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Think about this for a moment: what do all the most successful referral programs share in common?
I can think of three aspects:
It may not seem like much but these three success-driving factors are at the foundation of any thriving referral program.
So much so, that they can be the difference between success and failure.
To ensure your business stays on the winning side, we’ve put this post together to help you out.
Included in this post are 3 easy-to-follow tips on how to run a successful referral program. Plus, I detail 6 referral program ideas and examples for you to pull inspiration from. And one you probably shouldn't.
Let’s get into it.
Tips for running a successful referral program
Before we get into which referral program ideas you’re going to take back to your business, let’s get a few things straight.
First, you gotta set up referral incentives that people would actually like. While a 10% discount may seem like a good idea, it amounts to next to nothing when your products cost less than $20.
Second, you need to keep an eye on your referral rates. If you’ve created (what you think) is a great incentive, yet nobody is taking you up on your offer, then you’ll want to rethink your referral program.
And lastly, you’ll need to find a way to tell everyone about your referral program in a way that actually works. Having a cute little pop-up may not be enough and neither will your half-assed email about it.
But don’t worry.
We’ve got a few tips for you on each of these points, plus some solid resources for you to go through.
Tips for setting up referral incentives
One of the best ways to further the success of your brand is to look toward existing and returning customers.
After all, existing customers are your brand's biggest fans and, with just a few well-strategized incentives, are very likely to become your biggest advocates.
So which referral incentives work best?
Well, here at ReferralCandy we generally recommend using two-sided incentives.
Rather than simply rewarding your newly-referred customers, as a one-sided incentive would, we’ve found it’s best to also reward your loyal referring customers, just as a two-sided incentive would. That way, not only will your new customers feel great about their decision to do business with your brand but also your loyal existing customers will surely feel appreciated as well.
How exactly should you set up your payments? Who should you reward? Should you use cash or discounts?
- If your advocates are likely to make repeat purchases, give discounts to encourage them.
- If your product costs more than $100, a flat discount is usually more enticing ($500 off a $2,000 laptop)
- If your product costs less than $100, a percentage discount is usually better ($10 off a $50 t-shirt is better phrased as 20% off)
- If your advocates are unlikely to make repeat purchases, give cash.
- If you’re doing preorders, consider giving cash discounts on the advocates’ existing preorders.
- Remember to focus on your customers’ interests and motivations.
Tips for increasing referral rates
The next aspect of any good referral program is a focus on increasing referral rates.
For those that aren't sure, referral rates are simply the volume of referred purchases as a percentage of total purchases.
It may sound kind of complicated but I promise it's not.
Here's a super simple example.
Let's say your brand achieves a total of 100 purchases over a period of a few days, the purchases being made with the help of a 3 percent referral rate. That means that for every 100 purchases made with your brand, 3 of these were from referred customers.
Three percent may not sound like much but I wouldn't be too disappointed if I were you. The fact is, the average global referral rate is about 2.3 percent.
With that in mind, basically, the higher you can increase your referral rate, the more sales you'll make, and the greater your brand's revenue.
It's that simple.
How else can you increase your referral rate?
- Invite past customers to join your referral program
- Allow non-customers to benefit from referring friends
- Use two-sided rather than one-sided incentives
- Be generous with the Friend Offer
- Feature your referral program prominently on all your touchpoints
- Communicate the Friend Offer clearly to participants AND referred friends
- Keep your referral program top-of-mind with timely emails
- Communicate the conditions of your referral reward clearly
Tips for coming up with great emails asking for referrals
And the third tip we have for you is to take advantage of the magic of email marketing.
Email marketing has serious potential.
Simply by sending your customers a friendly reminder about your products and services, upcoming sales, or social media campaign, you're tapping into a stupid-easy way to keep them engaged with your brand.
And perhaps best of all, it encourages customers to engage in your refer-a-friend and referral programs.
That sounds like a pretty handy little earner, am I right?
So how can you improve your emails? There are broadly 6 things that you need to be mindful of.
- Focus on the subject line
- Keep the email simple
- Make your call-to-action impossible to ignore
- Emphasize the motivation for purchase
- Highlight the benefit to Friend AND Advocate
- Include any additional conditions for the referral
Learn more: How To Write Great Emails Asking For Referrals
7 Referral Program Ideas that you can try
There is a whole heap of high-converting referral marketing ideas that are sure to help bolster the success of your referral program. While many are listed online, there are seven that we recommend trying for your ecommerce shop and one that we recommend avoiding.
