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Thinking About Starting a Referral Program? Start Here

Cheryl Teo
Cheryl Teo
December 9, 2021
2 min read
Thinking About Starting a Referral Program? Start Here

If you’ve heard your friends and family rave about a certain shampoo or vacuum cleaner, you’re no stranger to word-of-mouth (WOM) marketing. Referrals are one of the most effective customer acquisition strategies under WOM marketing.

If you’re looking to build a referral program that turns into a steady flow of customer acquisition for your business, you’re at the right place. This guide will walk you through everything you need to know about how to choose the right rewards, perfect your referral messaging and market your program.

Your complete referral program guide

What can I expect from a referral program?

You’ve probably heard about referral programs before you decided to hop onto our blog to learn more about them. What you may not be familiar with is the process of setting up a referral program and what to expect from it.

If you’re still unsure, here’s a quick and simple guide to understanding referral programs.

How much do people trust referrals?

  • Nielsen reports that 92% of consumers trust recommendations from friends and family over advertising.
  • Word of mouth is the primary factor behind 20 to 50 percent of all purchasing decisions.
  • 60% of marketers say it generates a high volume of leads.
  • Customers referred by a friend are four times more likely to buy.

How do I get started with a referral program?

At ReferralCandy, we understand that jumping into a new marketing strategy may be a daunting task and that’s why we’re happy to guide you through the technical aspects of setting up your referral program from start to finish.

Basic referral program in 6 steps:

  1. Understand your customers.
  2. Set your rewards.
  3. Customize your referral emails and pages.
  4. Integrate your referral program to your store.
  5. Launch your referral program.
  6. Track, evaluate, and improve.

Need more advice and examples on each point? Here’s our guide to referral marketing!

Have you chosen the right incentives?

Now that you have a better idea of what’s needed in a referral program, it’s down to making the right choices. You’re on the referral setup page, deciding which incentive would best appeal to your customers and you’re in a dilemma. Here’s what you need to think about when it comes to deciding on incentives.

  1. Choose your incentive structure — friend offer, advocate reward, or two-sided referral program.
  2. Choose your incentive type — cash, store discounts, custom rewards.
  3. Showcase your referral incentives with a good copy.
  4. Further customize your referral incentives with advanced ideas.

Keep reading to learn more about the pros and cons of each incentive structure and reward.

Which brands can I learn from?

You’re almost ready to launch your referral program! But before you do so, we’ve compiled the success stories of a few top brands like Riff Raff & Co and Rothy’s that have aced the referral program strategy and are worth learning from.

If you’re looking for more inspiration, do check out our case studies segment!

How do I launch my referral program?

Just one last step and you’re almost ready to launch your referral program! The only thing left to do is to announce your referral program to your customers and watch the magic happen. Here’s a non-exhaustive seven-step checklist to guide you through the process.

How do I optimize my referral program?

So now that you’ve got your basic referral program down, it’s great but let’s face it. Referral programs are so commonly used by ecommerce merchants that if you’re not standing out, it’s tough to keep it going. What does it take for merchants to successfully leverage their most loyal customers to turn their referral program into one of their main marketing channels?

There’s more than one answer here. We’ve identified a couple of areas that you can specifically look into to perfect your craft and turn your referral program into an automated surefire customer acquisition channel.

How to promote my referral program?

After launching your referral program, you’d want to get the news out so that your existing customers are aware of it and actually take action. Here are some of the best ways ecommerce brands share the news about their referral program launch:

  1. Showcase referral program on your website.
  2. Prompt customers after they confirm their purchase.
  3. Send email reminders that coincide with customer highs.
  4. Highlight your referral program in your packaging.
  5. Incorporate your referral program into your social and email content.
  6. Increase referral incentives for a limited period.

Get inspired with more examples and tips on promoting your referral program.

How to master referral email marketing?

It’s true, it’s difficult to craft emails. It’s an even greater challenge to write emails to your customers encouraging them to share their love for your product with the people around them—either you don’t get the message across, or you sound too much like you’re trying to hard sell.

