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Referral program

10 Reasons Why Every Ecommerce Business Should Have a Referral Program

Arlen Robinson, 08/08/2018,

Referral programs. You may have heard about them or have seen them in several ecommerce businesses but you have not really seen its benefits for yourself. Well, you are really missing out on a lot by not having a referral program. Here are 10 major reasons why every ecommerce business should have a referral program.

It Increases traffic

One of the first roadblocks to a successful ecommerce marketing business is traffic. You cannot sell anything if you don’t have website visitors. You may have tried that already. You may have created a website and realized that you cannot even make a sale by praying that people visit your site. Sorry to say this. Even if you pray everyday, you will hardly get traffic to your site.

Most marketers will claim that getting to traffic to your site takes work. There are several ways to do this such as doing SEO, social media marketing and the likes. But referral marketing is different. While it does take some work to set up, you don’t have to do the heavy lifting when it comes to marketing. Your customers will do that for you.

Here is how a referral program works. You set up a system where your potential customers gets a referral incentive every time they refer new people to your website. The reward can be a simple discount code or it can be a freebie. Then, your customer earns the reward by telling their friends and family about your brand.

Can you see how this process aids in building traffic to your site? Not only is this effective in generating traffic. It can also help you get more leads and sales which I will discuss in the next sections.

Get more leads

Leads is the life of every business. Business owners are known to take actions that is beneficial to the success of their business - How? They do it by doing actions that can generate leads.

Leads can come in the form of referrals or subscribers. These people may not have bought anything from you but they have given you permission to contact them. This can happen when they give you their email address or other contact information.

How valuable will subscribers be to your business? Well, leads will help you get more sales. You see, these people trust you and that’s the reason why they gave you their contact information. They may not be ready to buy but they are on the brink of doing that. As a marketer for your business, it is your job to give them an incredible offer that they can’t say ‘No’ to.

Get more social media followers

Get more social media followers

In the same way, referral programs can drastically increase your social media followers. You see, referral programs is a form of word-of-mouth marketing. Through this, people get to know more about your brand. As one person tells another about your brand, the news about your brand spreads. In effect, you get more social media followers.

Why are social media followers important? Well, customers nowadays are different. Gone are the day when customers hang onto your every word and buys blindly. Now, they utilize the Internet to look for product reviews. And this is not only true for article reviews but in videos as well. One of the places that they frequent for reviews are social media websites like Facebook, Twitter, Instagram and Youtube. If you don’t have a presence in these websites, it can be quite troublesome for your business for you risk losing some sales. With a referral program, getting sales is easy for there is already an army of people who will promote you to other people.

Increase sales

If referral programs have the potential to increase your traffic and leads, then it can also increase your sales, right? Well, it is not just because of sheer quantity. It is easy to assume that as you get more traffic and leads, the chance for conversion is higher. But it is not like that for other forms of marketing. Referral marketing works because of the quality of the leads.

As I have explained earlier, referral marketing is a way for your customers to promote a business to their family and friends. Since they are promoting the business to the people that they know, the chance of conversion is higher. Why? It is all because of trust. Trust increases the chance of closing a sale. Think about it. When are you most likely to buy? When someone you know told you that a product is effective or when a stranger told you that a product is effective? I am sure you’ll choose the first. That’s just based on human nature. The closer the relationship, the easier it is to convert a person into a sale.

Increase brand awareness

Inevitably, referral marketing can also build your brand. These days, not having a brand can be a major mistake. If you have tried that already, you will just be another ‘replaceable’ online store in your niche. If you are like that, no one will remember your name if they need to buy something. Plus, they will not even tell you about other people.

Since referral marketing leverages personal relationships, it has a higher chance of increasing brand awareness. As more of your customers tell other people about your business, the more our customers will recognize you and remember you. Did you know that your customer has to see your brand at least 9 times before they remember you? No wonder big companies are willing to spend big money just to advertise on billboards and television. Brand awareness drives sales but it can only happen if your customer sees you often enough. With referral marketing, you’ll have another avenue where you can be seen and this is through your customers. In fact, this may be more effective. After all, you are not showing your brand in a scripted commercial. You are being referred by real people - to the people that they are closest to - and that makes the promotion more effective.