1. Offer A Free Surprise Gift
Generally, customers prefer to know exactly the reward they are going to receive when making a referral.
However, there are some instances where that may not be necessary. In fact, on the contrary, some customer bases quite enjoy surprise rewards.
For example, perhaps your product line is trend-based, meaning items come in and out of demand at a high frequency. This may cause excess stock lying about that's not as easy to shift as it once was at the spike of a trend.
This is where surprise gifting can work really well.
Use these largely under-purchased and excess products to reward your referring customers. Sure, the trend may be over but it's doubtful anybody is going to argue with freebies.
Or, perhaps your business is a services-based brand. A service-based mystery box may just work to entice your customers to create a referral opportunity for you.
As an example, check out this referral campaign from Uberflip.
Uberflip's refer a friend program rewards both the referring customer and the referred customer with a mystery gift box which, as they term it, "is filled with an epic experience".
Sounds intriguing, right?
Why it works: Surprise gifting works on your customer's anticipation levels. It keeps them excited and hyped about your products and services. And as long as the reward is worthy of their anticipation, they are sure to refer again and again.
How to do it: Hype, hype, hype. To ensure the success of this type of referral program campaign you must get people excited about the idea of receiving some sort of out-of-this-world reward.
How to measure its success: Basically watch your ROI. How much money are you spending on the mysteries you are rewarding your referral program participants? If the return is outweighed by the cost of the reward and marketing efforts, perhaps it’s time for a new strategy.
Campaign duration: All year round
2. Upgrade Product or Service
Rewarding your loyal customers with product or service upgrades is a great way to further bolster their loyalty to your business.
Let's say, for example, your business offers SaaS services (software as a service). Through your refer-a-friend program, you reward a successful referral with an upgrade to a premium package or free limited access to premium features.
Rewards such as these won't cost your business anything but are extremely effective in acquiring new customers while keeping your existing and referring customers very happy.
Take Evernote's refer a friend campaign for example.
Their referral program rewards every successful referral from an existing customer with points. These points can then be spent to upgrade their service to Evernote Premium, an upgraded version of the software that has many benefits over the free version.
And to make customer referrals super easy, the Evernote team has included three different ways that referrals can occur. The first is via email, the second is a link posted on social media, and the third is a simple copy and paste the link that can be shared on just about any platform including Slack, Twitter, or LinkedIn.
Why it works: It incentives existing customers to refer friends through three different methods. A software-based upgrade does not cost the business any extra money to run the referral campaign.
How to do it: This type of referral program works best for tiered or software-based products or services. Decide on a reward for your referring customers, ideally something that isn't a huge expense, and, if possible, make it super easy to refer by adding different methods for your customers to invite their friends.
How to measure its success: Pay close attention to 1) how many referral links are used and 2) how many of the referring customers actually sign up for the upgrade. Though it may not cost you much to offer a temporary upgrade, your referral program may be falling flat if it’s not actually enticing enough.
Campaign Duration: All year round
3. Run a Contest or Sweepstakes
Contest or sweepstakes-based referral programs work on your customer base's love of competition. The victors are rewarded with winnings, enticing them to refer an army of brand new customers to your business.
The best strategy here is to use rewards that are in high demand, something that will make it worth their while competing for.
A good idea here is to also offer prizes for those that don't come in the first place. This will help drive even more referrals as contestants feel they have even more chances to win a prize. Secondary prizes don't have to be big, a simple discount will often do the trick.
For example, check out Bagg’s sweepstakes referral program.
Contestants simply fill out Bagg's 'Refer a Friend' form and refer at least one friend to be automatically entered. This puts them in the running to win a special offer of $25 dollars off a $100 purchase or $50 dollars off a $150 purchase.
Contest-based referral programs such as this are best run for a short period, a period of around a month works best. A time period such as this keeps contestants enthused enough to enter but not too disappointed if they lose.
If they didn't win this time around, they can always try their luck next month.
Why It Works: This referral marketing strategy leverages the competitive nature of all of us and directs it towards driving new customers to your business.
How To Do It: When a successful referral is obtained, enter the referrer into the running to win. High-demand rewards work best, the latest and greatest tech gadget or a trip away should do the trick. Remember to reward contestants that come in second, third, and fourth place with rewards as well. This will only increase their chances of winning and your chances of acquiring new referrals.
How To Measure Its Success: This strategy is all about consistently acquiring new referrals from your existing customers each month. To measure if this is the case, record the details of all entered contestants and compare the number of entrants over time.