Here’s what you can do to optimize your referral email marketing tactics:

  1. Focus on the subject line.
  2. Keep the email simple.
  3. Make your email call-to-action impossible to ignore.
  4. Emphasize the motivation to purchase.
  5. Highlight the benefits to Friend and Advocate.
  6. Include any additional conditions for the referral.

Need more advice and examples on each point? Here’s our guide to referral email marketing!

On top of perfecting the content and copy of your referral emails, the design and layout are equally important aspects of driving more advocates to your referral program.

We’ve compiled a list of examples of incredible email designs that you can check out here.

How to master friend landing pages?

To put things simply, this is the page that your Advocates’ friends are taken to once they click on the referral link.

These are what makes a good friend landing page stand out from others:

  1. A strong header image selling your brand or product.
  2. Clear and succinct offers.
  3. Visible discount codes.

Be inspired by brands that have successfully created amazing friend landing pages.

How to master referral messaging?

Good referral messaging is key to a successful referral program. The reason is because it’s closely tied to everything from the way you choose your incentive structure and offer, promotion of your program to your landing pages. Your referral program should always be representative of your value proposition.

What effective referral messaging entails:

  1. It is clear and easy to understand (ideally within 5 seconds).
  2. It communicates concrete results your customers get from buying your product.
  3. It states how your business differs from competitors.
  4. It avoids hype, superlatives, and business jargon.

Here are some examples of brands that excel in the area of referral messaging!

How to prevent and deal with referral fraud and abuse?

At ReferralCandy, we actively speak to merchants to identify areas of concern when running a referral program and the majority expressed that referral fraud is an area they worry about. Referral fraud should not be taken lightly simply because it can lead to sizeable losses and wasted time.

Merchants should have these fraud prevention mechanisms in place:

  1. Advocates should not be able to earn rewards for referring themselves.
  2. Advocates should not be able to earn rewards for referring existing customers to your store.
  3. You should be able to set conditions for getting a reward.
  4. You should be able to set a referral review period.

If the fraud has already happened, you should:

  1. Disqualify fraudulent referrals.
  2. Ban advocates to stop further abuse.
  3. Delete a canceled or returned purchase.

Learn more about keeping referral fraud and abuse at a minimum here.

Extra referral program ideas

When you’re ready to go beyond the basics, it’s good to see what you have set up versus what other successful referral programs have in place. In fact, it’s good to explore ideas and experiment with marketing strategies that don’t seem like they’ll work for your business but could be worth a try.

Here’s what we have on our list of ideas to explore (and avoid)!

Is my referral program working?

Now that you’ve got your referral program set up, launched, and optimized, it’s time to see the results! One way to evaluate is by comparing your referral rate to the average referral rate across your industry.

Here are some key insights about referral rates:

  1. The global average referral rate is about 2.3%.
  2. Gadgets and electronics have the highest referral rates at 3.4%.
  3. Some outliers have higher referral rates of up to 7.5%.

Need help calculating your referral rate and understanding what it really means?

How to get more ecommerce referrals?

Once you’ve calculated your referral rate and realized that it’s lower than the average in your industry, do not panic and give up on referral programs entirely.

Check out this detailed checklist by our Customer Success Managers to make sure you’ve fully amplified your efforts.

How do I measure and improve my referral program ROI?

Analyzing metrics is a great way for you to know what’s working and what’s lacking in your current referral program. The most fundamental way of thinking about Returns on Investment (ROI) is breaking it down into two questions.

  1. How much are you spending on your referral program (cost of incentives + running the program)?
  2. How much revenue are you getting in sales?

Learn more about measuring and improving your referral program ROI here.

Where can I find more resources?

If you found this guide helpful, subscribe to our newsletter where we share our latest articles and more resources.

Cheryl Teo
Cheryl Teo

Cheryl is a full-time Content Marketer at ReferralCandy by day and a "Learnaholic" (aka always learning something new) by night. She loves learning new languges, storytelling, and creating experiences that are functional and visually compelling. She's also always lurking on Twitter so drop by and say hi!

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