Increase customer loyalty

Inevitably, referral programs also increases customer loyalty. In fact, referral programs are designed that way. It is designed to encourage existing customers to refer more people to the site and buy from the site again and again. You may even want to fuse a referral program with a customer loyalty program. This way, you don’t only reward your customers when they bring new people to the site. Instead, you also reward them when they make repeat purchases.

Some referral programs act as loyalty programs as well. Instead of giving a one-time discount, you can give multiple discounts that can be used in one transaction. This way, the user needs different transactions in order to use their discount codes. In the same way, you can also enforce a loyalty program right after a customer purchase. You can just flash them a discount code that will grant them a discount on their next order. As you can see, this will all depend on you and your approach.

Referral programs can increase customer loyalty because it gives your customers a reward to look forward to when they share your brand with others. If the reward is a discount code, they will need to purchase again in order to use it. Most likely, the ones who will be happy to share your site are the ones who have the intention to buy from you again anyway. So they are just sharing your site for that extra discount.

Lower your ad spend

Lower your ad spend

Getting more people into your site with a lower cost per click may take endless hours of testing. If you have launched a Facebook ad for your online store, you’ll find that you have to spend a ton of money just to get those clicks to your site. However, referral programs has the potential to lower your ad spend. Here’s how it does it.

As I have mentioned earlier, referrals usually have a high conversion rate and this is because they are referred to your site because of their trust to the one who referred them. This trust characterizes them as a high-conversion customer. This means that they have a greater chance of buying.

When more of these people visit your site, you need to have Facebook Pixel activated. This will capture all of the data of the visitors and potential customers that you currently have. But you know what’s amazing? Facebook Pixel has the ability to calibrate itself based on the data it receives. This means that it is able to target people who are interested in your content. As your traffic becomes more specific to your niche, you’ll end up getting more clicks (or visitors) for half the price. As for me, I like to set the goal to $0.15 per click. But if you are able to drive it down to $0.20+ per click, then you know that it converting well.

Better conversion than ads

While ads is a great way to drive more people into your site, referral programs can still work on its own. This means that it can have the same results even if you don’t run any ads. In fact, the conversion may be higher.

As I have tackled over and over again in this article, the high conversion rate is attributed to the relationship of your customer with his referrals. Usually, he will promote the brand to his family and friends. These people are already close to him so convincing them may not even be needed. And when they visit the site, they already have the mindset of trusting the brand and buying because of the recommendation for someone they know.

Aids in Influencer Marketing

Here’s a secret. The best links come from influencers. These are people who have some followers on the Internet. They may be bloggers with readers and subscribers. Or they can be social media celebrities with tons of followers in their social media profile. In any case, they are called Influencers because they are able to inspire their followers and direct them to act.

These days, the quickest way to get more sales in your ecommerce store is to tap these influencers. However, simply approaching them will not work. Remember, that these influencers are already so used to being approached. Some of them demand payment for promotion as well. But if you have a program that grants freebies or discounts and ask them to share it with their followers, they will most likely do it.

Want to increase their chance of sharing it? You can customize it. Customize the discount code and include their name and their brand. This will encourage them to share your referral program more.

It is what Successful Business Owners are Doing

Look around you. All the successful ecommerce sellers have their own referral program. Big brands like PayPal, AirBnb and Uber have it. Why? That’s because it works. In fact, it is the secret to their success. Everybody has to start somewhere. But if you have a good marketing system behind you, it is easy to get more traction in brand awareness, traffic and sales. You really have to give your customers a reason to promote you. They will not do it just because they like you. You have to give them something in return. It doesn’t have to be money. It doesn’t even have to be a gift. It can be a simple discount code to thank them for sending the word out about your business.

Do you have a referral program?

So tell me. Do you currently have a referral program in your ecommerce store? If not, now is the perfect time to start one. With all the benefits that it has, you are clearly missing out on all those traffic and sales should you have started a referral program. It is not that hard to do. You just need a referral program software and you can easily launch one in a few clicks.

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