Campaign Duration: 30 days
4. Launch a Seasonal Campaign
Another great way to really stir up some excitement around your referral program is to run a seasonal campaign.
Seasonal referral programs work similarly to contests or sweepstake campaigns as they leverage hype and even viral growth to drive success.
Perhaps the best part about running seasonal referral programs is the number of events or holidays throughout the year. You're really spoilt for choice, whether it be more traditional holidays like Christmas or New Year, events earlier in the year like Valentine's Day or St. Patrick's Day, or even more left-of-field events like World Environment Day or World Peace Day, there are a ton to choose from.
And whichever promotional period or event you land upon, simply ensure the grand prize at the end of the campaign is alluring enough to entrants. Your contestants can easily be turned off by a prize they don't deem worthy of filling out an application for.
To ensure the success of a referral campaign of this type, offering a worthy reward, one that truly represents the spirit behind a holiday or event, is a must.
For example, take a look at Rift’s Christmas refer a friend campaign.
Over the holiday season, Rift offered their customers a chance to win £1,000 when they successfully referred any of their colleagues, family, or friends.
That’s a pretty handy little Christmas gift for whoever was lucky enough to snag the prize, that’s for damn sure!
Why it works: Seasonal referral campaigns harness the hype and excitement of a holiday or promotional period and use it to drive referrals to your business.
How to do it: Start promoting the campaign prior to the seasonal event to ensure people know when it's time to enter the contest. And be sure to use gifts that align with the spirit of the season, this will help motivate them to refer as many customers as they can to your brand.
How to measure its success: One of the best things about seasonal campaigns is they happen once a year every year, this makes it fairly easy to measure its success. Simply look back at the referrals you received in years previous and compare them to the time period in which you just held your first seasonal campaign.
Campaign duration: Seasonal
5. Try (And Ditch) Social Gifting
Though virtually every marketing blog recommends social gifting as The Next Big Referral Program Idea, the truth is that many ecommerce store owners have tried this idea and ditched it after realizing it didn’t work that well.
The main reason for this? Social gifting is a one-sided incentive.
It works like this, the existing customer (the person referring their friend) doesn't at all receive a reward. Instead, the new customer (the customer they've referred) receives all the benefits. And although socially gifting someone a present or reward is a nice thought, this strategy simply cannot compete with two-sided incentives referral campaigns.
One that rewards both parties, the referrer and referred.
Thomas Jepsen of Check4Lead says that he tried social gifting by sending a small package of their product to another contractor of their customer’s choosing when they bought a bigger package.
AKA socially gifting their products to new potential customers.
So why did he discontinue the program?
“Unfortunately we found that contractors would rather just get more of the product themselves, and we also had a bunch of issues with chargebacks and other things that just ultimately led the program to be too expensive for us.”
Gilad Rom of Huan says that they tried something similar in the early days of their company. While this tactic was helpful in generating interest in their product, building their email list, and growing their social media following, they were barely breaking even with these new customers. So they cut the program after four weeks.
Moral of the story? Ignore those other blog posts that recommend this tactic and stick with what is proven to work.
Why it worked: In the past social gifting was touted as the hottest trend in ecommerce. But now, at least for the moment, it appears social gifting just won't cut it. A two-sided incentive is much more likely to attract referrals.
How to do it: Social gifting worked like any traditional referral strategy. It was simple, existing customers would refer a friend, who would then do business with your business, and subsequently be rewarded for it with some sort of discount or other incentives.
Campaign duration: All year round
6. Give Store Credit, Cash, or Discount
A business gifting its existing and newly referred customers with credit, cash, or discounted products is a referral program strategy that isn't likely to go away any time soon.
Simply because it works and has been proven to do so again and again.
Take MeUndies here for example.
MeUndies' refer a friend program is based around a two-side incentive, a simple give 20% and get $20. All the referred customer has to do is complete a purchase of $12 or more and both parties are rewarded with a very tidy discount on future purchases.
Why it works: As with all the marketing ideas recommended throughout this post, rewarding both the existing customer and the newly acquired customer is a must. The best way to do this is to match the incentives for both customers. An incentive, as small as a $5-10 discount, for both customers is often enough to encourage them to sign onto your referral program.
How to do it: It's super simple, a referring customer refers a friend of theirs to your business. In return, they are rewarded with an attractive incentive like store credit, a cash card, or a percentage discount on their next purchase. And on the other hand, the newly acquired customer also enjoys a similar incentive, something that rewards them for doing business with your brand.
