9 Reasons Why Great e-Commerce Referral Programs Succeed

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A well-run e-commerce referral marketing program will almost certainly deliver on its promises: low-cost customer acquisition, and the most efficient method to attract new customers.  At Buyapowa we take time to educate our customers and prospects on the nuanced elements of a successful referral marketing program.   During the launch of a program, we help our customers understand some of the most basic and fundamental tenets of a good referral program.  The first six of these are:

  1. Usability – Making and receiving referrals should be easy.
  2. ValueThe rewards should be meaningful.
  3. Equality – Both the advocate and the referee should be rewarded upon a successful referral.
  4. Immediacy – The rewards should be issued as close to the referral activity as possible.
  5. Simplicity – The rules of your referral program should be easy to understand.
  6. Efficiency – The program should be easy for you to administrate.

We often hear from new prospects who have tried referral programs in the past and have encountered difficulties.   In most cases, one or more of the above criteria have not been met. Knowing how to implement programs that meet these criteria is critical. But to be honest, these reasons are really the obvious ones.   Some are related to your customer’s interaction with the program: The top five pertain to your whether or not your customers will actually make referrals: Can they figure out how to do it?  Is there strong incentive for customers to make and keep making referrals?  Do customers feel that both they and their friends will receive a worthwhile benefit?  Are the rewards issued in a timely enough fashion to help referrers and advocates mentally associate the referral action they’ve made to the resulting reward?  Is it clear what types of referrals will result in a reward being issued, or are there complicated steps required in order for recipients to receive their reward?  Getting the first five of those six elements right is certainly very important to the overall success of a referral program.

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Likewise, the sixth point is just as important. It pertains to your team and whether or not the referral marketing program is going to be friend or foe to your operational employees: Complicated programs that are difficult to oversee, hard to administer and challenging to execute are more than likely going to result in errors. Errors can result in rewards not being issued, which is as about as discouraging to your customer advocates as you can get. If the program is hard to oversee and error-prone, your employees won’t promote it properly, or will fail to complete the referral cycle properly, resulting in the non-issue of rewards.

Effective referral marketing programs sort out these challenges in the initial planning phase. Most importantly, a well-designed referral marketing program operating on a best-in-class platform will ensure that these elements are designed into the program in the first place. Before you tell your customers about the referral marketing program or get your first referral, you’ll have sorted these out.   If you don’t, you’ll certainly increase the risk that your referral program will under-perform.

In programs that do under-perform, we frequently see that one or more of the above elements has not been properly thought through or executed upon.  In the most successful programs, each of these elements has been considered in advance and implemented effectively.

But what about the other three measures of success? In every case of a failed referral marketing program that we’ve encountered over the years – programs that customers have abandoned due to non performance – none of the following criteria have been met.

  1. Regular promotion.
  2. Consistent engagement.
  3. Staff education.

What do these mean?

 

Promote your referral marketing program regularly.

If your customers don’t know about the referral marketing program, they will not make referrals.  And as you know, sometimes it’s hard to get through to your customers.  It is not enough to simply send out an email notification to your customer base announcing the availability of the program and expect the referrals to start pouring in.  Our most successful customers send out regular, cyclic and consistent communications highlighting and promoting the program.  Their referral program can be easily found using a web search.  Referrals may be initiated from every corner of their web site: the home page, account pages, checkout pages, navigational header and footer bars, front-page carousels, plan and pricing pages; everywhere their customers spend time on their web properties. Their social teams ensure that the program is promoted to advocates through all their social media channels.  It’s featured in printed materials sent to customers and wherever customers are making purchase decisions.   The language used to describe the referral program is consistent, easy to understand and relates back to the customer’s experience with the brand.  There are often seasonal promotions that are repeated year-over-year and these are also consistently promoted across all marketing channels.   For e-commerce retailers, it’s easy to ensure that your customers are aware of your referral marketing program by promoting it on product pages (“Like this sweater? Refer your friend and you could get it for free”), on check out pages, on emailed receipts and on electronic flyers.

I’ve used the word “consistent” here, and that’s important: It is easy for marketing team priorities to shift once a referral program has been launched, and many a time we’ve seen links to the referral program disappear from the customer’s website during a site refresh, only to result in a slow decline in program activity over time until it is restored.

More than 50% of respondents surveyed by New York Times said they would make a purchase based on a recommendation from friends or family.

Engage with your customer advocates on a consistent basis.

One of the saddest aspects of a poorly run program that we’ve seen in the past is a lack of engagement.  Referrals start happening, and new customers sign up as new customers as a result, but the brand chooses to not engage with those advocates (referrers) to thank them for their action, or to encourage further referrals.   It seems simple, but it’s more common than you’d think.    We’ve also seen situations where new customers sign up as a result of a referral, and are not encouraged to make referrals themselves.  Like the original reward itself, it’s just as important to reinforce the customer’s behavior by reaching out to them to thank them for their referral, to remind them of the reward program, and to encourage follow-on behavior.  Our customers typically set a ceiling on the number or value of rewards that can be earned in a year, which is understandable, and it’s also important to remind customers to try to achieve that goal. It’s a good idea to show the customer how many rewards they have earned and how far along they are in achieving their goal during their regular interactions with your site. If you thank your successful advocates with a $50 reward, and they have the opportunity to earn up to $500 in a year, make sure they know that. We advise clients to send out a personalized “thank-you” note and a reminder with the reward itself, as well as to follow up no later than 30 days after the referral event to encourage repeat behavior.  It’s also important to reach out to program members who have lapsed for several months to encourage them to act again.  For e-commerce retailers using commercially available platforms to operate your site, it’s typically possible to present a welcome message to returning customers on your site, which is a great opportunity to present a subtle reminder of the program itself.

 

Educate your staff so that they understand your referral marketing program.

Finally, and most importantly, your referral marketing programs experience the greatest success when your employees are aware of the program, and can explain it to customers. Everyone in your organization should understand the referral program, and your customer-facing team members should be able to explain it clearly to customers. Whether it’s your social media team, your client success and customer satisfaction team, your tech support personnel or your retail sales clerks, everyone should know there’s a referral program in place, how it works, and how customers can access it.  Whether your customer-facing team members speak to customers on the phone, through chat windows, or simply handle queries by email, these interactions are all opportunities for engagement.    If your employees are not aware of the program or don’t understand the benefits to your customers, it can seriously undermine the performance of the program over time.

We’d love to hear about your experiences and successes with your referral marketing programs. Or get started with your own online referral program campaign here.

 

2 thoughts on “9 Reasons Why Great e-Commerce Referral Programs Succeed

  1. Currently, my online store is running customer referral program as well and is only for customers who have made their first purchase. Due to my customer base is < 100 currently, I foresee it might be difficult for me to get the traction based on this size. What is your opinion for me to extend my customer referral program to those who do not made any purchase yet?

    1. You might want to consider offering a lower reward for people who refer others to you, but who themselves are not yet customers. We recommend that non-customer advocates receive points in a points program that over time can add up to discounts and promotional deals. The big benefit for you comes when existing customers bring you confirmed new customers. Your only risk is that people send out a large number of “fake” referrals (to false email addresses, or people who will never become customers) just to earn discounts. By rewarding this activity with points, you minimize the risk.

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