How Referral Programs Can Encourage Customers to Do Your Marketing for You

Ecommerce powerhouses like Bonobos, Rothy’s, and Everlane have all been known to run referral marketing programs. They work. They help retailers build a loyal following of their best customers.
But referral programs can be complicated to set up, aren’t a fit for every business, and, as with every growth initiative, offer no guarantee of success. There are many moving parts to consider and configure because an effective referral program needs to be treated as a holistic marketing campaign.
As a result, many retailers setup referral programs prematurely, often before they’ve found product/market fit or a large enough customer base. Or, they invest in referral marketing halfheartedly, not allocating enough investment in promoting their campaigns. Either situation is sure to lead to underwhelming results, which means wasted time and resources.
So, with all of that in mind, should you run a referral program? To help you answer that question for your business, let’s walk through the broad strokes of what you’ll need to do to run a referral program successfully.

Is a referral program right for your business?

Referral programs amplify the existing word of mouth that your store already gets from your customers and fans; they cannot create brand new customers or word of mouth out of thin air.
Since referral programs depend on happy existing customers or advocates to help extend your reach, there’s no single magic measure to tell you in advance whether a referral program would be successful for your store. However, for entrepreneurs who are seriously considering implementing a referral program, I recommend looking at the following two variables:

1. Are you already getting organic word of mouth referrals?
2. How many sales does your store make a month?

To be confident about the potential success of your referral program, already having at least 100-200 monthly transactions is ideal. A customer base of this size accounts for the fact that not every customer will be willing to make a referral, and even those that are will often forget, or fail to recognize opportunities to refer your products.

Tailor the specifics to match your store

There are a few things you need to get right when setting up your referral program from scratch.

1. Incentives

Example from Shopify customer Greats Brand.

The whole point of a referral program is to incentivize more deliberate word of mouth from people who are already casually talking about your store.
To do this, you need to think clearly about what would be a meaningful incentive for both the advocate and the friends they are referring. The right incentives vary depending on the conditions of your store, your product, your pricing and so on.
The big question to answer is: Should you use a cash incentive or a discount coupon?
This depends on whether you expect advocates to return to your store to make future purchases. If you’re selling a product people buy once, or infrequently (like a mattress), it’s better to offer a cash incentive since your advocate won’t have any use for five “20% off your next mattress” coupons.
If you’re selling something people buy often or need to regularly replace i.e., apparel, makeup, or shaving razors, then a discount coupon means that each referral is likely to lead to two new sales. Score!

2. Messaging

Example from Shopify customer GoldieBlox.

There are multiple touchpoints in a referral program where you’ll have the opportunity to communicate your brand’s voice, particularly through the images and copy you create.
You want to ensure every referral touchpoint reminds your advocates, and the friends they’re referring, what your store is about: your ethos, your company’s mission, and the values your brand represents.
Consider the above example from GoldieBlox. The mission of the product is to encourage girls to get involved in engineering. The messaging makes sure to emphasize that, and in turn creates an offer that’s significantly more compelling than a mere discount.
Referral emails are a particularly important channel in which to hone and refine your messaging. Referral emails can be an effective way to remind your existing customers that they can be rewarded for referring their friends to your store.
But to do that, the emails you send have to capture attention and spur action—the table stakes are an interesting email subject line, copy that is short and sweet, content that highlights the benefits to both the advocate and their friends, and a crystal-clear call to action.

Promoting your referral program

Airbnb is one of the mega-brands that is commonly referenced when people discuss and analyze examples of highly successful referral programs. But did you know that their first referral program was a complete failure?
It failed because it wasn’t adequately promoted; even Airbnb employees didn’t know it existed.
You want to avoid this outcome at all costs. It’d be pretty tragic to take the time and energy to figure out the right incentives and messaging for your referral program, only to have customers completely ignore it.
There are several steps to effectively promote an ecommerce referral program to ensure the right people hear about it.

1. Email your existing customer list

Example from Shopify customer ZOOSHOO.

Store owners who’ve been running businesses for years will sometimes confidently declare they wish they would've created and run referral programs sooner. There’s a hint of regret that they must have missed out on acquiring lots of new customers.
But that’s not necessarily true! Relatively “mature” ecommerce stores often get significantly more out of their referral programs compared to brand new stores, because they have the opportunity to send out an email campaign to a much larger email list of past customers. And in general, the audience available to established stores makes getting the ball rolling for a new referral program significantly easier.

2. Feature your referral calls to action

Example from Kurgo.

It’s always sobering to realize how easily distracted customers are. They’ve got tons of other things on their mind—now more than ever. So it’s always worth taking the extra effort to remind them of your offers at every step of the way. Here are some locations you could consider putting your referral program calls to action:

• Header (“Earn $20”)
• Hero Image Carousel
• Pop-up Widgets (use sparingly!)
• FAQ Page

3. Prompt customers after they purchase

One of the best times to ask your customers for a referral is right after they’ve purchased your product. They’ve just made the decision to buy, and they’re extra receptive to taking another little action—ideally, telling their friends about you.
This is an important time to get the copy exactly right. Your customers have just purchased, they’re (hopefully) excited about completing the purchase and getting what they want. You want them to do you a favor, but you don’t want it to sound like a burden or a chore.
To do this, you’ll want to emphasize the good feelings that your customer is going to have when their friend enjoys your product at their referral.

4. Add referral marketing to existing channels

Example from Boxed.

Your referral program doesn’t need to “live” in any particular place, like on your site or in your marketing emails. You can and should remind your customers about your referral program across all your marketing channels.
Of course, be tasteful about this. A referral program, while it offers benefits, is still a marketing tactic. Space these messages out within the context of a broader, more comprehensive social media strategy.

5. Send smart email reminders to your advocates

It's incredibly easy to overestimate how many customers have heard or paid attention to any of your campaigns, referral or otherwise. We all lead busy lives, and that often makes us very forgetful customers.
Sometimes it takes multiple reminders before customers realize that your business even has a referral program, and a few more after that before they remember they’ve got a friend who’d be a perfect fit for your product. To address this, it’s worth sending reminder emails from time to time.
It might be tempting to send referral reminders every week, but what other emails are you sending your customers? If you’re already sending them lots of other emails—discount coupons, new arrival announcements, and so on—then it makes sense to send them out less frequently.
You can always also insert mentions of your referral program in your existing marketing emails! The important thing is to pay attention to your customers’ experience, and make sure that it’s a positive and pleasant one.

Reach your next best customer

Let’s not sugarcoat things: referral programs are a lot of work. But they work. People who participate in your referral program are doing you a huge favor—they’re incentivized to think about which of their friends, colleagues, or followers would most love your products, and that level of targeting is how you reach some of your best and most loyal customers.
Customer referrals are proof that you’ve built something that your customers truly love. If you’re selling something that has a positive impact on your customers’ lives, then a customer referral program will enable and encourage them to tell their friends about you.
What’s more important, however, is that you get a good sense of the scale and scope that a successful referral program requires. This will help you better plan how and when you should run your referral program. Happy referring!

About the Author

Visakan Veerasamy works on the ReferralCandy marketing team. ReferralCandy has helped thousands of online retailers run successful referral programs, and recently launched CandyBar to serve offline retailers, too