everything must be multi-channel. SMS, direct mail, email, and even ad retargeting can be considered retention marketing."
This tip will only work for some brands, but Braxley Bands is the perfect candidate for building excitement by making products feel collectible. They already have a ton of SKUs to choose from, but they often release new bands in batches, calling them "collections."
Making the bands feel "collectible" is done by introducing every collection as a limited edition one. The brand also uses the hashtag #JoinTheBand for customers to show off their bands and engage with Braxley on social media.
Nothing kills a shopping experience more than bad customer service. Investing resources behind your customer support channels is essential if you care about your retention.
Every shopper expects
If you don't offer that, the results can be detrimental (to say the least).
One recent survey found that 65% of customers will switch brands because of a bad experience. But the numbers aren't all bad; three out of five customers said good customer service is essential for them to feel loyal to a brand.
What can you do? Make it easy for customers to reach out if they have questions. Your contact page should be easy to find, and you can use channels like email to let customers know how they can get help. Check out this example from Plantmade:
Tip: Instead of expecting your customer support team to continue "putting out fires," help make their life easier by learning how to prevent fires simultaneously and show customer appreciation.
“Product and product experience is by far the most important factor. If you have a great product and pair that with a world-class experience, people will come back again and again. The onboarding experience is incredibly important. Always make sure you're under-promising and over-delivering.” - Steve O’Dell, Founder of Tenzo Tea
Referral programs are a common acquisition strategy—getting your most loyal customers to recommend your brand drives impactful results.
But did you ever consider how a referral program can also be used for customer retention? The benefits are two-fold:
When you remind customers that they can engage with your referral program, they relive all of their positive feelings toward your brand (which could inspire them to make repeat purchases).
Referral programs have many benefits, but if you need help figuring out where to start, we have an in-depth guide on how to build a referral program that works here.
For many years, brands have used loyalty programs to improve retention. We've all engaged with them (Starbucks, Sephora, and Petsmart… To name a few).
But it isn't that these programs exist that makes them successful—it's the experience the brand provides to those who are members.
Are there any exclusive perks you can offer to loyalty members? You can drive more purchases at the same time by making these experiences only available to members on a specific tier, like VIPs.
"I really love Aura Bora's secret menu. It's an experience they created that's exclusive to loyalty members who have reached a certain status. I love that they actually keep it an exclusive experience instead of touting something as VIP, then opening it to all," she said.
Customers always sign up for a loyalty program and forget about it. Part of this goes back to what I just said about providing an exciting membership experience that keeps users engaged.
However, you should also reach out to customers to remind them about the perks of participating in your program. You can do this easily by reminding them how many points they have, how far off they are from getting a valuable reward, and if/when their points expire, so they act immediately.
Haven't heard from a customer in a while? Send them a winback campaign to remind them that they're missing out on fantastic products. These emails benefit CPG brands, where customers eventually need to restock their goods.
Plan to send these emails around the time when a customer should be close to running out of product. And even if you don't sell consumable items, you can still build excitement for past shoppers and get them to make another purchase.
Here are a few tips for your winback email campaigns:
And make it easy for customers to make these purchases. For example, Graza shares a QR code that makes it easy for customers to reorder an item immediately from the container.
“This is great for people who try it the first time by picking it up from the store rather than buying DTC,” said Alex.
Retention looks different at every business, and there are many factors that play into whether you have a successful retention rate.
Either way, there's one thing we can all agree on: Retention is far more important than acquisition.
Steve O'Dell says it best, "I'd go so far as to say that there is not a great company in the world that doesn't have world-class retention systems. Improved retention also unlocks more aggressive acquisition or increased net income."
The strategies mentioned in this article will help you create new methods for improving your customer retention and LTV. But don't forget to start with the basics—and build the right foundations.
What is referral tracking and why is it important? How to track referrals? We break down everything you need to optimize your referral program with a free referral tracking spreadsheet.
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A referral program is a deliberate, systematic way of getting people to make referrals to your business. Referral programs are often called word-of-mouth marketing, because they reward existing customers for sharing and incentivize new customers to try out your brand.
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