The Epic Beginner’s Guide to Building a Successful Referral Marketing Program

Your customers are the lifeblood of your business. Frankly, while you can have a fantastic team, a great catalogue of products, and an amazing business plan, but none of this will matter if you can’t keep those customers happy, engaged, and willing to tell their friends good things about you. Quite simply, in ecommerce, your customers are arguably the most important and effective sales tools you have at your disposal today. That’s because, when your customers talk, their friends and family listen. So you could spend your entire marketing budget on precisely targeted Facebook ads, compelling email campaigns, and clever CRO tests, but you’d probably be better advised to get loyal customers — or brand advocates – to convince a friend or family member that your products are worth buying.

The reason word of mouth is so effective is simply that 92% of consumers say that they trust word of mouth marketing and positive word of mouth on its own is estimated to account for 13% of all consumer sales.

So considering the above, what can you, as a business owner or marketer, do to encourage more customers to spread positive word of mouth about your business? That’s where a customer referral program can come into play; by motivating and encouraging your existing customers to recommend you to their friends, colleagues, and family members. 

This short guide is intended to provide you with actionable steps you can take in order to get started with a referral program as soon as possible.

Step 1: Ensure you do it correctly

Before getting too far into developing a customer referral program for your business, you need to first ensure you know what your goals are for your program. Do you want to drive sales, sign-ups to free trials, app downloads etc. How many actions will you be looking to drive, and how will you measure them and judge success.

Because a poorly designed referral programme can reflect negatively on your brand, you need to pay attention to the look and feel, make sure that the whole experience is on brand and that everything works as expected. This is why, we always recommend leaving it to the professionals. Quite simply, no business can do everything. Unless you have infinite development resources, you probably already have a full product pipeline, so outsourcing your referral platform allows you to focus your scarce resources on doing what you do best: developing your USP and generating revenue.

But it is not just a question of getting the right software, you should also find the right partner to guide and help you make the right decisions. Having run referral programmes for over 100 leading businesses around the world and across a host of verticals, including telecoms, financial services, utilities, fashion, beauty, retail, online gaming and more, we think we are well placed to help you make the right choices.

Step 2: Educate Yourself and Understand your Audience

Key to success in business is understanding what motivates your customers so that you can fine tune your products and services to align with your customers’ needs and desires. In the context of a referral program, this means offering rewards and incentives that motivate them to share your offers with friends.  

“My #1 tip to succeed with customer referrals at any company is the value of the referral program has to be all about your customer. Your customer’s job is not to sell your services or product, but quite the contrary. Your service or product’s job is to provide value to your customer, hence why it has to be all about the customer. And this does not necessarily mean you give them money, even though that is often a strong motivating force and one of the methods we use. Another method is Dropbox, as they are the go-to example with their double-sided referral program where both the referrer and recipient were given additional storage, which is something everybody needs today. People like Ramit Sethi have given away free flights to travel around the world. Figure out what your customers really want — money, software, prizes, recognition — and reward them accordingly.” — Casey Armstrong @CaseyA, Director of Marketing at BigCommerce

A good place to start is by working backwards from your desired outcome and plot everything out from there. Ask yourself what you really want people’s friends to do, and, if you were the person receiving this offer, would it motivate you to take action? But just don’t rely on your own judgement. Ask others. Do some testing.

Step 3: Choose Your Platform

Once you have decided your strategy, your next step is to pick the right tool to manage your customer referral program. It’s a given that you want your existing online customers to get their friends shopping. But perhaps you will need much more than just basic referrals.

Consider whether the tool you need should offer the following:

  • Product-level referrals
  • Omnichannel referrals
  • Net promoter targeting
  • Driving high value acquisitions
  • Gamification
  • Tiered rewards
  • Employee Friends & Family programmes

Step 4: Identify Your Audience, Decide on Your Offer, Set Your Goals

There are three action items you need to focus on during this step:

Action Item #1: Identify Your Audience – Not every person who buys from you is going to want to refer you business. There are people who will buy from you one time and never again, and then there are people who will return time and time again to do business with you. As you work to develop your customer referral program, dig into your data and talk to your employees in order to compile a list of your most loyal and active customers. This is the group that you’ll want to reach out to first when launching your new program. You can also find advocates by saving positive mentions or interactions that you have with customers on social media sites, and by looking through recent reviews of your products on your own site and on third-party sites like Amazon.

Action Item #2: Decide on Your Offer(s) – This is one of the most important pieces of your referral program, so it’s important that you set aside a good amount of time to think it through. Some percentage of your customers will need to be incentivized in order to refer their friends to you. It’s true that some will spread the word organically on their own, but if you want to leverage your customers as active sales tools, presenting them with an attractive offer will increase the incidence of referrals, and increase the number of customers who will refer you.

Your rewards don’t have to be monetary, and they don’t have to be huge. But your customer base is probably split roughly evenly into three groups:

  • Those that will refer their friends to you without any reward.
  • Those that require a reward to refer their friends to you.
  • Those that will never refer their friends to you whatever you offer them.

