Referral Programs: Why Your Online Business Needs One and How to Set One Up

by / ⠀Entrepreneurship Finding Customers / June 17, 2021

Referral programs have arguably made the jump from nice-to-have to must-have. They are one of the most trusted marketing approaches in use by businesses today. Not only do they increase potential clients but they also help maintain customer loyalty.

Ever heard of the principle of reciprocity? The one that says you must give to receive? It remains relevant today even in online businesses. But what does it really mean?

People influence each other, which means that every customer connects with a new one. Influence represents the very foundation of a referral program.

Want proof? Approximately 82% of consumers proactively look for referrals before purchasing a product. This dynamic speaks volumes about the power of referrals in the world of business. 

But what are the benefits of a referral program, and how can you create one?

Why Business Owners Should Set Up a Referral Program

Referral programs aren’t just an extra feature that big businesses offer. They have a purpose and can be very useful to grow one’s business and score more customers, all without making a considerable investment.

Referrals Make You More Trustworthy

Business owners tend to overlook referral programs because of an ever-increasing focus on digital and online marketing. What they don’t realize is that potential customers feel more comfortable when a service or product is recommended by someone they trust. It’s human psychology, really.

Referred customers approach your business with a sense of credibility and trust, making it more likely for them to convert.

Referrals Help You Build Your Brand

When you’re just starting out, not many people know about you or your brand. It’s why they can remain skeptical about your products. A leading indicator might be that you find many customers swiping through your page, yet sales remain dormant.

On the other hand, having a different program provides potential customers with proof that you have satisfied customers and that your products and services are worth trying. It’s also one of the ways of building brand awareness.

Once your current customers demonstrate that your service does indeed provide a solution for their needs, they’ll feel encouraged to take action. Moreover, as more people trust your brand, buying from you will become second nature to them. It’s a win-win.

Referrals Produce More Repeat Customers

Once a customer joins a referral program, they do more than just promoting your online business. 

You may think they’re simply after your rewards. Even if that’s true, they still get very invested in helping you succeed. Repeat customers become regular promoters, resulting in an infinite loop. The more you reward your customers, the more they support you by referring your product to others.

How To Set Up a Referral Program

If you’re looking to turn your online referral program into real-time results, you have to make it manageable and easy to understand. Here are a few simple but effective steps you can follow to create a successful referral program.

Step #1: Set Practical Goals

You want to increase your customer base and boost sales. Great, but is there anything else that you want?

Is one of your goals increasing customer retention by establishing customer loyalty? Do you have a sales target that you want to achieve faster? Do you want more brand advocates?

Figuring out your motives will provide you with set parameters you can use to determine whether your efforts are really fruitful and help you achieve your goals. If not, you’ll know that something is wrong with your strategy, and can then work on rectifying errors.

Step #2: Create Your Referral Messaging

A referral program should be easily doable and understandable. Otherwise, potential customers won’t bother giving your online business a second look.

You must make sure you have a catchy title to capture customer attention. Here are some headlines that have been shown to work:

  • Share the word and get a free pair of shoes.
  • Refer a friend and get $25.
  • Give $10, get $10!

You should create a clear outline of how your program works. It’s also advisable to give a clear call to action (CTA) and make your intentions clear. Remember, transparency is key here.

Step #3: Select an Appealing Referral Program Incentive

Word-of-mouth advertising doesn’t always happen organically. You have to strategize and put in (a lot of!) effort by offering specific incentives that hold serious appeal and can encourage users to take part in your referral program.

Dropbox, for instance, has launched several successful referral programs. Apart from the monetary goodies, the platform gives customers up to 16GB of free space for referring a friend.

This is just an example. You can pick an incentive that you think makes sense considering your target audience and brand. Think about something that could wow and benefit both your loyal and potential customers.

Step #4: Make a Landing Page for Your Referral Program

Having a central location where people can get all the essential information about your referral program is an absolute necessity. You should have a dedicated landing page on your website that’s easily accessible from your homepage.

What’s more, optimizing the page using relevant keywords to ensure potential customers can search and find you is also a top priority.

Any quality landing page typically includes the key message, details on how to submit a referral, and a call to action. You can always add other elements according to your preferences, but these three are important factors that should always be there.

Step #5: Implement Elaborate and Effective Analytics and Planning for Your Referral Program

Google Analytics or a referral program software will allow you to see and track the success of your efforts. Analytics can show you how people reach your landing page, which source or channel they came from, which product they click on most often, and so on.

You can use this information to identify why specific channels aren’t performing satisfactorily. You can also focus your efforts on maximizing results from successful channels for even better results.

Tracking referral program results comes in handy when you want to prove to the executives in your organization that referral program efforts are paying off.

Step #6: Spread the Word and Create More Publicity

While most online businesses easily come up with the terms and conditions of their referral programs, it’s marketing their referral program where they often fall short.

Marketing is important here because otherwise, how are your customers supposed to know about your referral program? An unpopular referral program will result in a weak rollout, which, in turn, will translate to unsatisfactory results.

So what should you do?

Plan to promote your referral program across your blog, social media, and third-party blogs. Use as many channels as possible to reach out to potential customers. 

Step #7: Train Your Employees

When you are the owner of several online businesses, efficient and effective management can become a problem.

This is where turning your employees into brand advocates and training them as a part of your referral program can come in handy. While you’re at it, you can also encourage them to share your program on their social media channels to widen your business reach further.

Genius Tips to Make Your Referral Program a Success

Let’s face it. Some offers just don’t cut it. For instance, offering your loyal customers $5 off a product or service that costs $100 or more isn’t going to get you anywhere.

Before you decide what to give away, put yourself in your customer’s shoes. Think about whether a deal is good enough to motivate them to generate a referral to friends and family.

Wondering how to go about this? Here’s how you can make your customers feel compelled to act:

Create Referral Contests

Sometimes the thought of providing a free service may be a big pill for your online business to swallow, especially when you’re just starting out.

Referral contests can result in a friendly competition among your current customers. For example, you can offer $20 off on the next service if your customer refers anyone new within the provided time frame. You can also offer cash prizes or other enticing incentives to the second and third winners to sweeten the deal.

Cash on Holidays and Events

Offering exclusive and attractive deals during the holiday or special events is an excellent way to boost sales. In fact, your customers expect sales offers once the holidays start rolling around.

You should also join the bandwagon and run offers for a short time for your current customers who refer a new shopper on any holiday or national event.

Offer Surprises and Create Mystery

Having a little mystery creates interest in online businesses. Curiosity causes people to act. You’ll be amazed at how this drives sales to your business. Even a one-time customer will strive to refer friends once you promise them a surprise gift.

That said, make sure you have a carefully thought-out strategy in place to enhance the customer experience.

Over to You, Business Owner

At this point, you have the knowledge and the know-how needed to create an excellent referral program. Start leveraging your current customers as your biggest marketing asset to get more sales and establish customer loyalty.

Remember, the key is to harness the referrals you receive and incentivize word-of-mouth publicity using your referral program.

About The Author

Raúl Galera is the Chief Advocate at ReferralCandy, an app that allows ecommerce brands to set up and run customer referral programs. ReferralCandy is the leading platform in terms of referral marketing for ecommerce brands. Founded over 10 years ago, ReferralCandy has helped over 30,000 brands leverage the power of word-of-mouth and turn their customer base into their marketing team. Raúl has been leading ReferralCandy’s partnership efforts for the past five years, working alongside marketing agencies, media and tech companies.

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