How to Create and Promote a Referral Program to Increase Sales

A referral marketing program is one of the best ways to market and increase your business's sales in digital and ecommerce marketing. What's better than your happy customers reaching out to those they know and speaking about how awesome you are in what you do? The reality is that, done right, a referral program will increase sales and also your customer acquisition rate. Moreover, by rewarding your customers, you create a win/win situation for them and you.

According to ReferralRock, word-of-mouth influences 91% of B2B purchasers. Also, 88% of B2B buyers rely on 'information and advice' from others. So, a referral program could greatly benefit your company because you're giving your prospects exactly what they want—trusted advice and information from someone they know instead of cold marketing and advertising that many tune out.

This article will explore the benefits of a referral program and provide you with a step-by-step guide to creating and implementing it. Also, we'll discuss some of the challenges you may find along the way, including solutions and specific techniques you can use to measure the success of your program. Further, we'll cover what you need to know about the best practices for creating and succeeding with your referral program, so let's dive right in!

Benefits of Referral Marketing in eCommerce

The fact is that referral marketing offers many benefits for ecommerce marketing and any business with a digital footprint. That includes benefits such as increased sales to higher customer loyalty.?

A. Increased Sales

One of the big plusses of referral marketing is increased sales. You can get new leads and develop your customer base by incentivizing your existing customers to refer those they know. In fact, customers that get referred spend 25% more and also refer someone else to the brand—so what’s not to love??

B. Higher Customer Acquisition Rates

Referral marketing brings new customers at a lower cost than traditional marketing channels, which makes sense because these are warm leads. So, when your clients and customers refer leads, they’re marketing for you by increasing customer acquisition rates.?

C. Enhanced Customer Loyalty

Referral marketing can help you boost customer loyalty and increase business efficiency. When you offer incentives to your existing customers to refer others, you’re letting them know you value them. By asking for referrals, it demonstrates you value their opinions and ideas. The fact that you trust them for good leads increases loyalty and customer satisfaction.?

D. Lower Customer Acquisition Costs

Finally, another benefit of a referral program is lower customer acquisition costs. When you get existing or past clients to help you with marketing, you don't have to spend as much on advertising and marketing. Further, if you have a robust referral program, you may even significantly lower your costs.

Steps to Create a Referral Program

A referral program is a powerful way to get new clients and increase sales at a lower cost. That said, creating a program that works so your efforts align with your business goals and marketing and sales objectives is essential. The following section explores the elements of developing a robust program that works well.?

A. Determine Your Goals and Objectives

The first step in creating a referral program is considering your goals and objectives. For instance, what percentage of your client base or by how much do you increase your retention rate of customers as a result of the program? How much revenue do you expect your referral program to generate? Setting realistic goals is vital for ensuring your referral program succeeds. Also, ensure your program aligns with the overall business plan and objectives.

B. Identify Your Target Audience

Once you've determined your goals, it's time to identify the target audience. For starters, what qualifies a current or former client the chance to participate in your program? Concerning new customers, who are you looking to get on board? During this stage, buyer personas work wonders because they help you understand the characteristics of your expanding target audience, including motivators and preferences.?

C. Design Your Referral Program

Once you identify your target audience and are clear about what motivates them to engage, the next step is to design your referral program. Fortunately, you can get creative and find an approach that aligns with your company. For example, you could create discounts for your customers on closed new sales referred from them. You could also create a bonus or points program that gives them an easy way to see referral rewards.

D. Launch and Promote Your Referral Program

Finally, when you’ve created your program, it’s time to launch and promote it. One of the best places to start is by sending a series of targeted emails encouraging your targeted referrers to visit a landing page with information on the exclusive referral program. If your program allows any customer to refer someone, use social media to promote the program to your current customers and those considering your products or services.

Measuring the Success of Your Referral Program

The success of your referral program is founded on the idea that your efforts align with clear business objectives for marketing, sales, and any ecommerce marketing initiative. For example, your sales team has to be part of the process every step of the way, and you have to align quarterly and annual sales goals with your referral program. Your methods should potentially include your sales group calling on current customers to get them to refer your business. Still, once your referral program gets launched, it's critical to have benchmarks for measurement so you can evaluate what works and what doesn't. When you measure something, you can make incremental adjustments and improvements based on metrics and results. ?