How to measure its success: As with any marketing strategy, the success of this referral program is dependent on ROI. To ensure your investment in this strategy is worth your while, balancing the investment and return is essential. With that in mind, offer incentives that motivate your customers to participate in the program. Incentives that aren't too large, hurt your bottom line and cause the program to be a money pit.
Campaign duration: 30 days, all year round, seasonal
7. Donate to a Worthy Charity
Not all customer referral program ideas have to be based on discounts or product upgrades. In fact, aligning your brand with a social cause, one that is important to your customer base, can be the perfect solution to boosting your referral marketing outreach.
Naturally, people love getting behind a good cause, particularly one that aligns with their moral compasses. With that in mind, leveraging word of mouth is the best way to get the word out about your socially aligned customer referral program.
Take the software company, Vena, here for example.
Vena donates an incredibly generous $2,000 to a charity of their customer's choice. They are aligned with charities such as American Red Cross, WWF, UNICEF, Doctors Without Borders, and even the Wounded Warrior Project.
Why it works: What does your business stand for? This is a question that is becoming more and more important to many consumers. If you can align yourself with a worthy cause, one that is shared by your customer base, you are well on your way to making this referral marketing strategy an absolute winner for your business.
How to do it: Take a good look at your brand and what it means to your customers. Does your business stand behind anything of worth? Does it support the environment, local people, or other socially aligned causes? If so, leverage this to your advantage. Make every referral count towards something that really inspires your customer base to support your business and this worthy cause of yours.
How to measure its success: Social media is a great way to spread the word about a worthy cause. Take advantage of this and get the word out that your customer referral program is all set to help something or someone in need. Sure ROI is important, but also pay attention to how well your social media posts are performing. People who aren't signing onto your customer referral program are still being exposed to your brand, and perhaps best of all, are seeing it in a positive light thanks to your brand new social cause.
Campaign duration: 30 days, all year round, seasonal
8. Bonus: Try Affiliate Programs
Another incredibly powerful way to boost your referrals is to establish an affiliate program. And although affiliate programs aren't technically referral programs, they do work on very similar premises.
Here's how they work.
Instead of taking advantage of your current customer base, affiliate programs often use marketers, bloggers, influencers, and other similar partners to drive customers to do business with your brand. These partners use their influence, hence the name influencer, to promote your products and services to audiences they already have through social media posts, publishing content, or PR.
The advantage to this?
It saves you having to put in work to build audiences or, maybe worse and consequently more time-consuming, figuring out a way to find exposure equal to this level. Instead of this, an affiliate marketing strategy leverages other people's followers, and followers that trust their every word and direct that trust towards your brand.
It's basically targeted marketing on steroids.
Take a look at Recovery For Athletes here for example.
Recovery For Athletes specializes in selling and distributing quality athletic, therapeutic, and recovery equipment. They, like many other online shops, offer an affiliate program that not only makes them a hefty increase in their brand exposure but also drives future sales towards their own online store.
Why it works: An audience that is interested in your brand's products or services isn't always easy to find, but that's where affiliate marketing really shines. It exposes consumers that are already well known to be interested in your brand's product or service niche, to your business.
How to do it: Find affiliates that are well-trusted by their followers, and followers that are likely to be interested in your products and services. Use this form of targeted marketing to extend your business' reach and boost your bottom line.
How to measure its success: Customers that are referred to your business usually come through an affiliate's website or other platforms like YouTube or Instagram. Normally, affiliates use a unique link that is assigned to them through an affiliate program. This link is assigned to customers, usually in the form of cookies, and allows easy monitoring of how many referrals are coming in and where they are coming from.
Campaign duration: All year round
There's no doubt, that coming up with referral program ideas can be tough at times.
And finding a program that aligns with your business model and promotes or represents your products and services in the right light can be even tougher.
I’m certain, though, that the referral marketing ideas I’ve mentioned within this post should work as inspiration to get your very own referral program off the ground. And the examples mentioned should certainly give you the confidence needed to make your referral program an absolute success.
Here are a couple of interesting articles that we think might help:
- 10+ Top Ecommerce Referral Programs to Learn From
- Referral Program Benchmarks: What's A Good Referral Rate?
- The Ultimate Referral Widget Guide to Improve Referrals
- Why We Use Referral Links at ReferralCandy (and the Secret Features You Can Use With It!)
- What We Learned From Analyzing 3,000+ Referral Programs For Ecommerce Brands