How to Grow Sales With a Well-Designed Referral Program

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Recall the last time you visited a new restaurant or bought from a new brand. Even with a robust onboarding process, excellent customer service, and a compelling marketing strategy, first-time customers will likely turn to their friends and family to make the final decision to purchase. After all, they’re the ones we trust the most. 

In a nutshell, this is how referral marketing works. If you want to ensure your money is well-spent, you’ve probably relied on referrals to guide your purchasing decisions. Below we’ve outlined some tips on how a well-designed referral marketing program can help you boost ecommerce sales. 

What is a referral program?

Referrals can happen organically through friends and family promoting a brand or via natural conversations. 

A referral program follows the same principle.  The main difference is that it incentives brand advocates to share a referral link to refer someone by offering rewards. These rewards can come in many forms such as discounts, coupons, cash, and freebies. 

Consider Love Wellness’ referral program which encourages brand advocates to share their business with friends. In exchange, the brand advocate and referred friends can receive $20 off their next purchase. 

Sales referral program discount reward

How referral programs can boost sales?

Now that you’ve learned the gist of the program, how can it help your sales numbers and conversion rates? Let’s take a look at some of the benefits that referral programs can offer. 

Customer referral program to improve customer acquisition 

Customer referral programs are a fast and effective way to increase your first-time customers. Imagine if a friend or family member gushed about a new product or service. Are you more likely to try the product because of your trusted source? Or are you more likely to be enticed by promotional posts and sponsored ads? Obviously, the referral is a stronger motivator, and this is why it works. 

In fact, ReferralCandy found that people pay 2x more attention to recommendations from friends. 92% of consumers also trust recommendations from people they know. 

Referral programs are cost-effective 

Getting new customers across the customer lifecycle process involves sending a  bunch of targeted ads, emails and other marketing material. Despite your best efforts, some leads fall in through the cracks and don’t end up converting. 

With a referral program, brand advocates can get this job done for you. They will relentlessly highlight the benefits of your product or service and onboard your friends to the platform. No need to send a lot of promotional material or get customer support to guide them—because they will turn to their friend instead. 

Interestingly, Web Profits found that 75% of businesses considered referrals as their lowest-cost method of acquiring new customers. On top of this, 44% say it’s the best way to acquire new customers; however, this figure jumped to 64% among businesses with a SaaS-based referral marketing system. 

Referred customers are loyal 

Referred customers tend to be loyal due to the influence of their network. Since their friends or family are current customers and regularly buy and patronize the brand, they are more likely to follow their example. 

A study found that 78% of businesses consider referred customers more loyal than other customers. Even with similar demographics and time of acquisition, referred customers’ churn rate is 18% lower compared to the average customer. 

A popular saying goes “birds of the same feather, flock together”—and it seems the same is true when shopping. Referred customers are valuable because they are more likely to remain loyal as long as their friends continue to patronize your business. 

Brand advocates are great brand ambassadors

Sure, you can create compelling infographics, emails and marketing campaigns—but these promotional materials are subpar to the words of a brand advocate. Unlike sponsored influencers or campaigns, brand advocates are real customers. They know the pros and cons of using your product, as well as its edge against the competition. Thus, their feedback is valuable to leads who have yet to try your product or service. Also, they are perceived to be more trustworthy and believable  than a paid ambassador or a sponsored promotion. 

To understand the effectiveness of your referral program, you can use a net promoter score tool and evaluate “how likely your customers are to recommend you to others”. The results (shown in the range of -100 to 100) can tell a lot about the quality of your referral program and how to improve it to have more loyal customers. 

How to Create a Well-Designed Referral Program 

At this stage, you’re probably motivated to launch your own program. To get you started on the right path, here are some tips to keep in mind. 

1. Pick your referral reward 

Rewards will determine whether or not consumers will participate in the referral program. Most brands use a double-sided rewards system which offers incentives to both brand advocates and their friends. This tactic ensures that both parties are motivated to make the referral process happen. 

There are many types of rewards you can distribute en-masse to consumers. But here are the most common reward types to consider:

  • Cash: a practical and useful reward that customers can use anytime and anywhere. Unlike other incentives, it is also highly scalable. Imagine receiving a $10 reward for a successful referral. Even if customers refer 10 friends and receive the same amount, they’re still motivated to refer due to the small commission they can earn. 
  • Discount coupon: best for businesses relying on loyalty and repeat purchases (i.e. restaurants, clothing retailers). The advantage is that customers will spend their referral reward by buying from your shop again. It’s the perfect win-win situation! 
  • Free subscription month: Businesses with a subscription-based model can offer a free subscription month which is one of the best lead magnets and an attractive offer for both brand advocates and referred friends. 
  • Custom rewards: requires a bit of effort on your end but they can be quite rewarding. Custom rewards are usually exclusive products not available in-stores such as a special experience or an autographed book. Since these rewards can’t be found anywhere else, it can effectively motivate brand advocates to refer their friends. 

Saje’s program lets brand advocates and referred friends receive 10% off their next purchase. This small discount may be the push that both customers and their friends need to return to your store and shop. 

Sales referral program refer friends

2. Use a referral app 

Businesses can opt to build their own referral program from the ground up. However, if you don’t have any technical expertise, you can opt for a referral app. 

A good referral app, like ReferralCandy,  can let you set-up your own referral program within minutes. Once you’ve specified the referral incentives to offer, it can fully automate the process. It can distribute the referral rewards to shoppers who made a successful referral, send thank you emails and onboard first-time customers to the app. Not only can you get started quickly, but you can eliminate the technical headaches and focus on your business. 

3. Build a referral program page 

Of course, people won’t be able to join your referral program if they can’t sign-up and learn the nitty gritty details. That’s precisely why you should have a well-designed referral program landing page on a communication platform you use more often–website, social media, email, etc. Ideally, this should include the details about the referral program (i..e rewards) and a text box where people can submit their email to register. If you’re offering a particular freebie (i.e. a free subscription box month),  include a photo of the reward to further incentivize brand advocates. 

Soko Glam’s refer-a-friend landing page communicates that referred friends can get $10 off their first order while brand advocates  receive $10 off their next order. 

Sales referral program refer a friend

4. Promote your referral program 

People may not sign-up the first time they hear about your referral program. But if you persistently promote and show off your rewards, they’re bound to give in sooner or later. 

To communicate the perks of joining your program, create marketing campaigns. Launch social media posts talking about the rewards and incentives that you’ll offer. Use social media schedulers like Hootsuite or Buffer to spread out your communication over several days. 

You can also create referral emails with links to the referral program landing page or FAQ page where customers can learn more in-depth details. And if you’re launching your referral program for the first time, you can create a website banner to boost awareness. 

For example, Advance English Academy launched a referral program and rewarded participants with a $100 tuition discount. 

Sales referral program promotion 1

You can also include referral program details at the bottom of your marketing emails to keep it in the back of your customers’ mind. This is a subtle and non-intrusive way to encourage them to continue referring. 

Sales referral program email marketing

5. Thank brand advocates 

Making a successful referral takes time and effort so don’t forget to send a thank you email to show your gratitude. That way, customers will know their efforts are appreciated. Maybe they’ll even end up referring more friends to your business. 

Sales referral program brand advocates

Ready to launch your referral program?

Having a well-designed referral program can have a huge impact on your sales. 

Potential customers are more likely to trust the word of their friends and family. So, a positive referral from their friends can pique their interest and encourage them to try your products or services.

In contrast, brand advocates love talking and sharing the brands they love. The possibility of getting rewarded for it may even motivate them to make more repeat purchases in your store. 

How will you boost sales with a referral program? Let us know in the comments.

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