A. Setting Key Performance Indicators (KPIs)

Getting your team to develop key performance indicators (KPI) is fundamental to measuring the referral program's success. KPIs you should consider measuring include the revenue from referrals, acquisition costs, and the conversation rates on referrals made. Again, the KPIs measure concretely what works and what doesn't work. Moreover, it's vital to ensure that the KPIs get integrated with the appropriate team members (e.g., marketing, sales, ecommerce) based on the groups' overall departmental and business goals.

The referral conversion rate measures the percentage of referred visitors or leads that become paying customers. This metric is essential to determine the effectiveness of your referral program in converting leads into sales. Referral revenue measures the total revenue generated from your referral program. This metric is essential to determine the financial impact of your referral program on your business. Referral customer acquisition cost measures the cost of acquiring a new customer through your referral program. This metric is essential to determine the efficiency of your referral program in developing new customers at a lower cost.

B. Tracking and Analyzing Customer Data

Additionally, gathering and analyzing customer data is vital to gauge a referral program's performance. In other words, you need to understand quantitatively and qualitatively what drives customer behaviors and preferences. However, you also need to know what's prompting your customers to provide you with referrals—or not. For example, if you see a low referral rate, you need to explore (and determine by strategic conversations with customers) why they're not taking advantage of the program. Is the discount too low?

As you know, data is gold. As a result, a successful referral program is continually improving in an iterative process based solidly on data. Again, you want to understand the performance and interest in your referral program, so it means connecting with customers. Techniques you could use to track performance and analyze data about customer preferences include surveys, referral clicks, increased ecommerce sales, and direct conversations from the program. In short, ask your customers to provide feedback to improve your referral program.?

C. Conducting A/B Testing

A great approach to measuring your referral program is to A/B test elements of it. A/B testing is a commonly used approach that compares two versions of something to determine the most effective. Regarding a referral program, you could A/B test different program elements. Further, as your program grows, you can continually test updates, so the program doesn’t become stale over time.?

Let's say you offer different rewards to your two A/B test groups. By doing so, you can determine which incentive works best. Later, you can do another A/B test using the same reward but different messaging to see which resonates more with your audience. You can also A/B test on promotion strategy (e.g., calls, emails, social media). That said, A/B test on one element at a time, so you ensure too many differences and options don't cloud your data. ?

Remember, measuring your referral program is an ongoing process and effort. As a result, it needs to happen and get integrated into your ecommerce, marketing, and sales efforts to have the most significant measure of success.

Best Practices for a Referral Program

As you can see, referral programs are a powerful tool in marketing. You have the opportunity to increase your sales revenue and broaden your base. Still, if and when you create a referral program, there are some best practices to remember.

A. Make it Easy and Simple for Customers

A critical element any referral program must have is to be simple and easy for customers to refer. As a result, you should create a landing page that you include in your promotions explaining the program. But again, keep it simple for them. For instance, they get a percentage discount for making referrals. Further, make it easy for people to refer. A form on the landing page includes referrer names and contact information for those referred.

B. Offer Relevant and Attractive Rewards

To encourage your customers to refer others, you want to create a referral program that resonates with them. In other words, the rewards and incentives your program provides must appeal to your existing customers. Explore different ideas for those rewards and incentives. For instance, consider cash incentives, rewards, bonus programs, tier-based rewards, percentage discounts, free products, etc.?

C. Track and Analyze Customer Data

As mentioned earlier, tracking and making sense of customer data is critical to measuring the success of your referral program. Moreover, it gives you the information you need to make data-driven decisions to optimize it. The correct data to evaluate involves quantitatively understanding the behaviors of your customers and the referral activities based on optimized calls-to-action. By tracking and analyzing your data, you can spot patterns and important trends to improve and improve it.

D. Promote Your Referral Program Consistently

Another vital best practice is promotion. But more than that—consistent promotion. Of course, when you start your program, you might get some customers who will ask questions. However, beyond those initial efforts, customers need to get reminders regularly that there’s a referral program that could benefit them. Therefore, make it a point to have your marketing, sales, and ecommerce teams integrate the program into their social media (if appropriate), emails, and calls to customers to increase the chances your customers will make referrals.?

Closing Remarks about Your Referral Program

In closing, a robust referral program is a game-changer for any company. As discussed, when you incentivize and reward your clients, boost sales, expand your customer base, and retain your customers by rewarding them for their company support. As a result, with a solid referral program, you create a win/win situation both for your customers and the company. The best marketing you can ever do is to have happy customers promote your business, so creating a well-executed referral program makes sense.?

? 2024 Wayne Elsey. All Rights Reserved.