How to Create a Referral Program for Your Online Store

Are you looking for new ways to generate more sales for your online store? Consider starting a referral program so that your happy customers and brand advocates can spread the good word about your products and help you generate more sales in the process.

Successful ecommerce businesses such as Everlane and Bonobos have figured out how valuable referral programs were a long time ago. It’s estimated that businesses generate up to $558,000 in yearly referral marketing revenue.

Studies have also shown the effectiveness of referral programs, with referred shoppers being more likely to make a purchase, as well as having a 16% higher lifetime value than non-referred shoppers.

Here are the four steps you need to take to create your very own referral program.

1) Offer an incentive

As many as 83% of shoppers state they would provide referrals if asked to do so, yet only 29% do it. To increase the number of customers referring their friends and family to your online store, you need to offer them some sort of incentive.

You can use a wide variety of monetary and non-monetary incentives, with the most common ones being:

Discounts - Everyone loves discounts, and offering one as a reward for providing referrals can be a great incentive. Just make sure to offer no less than a 10% discount, otherwise, most customers won’t be interested.

Free products - Offering a free product can be a cost-effective way of rewarding your loyal customers, especially if your profit margins don’t allow you to offer large discounts.

Store credit - A incentive frequently used by online clothing stores, store credit is an excellent way to reward your customers for referrals while also making sure that they’ll continue to shop with you.

Whichever type of incentive you choose, you need to make sure that it’s something of value to your customers. The incentive also needs to be proportionate to the amount of effort that customers need to put in to refer people to your store. Offering a free product in exchange for referring a friend might be a more attractive incentive than simply getting a 10% discount.

You should also put some thought into how you’re going to structure your referral program. Most referral programs fall under one of these three categories:

Single incentive - This type of referral program only rewards the original referrer once and is often used by businesses that have low profit margins.

Double incentive - Rewards the original referrer for every new customer or sale that they refer. This type of incentive usually encourages customers to put in more effort into referring your store, since they get rewarded for every person they refer.

Dual incentive - Offers a reward for both the original referrer and the person that they referred. This type of referral program frequently outperforms all others due to the amount of value it provides to all parties involved.

2) Make it easy

The referral process needs to be as easy as possible to be successful. If you make it too complicated or time-consuming, very few customers will take the effort to do it. In short, it shouldn’t take your customers more than a couple of clicks to refer someone to your store.

Create a dedicated page for your referral program and include everything customers might need to refer their friends on it (e.g., custom referral links or social share buttons).

3) Invite your most loyal customers

If your current customers aren’t satisfied with your products or your service, they certainly won’t refer their friends to you. Work on improving your customer service to increase the number of customers that end up being so happy with your service that they can’t wait to tell their friends about it.

When looking to build your referral program, you should start by inviting your most loyal customers, because they’re the ones that will provide you with the most referrals. To find your most loyal customers, you can either use the Net Promoter Score (NPS) or the lifetime value (LTV) of your customers.

The Net Promoter Score is measured by sending your customers a survey, asking how likely they are to recommend your online store to their friends on a scale of 1 to 10. Once you get the results, contact the customers with the highest NPS scores and ask them to join your referral program.

The other option is to invite customers with the highest lifetime value. This can be particularly effective if you’ve been running your store for a while and you have a lot of data on your customers’ spending habits.

4) Promote your referral program

Once you’ve decided which incentives you’re going to use, invited your first members and launched your referral program, you should now spend your time promoting it.

You can promote your referral program in the following places:

Website - Create a dedicated page for your referral program and link to it from various parts of your website. An excellent place to ask people to join your referral program is the post-purchase page.

Blog - Write a blog post about your new referral program and ask everyone to join it. Explain all the benefits that come along with referring new customers to your store.

Email list - Send an email to your email list subscribers informing them of your referral program and ask everyone to join it.

Social media - Post about your referral program on your social media pages and ask your followers to participate.

Now that we’ve went through all the crucial steps of creating a great referral program, let’s look at some tools that can help your run and manage your referral program.

Referral marketing software

There are a number of software solutions for running your referral program. Here are a few of the most popular ones:

Ambassador - Used by companies such as Hulu, Logitech, and Shinola. Ambassador also lets you start an affiliate program and an influencer program.

Buyapowa - Suitable for businesses with bigger budgets, Buyapowa is a premium solution used by ASOS, Gap, and Expedia.

ReferralCandy - An affordable solution for starting a referral program, ReferralCandy supports a variety of ecommerce platforms including WooCommerce, Shopify, Magento, and BigCommerce.

Referral Saasquatch - Used by LogMeIn, 99Taxis, and Typeform, Referral Saasquatch is an all-in-one-platform for managing affiliate and referral programs.

Start a referral program today

A referral program is an excellent way to boost your online store’s sales. To make your referral program a success, you need to offer your customers an incentive to participate. This incentive can either be monetary or non-monetary. Most ecommerce businesses use discounts, store credit, or free products as incentives.

You’ll also need to decide between using a single incentive, double incentive, or dual incentive structure. Keep in mind that referral programs using dual incentives are usually the most successful ones.

Apart from choosing attractive incentives, you also need to make it as easy as possible for your customers to participate in your referral program. It shouldn’t take customers more than two clicks to refer friends and family to your online store. It’s also a good idea to create a dedicated page on your website where you’ll provide customers with everything they need to refer people to you.

Once you’ve set up your referral program, invite your most loyal customers first. They’ll be the ones that will be providing you with the most referrals. To find out who your best customers are, you can use the Net Promoter Score or customers’ average lifetime value (LTV).

The final step is to promote your referral program. Post about it on your website and your blog. Send an email to your email subscribers and let your social media followers know about it as well.

Looking to generate more sales?

Do you need help with boosting your online store’s sales? Our ecommerce experts can help you drive more traffic, generate sales, and improve your conversion rate. Fill out the form below, and we’ll get back to you with more info on how you can increase your online store’s revenue.