The incentives and rewards in your referral program will completely depend upon your own individual business. Some companies offer discounts or special promo codes in exchange for referrals, some offer cash, and others offer other types of free goods. At the end of the day, while you need to spend time figuring out what your customers want—what they would be motivated by, you need to think what your business can afford to offer, given the value of a new customer.

If you’re not sure where to start, sometimes the best and easiest way to do it is to simply reach out to a handful of your most loyal customers, present them with a few scenarios and options, and gauge their interest. Alternatively, you could look at what the competition, or comparable businesses, are offering in order to see how generous your offer is likely to be perceived.

Action Item #3: Set Initial Goals – you can’t identify successes or failures if you’re not working to achieve specific goals. Before launching your referral program, imagine what success would look like for you.

Many of our customers focus on the following areas when developing goals:

  • Increasing the overall number of customers at a lower customer acquisition cost (CAC)
  • Attracting higher lifetime value customers
  • Increasing the average purchase value each customer makes
  • Increasing customer loyalty

Ultimately, there’s really no point in launching a customer referral program for your business unless you’re willing to set and work towards, goals. Keep in mind that your goals can (and likely will) change often as you continue to develop and optimize your referral program. But setting clear and realistic goals now will help you build a stronger and more effective program over time.

In addition to setting clear goals, you should also make sure you’re in the position to track performance and metrics from month-to-month. The best place to do this (aside from the referral marketing program you’ll be using) is in Google Analytics. If you’re new to Google Analytics, read this beginner’s guide from Shopify. This will help you understand how to set up tracking and reports for your ecommerce business.

Step 5: Prepare Your Team

Once you have your tool picked and you’ve started to work on setting up your referral program, you need to spend some time educating your team and preparing them for the launch of your new program. One of the primary reasons that referral programs fail is that staff are not properly trained on what the referral program is, how to promote it to customers, and what the benefits are to both the customer and your company.  Everyone at your company should be involved in the discussion, but you should spend the most time talking to the following departments:

  • Sales: If you have a sales team, make sure to arm them with all the information they need to answer questions and promote the new program when they’re talking to potential and existing customers. Your customers won’t instinctively know about the referral program once it launches, so it’s up to your sales team to bring it up at the end of conversations or after a successful sale.
  • Customer Care: Newly launched referral programs often result in a lot of questions from existing customers who want to learn how to take advantage of the offers and receive the rewards you are promoting. As such, it’s important to bring your care team up to speed and help them craft the right answers to send to customers when they reach out wanting more information.
  • Marketing: You’ll need to work closely with your marketing team to design a launch plan that can be initiated as soon as your new program goes live. This may involve making updates to your website and product pages, incorporating new emails into your lifecycle marketing drip sequence, adding messages to your transactional emails, writing blog posts, and sharing the news on social media. You’ll also want to work with marketing to develop an ongoing plan for promoting your new program month-to-month. For many companies, marketing also has the responsibility of tracking data, evaluating performance, and optimizing the program based on results over time.

Step 6: Launch and Promote

Koodo referral program

You’ve finally made it! It’s time to launch and promote your new customer referral program. In order to ensure a successful launch, you’ll want to plan well in advance. Work with your marketing team to develop a ‘go live’ strategy that gives you 4-6 weeks to:

  • Make changes across your website, email campaigns, and other marketing collateral. Ensure the referral program can be discovered in these top five locations:
    1. Your top navigation bar.
    2. Your sitemap (bottom nav).
    3. Your checkout process (ideally right after the purchase when the dopamine is running high).
    4. In your emailed receipts and/or invoices.
    5. In all your email footers.
  • Build buzz with your most loyal customers by telling them about the program before it goes live.
  • Test the functionality of the tool and the readiness of your team to respond to inquiries and a general uptick in activity (sales, traffic, support tickets, etc.).
  • Create new marketing material to promote your new program (blog posts, press releases, social media updates, any physical marketing collateral that can be packaged and sent with products.

When you finally reach the day that you’re going live with the announcement of your new customer referral program, you should consider trying to incorporate as many of these tactics as possible into your launch day strategy:

  • Send an email to everyone who has purchased from you in the past 30-60 days.
  • Send personalized emails to your most loyal customers letting them know about the program.
  • Launch Facebook ads that promote the new referral program.
  • Publish a blog post that offers specific details about the program and helps people understand how to use the customer referral tool you chose.
  • Launch a contest and offer a special prize to the customer who can successfully refer the most people in the first week.
  • Add information about the customer referral program to your email signatures.
  • Feature the news prominently on your homepage and within your product pages.
  • Interact in real-time on social media as messages of support and questions come in from customers and followers.
  • Launch a contest among your sales team to see who can get the most customers to sign up for the referral program in the first 48 hours.

Step 7: Test and Optimize

After you launch your customer referral program, the final (ongoing) step is to test and optimize your program in order to make it even more effective and attractive to your customer base. If you’re not sure where to start, read through the blog post from Optimizely. It includes a number of simple ideas you can try in order to optimize and improve the overall performance of your program.

It can also be beneficial to circle back with customers to ask them what they think about the program after launch and after successful referrals. Use their qualitative feedback to make adjustments to your incentives, your marketing, and your referral program as a whole.

Are you thinking of launching a referral programme? Contact us today and we will guide you through the entire process.