This post comes to you from Raul Galera, the Partner Marketing Manager at ReferralCandy and Candybar—two tools that help SMBs run customer referral and loyalty programs. Today, Raul is explaining how to start a referral program for your ecommerce store so you can win more business.

Does your ecommerce brand have buzz? Are people talking about it and sharing it with their friends? If so, it's time to leverage that so you can win more business. And if not, it's time to kick-start some positive word of mouth to grow your brand! We're talking about referral programs.

What is a referral program?

A referral program is a rewards system that incentivizes your current customers to refer to their family and friends to you. The rewards you give your customers for their referrals can vary widely, depending on your brand and your audience. You might offer participants...

  • Discounts, like X% off their next purchase for every new customer they bring in
  • Points, which they can redeem for products or perks on your site
  • Exclusive products, like getting to sample or buy your new products before they're released to your entire audience
  • Free products, like getting something you sell for free after they've referred a certain number of friends
  • Cash, like a $X cash reward for every new customer they get to buy from you, or for every five, ten new customers, etc.

Your reward system can be single-sided, where only the brand advocate benefits, or double-sided, where they and the new customer they refer receive a benefit. (Double-sided programs are common, since they're more likely to get the new prospect to convert.) Whichever way you do it and whatever reward you offer, it has to be motivating to your particular audience so they'll get out there and start bringing you new business.

What's the purpose of a referral program?

It all comes back to trust. People trust other people (especially their family and friends) more than they trust brands. That's why you, as a consumer, can get ads and see posters all over for that new restaurant in town, but not actually go until a friend raves about their experience there.

So if a happy customer encourages their friend to shop at your ecommerce store, the friend is likely to take the recommendation and see what you have to offer. And if the happy customer has a financial incentive to encourage their friends to shop with you, they'll be more likely to do it (and do it often!).

The statistics reflect all of the above: An incredible 92% of consumers trust recommendations from people they know—and that translates to real returns. In the long run, referred customers can bring you a 25% higher profit margin. And the best part is: Once a customer has joined your program, they'll start driving traffic to your store on their own with no extra work from you. That's why amassing a large team of customers for your referral program is in your best interest.

How to set up a referral program for your ecommerce brand

Ready for the referral traffic to start pouring in? Follow these steps to set up a referral program for your ecommerce store.

#1. Decide what you'll offer to participants.

This first step is also one of the most important. If you don't have a compelling offer, even the happiest of customers may not take the time to spread the word about your brand. Make sure you understand exactly who your customers are, then design an offer that will interest them. You might even narrow it down to two offer options and have your community vote on which they'd rather have, or A/B test the two.

Let's look at an example. Bombas, an online sock store, offers a referral program where brand advocates can refer a friend to get free socks for themselves. To boost the chances of conversion, they also offer a discount to first-time referred customers. Free socks works as a motivation for their particular audience and product. (A discount might not have been as effective, since large sock orders that would benefit from a discount are probably rare!)

#2. Create a landing page to share the details about your program.

Next, you'll need to lay out all the relevant details of your program and post it somewhere your audience can easily find it. For most ecommerce stores, this takes the form of a landing page on their website. You can (and should!) advertise your referral program on other platforms too, but being able to share a link to where all the information is in one place is helpful.

Your landing page should include details like:

  • Who is eligible to participate in your referral program
  • How they can apply or join the program
  • What they'll get for referring new customers (and what those customers will get, if anything)
  • A list of FAQs about the program, if you find that you're getting a lot of the same questions about it
  • Any fine print necessary

Check out Sephora Singapore's referral program landing page, for instance. It includes an FAQ section, prize updates, terms and conditions, and a CTA to get prospects to join.

Sephora Singapore's landing page gives all the necessary information about its referral program.

#3. Encourage social sharing.

Next, make it easy for your customers to do your marketing for you. If you include social sharing buttons (and maybe even a pre-written Tweet or caption to go with it), you increase your chances of ambassadors posting about your brand. And of course, this helps attract new business, which benefits all parties involved.

Check out how Soko Glam does this. Their site has a box where brand ambassadors can enter their friends' emails. Clicking "Send" will shoot an email to each friend, detailing how both they and their ambassador pal can benefit from them making a purchase. Under that, they offer social sharing buttons that make it possible for brand advocates to share the program info via social media too in one or two clicks.

Soko Glam makes it easy for brand ambassadors to refer their friends via email and social media.

When brand advocates click the social sharing link for Twitter, for example, they’ll find a pre-written Tweet ready to go, along with their referral link. A small, time-saving detail like this can have a major impact in getting more new business through your referral program.

#4. Integrate the referral program with your existing platforms and tools.

To make the experience easier for both you and your brand advocates, consider integrating your referral program with platforms and tools you already use. For example, you could integrate it with...

  • Your ecommerce platform, so brand advocates can easily apply their available rewards to their purchases
  • Email software, so you can automatically send out triggered communications about the ambassador's status in your program (how many rewards they've earned, new incentives that are available, etc.)
  • Your mobile app, if your store has one, to speed up the referral and payment processes (and get more shoppers to download your app)
Poshmark’s referral program lets users share their referral code and get paid within the app. It also makes it easy to share the code with friends via Facebook, Twitter, SMS or email.

#5. Promote your referral program.

Now that your program is all set up, you need to promote it. Share the basics of your program (focus on the perks the ambassador will receive!) with customers wherever you can. You might promote your program by...

Lots of brands use social media to promote their referral program, like Joanie Clothing does.
  • Sending an email(s) about it to customers after they make a purchase. (Or, you could send cold emails to try and get more participants. Check out these cold email templates to help you get started.)
  • Adding a banner to your store's homepage that announces your program
Tobox incorporated an announcement about their new referral program into the design of their store's homepage

You can combine methods on this list for maximum efficiency, too. You might coordinate social media with email marketing, for example, by asking interested customers to share their email address to grow your list.

Examples of successful referral programs

The way you design and promote your ecommerce store's referral program will be unique, since it depends on what you sell and who you sell it to. But you can still take inspiration from the many thousands of great referral programs that are already out there. Here are a few we love!

Riff Raff & Co

Riff Raff & Co sells sleep toys for children. Their referral program lets parents get a free toy for their child in exchange for five referrals, and gives the referred friends free shipping.

They get enthusiastic parents to share the brand with their fellow moms and dads in Facebook groups and their own communities. The strong peer recommendations eventually led the brand to attribute a 35% increase in sales to their referral program!

Christy Dawn

Christy Dawn is a sustainable women's fashion brand. Their referral program lets brand advocates and their referred friends earn store credit. Being able to buy more clothes for less was the right incentive for their particular audience. Since it was started, Christy Dawn's program has generated a 26x ROI for the brand!

Ready to launch your own referral program?

Referral programs offer a wealth of benefits to ecommerce stores. In addition to increased sales, they can also help you boost customer loyalty, retention, and brand awareness. That's why creating a great referral program is an investment, because it can benefit your brand in both the short- and long-term. Just remember to build a program that will resonate with your unique target audience, and you're sure to see success! Want help getting started? You can use ReferralCandy to get your own program up and running in ten minutes. Interested in joining Chatfuel's affiliate program? Get more information here.