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How To Start a Successful Referral Program and Boost Sales

Referral Programs will boost your sales

Introduction

Do you have loyal customers and brand advocates? If you do, try inviting them to participate in your referral program and gain rewards for themselves and their friends.

A referral program can increase the effects of word-of-mouth marketing that your business is already experiencing and drive additional customers and sales. Large ecommerce businesses such as Bonobos and Everlane all run referral programs.

Depending on the industry, businesses report anywhere from $155,000 to $558,000 in yearly referral marketing revenue.

Research has shown that referred shoppers are more likely to make a purchase than shoppers who were not referred by friends. 84% of shoppers state that they completely or partially trust recommendations from family and friends when it comes to purchasing products and services.

Referred customers also tend to spend more, having a 16% higher average lifetime value than non-referred customers. This is why all businesses should consider starting a referral program.


Before you start

There are two main things you need to have before starting your referral program.

Satisfied customers – If customers aren’t happy with your products, why would they promote them? To make your referral program work, you need to have existing customers who are satisfied with your products or services. You can survey your customers and ask those with the highest Net Promoter Score to join your program.

A great product – You also need a great product that people can recommend to their friends and family with confidence.

Once you are certain that you have these two things, you can move on to designing your referral program.


Provide Incentives

provide incentives for referring customers

While 83% of customers state that they wouldn’t mind providing referrals, only 29% of them actually refer their friends to a business or product. This is why it’s important to provide an incentive for customers to refer people to your business.

You will need to put some thought into what type of incentive would provide the best results for your specific business and customers. The three main types of incentives that you can offer include:

  • Store credit – You can offer your customers a fixed amount of store credit for each friend they refer.
  • Discount – Instead of offering your customers store credit, you can also consider giving them a discount on their next purchase. ReferralCandy recommends using discounts that are worth at least 10% of the value of your product.
  • Free product – Some businesses opt for giving free products to customers who refer their friends.

After deciding which type of incentive you would like to offer to referrers, you will need to consider what kind of incentive structure you’re going to use. The three most common structures include:

  • Single incentive – Reward the original referrer once. Don’t provide any incentive for referrals. Suitable for businesses with small profit margins.
  • Double incentive – Reward the original referrer two (or more) times. E.g. Reward them for each friend or sale that they refer.
  • Dual incentive – Reward both the referrer and the person that they referred. Referral programs that use a dual incentive structure usually perform the best since they provide more benefits for everyone involved.

You might also want to consider running contests, rewarding the best-performing referrers with additional rewards and encouraging others to join using social proof


Make It Simple

Make it easy to share referral program

To improve the chances of people referring their friends to your business, you should strive to make the referring process as simple as possible. It shouldn’t take more than one or two clicks for customers to invite their friends to check out your website.

You can build a dedicated page on your website to let customers see how many friends they’ve referred and what kind of rewards they have earned so far to motivate them to refer even more people. You can also use this page to provide customers with various ways to promote your referral program: via social media share buttons, custom referral links, or email signature codes.


Start With Your Fans

To make the task of finding quality referrers easier, start with the customers that are your biggest fans. There are two ways to find your best customers: looking at their Net Promoter Score (NPS), and their Lifetime Value (LTV).

To find out the NPS of your customers, send your email list subscribers a survey asking how likely they are to recommend your brand on a scale of 1 to 10. The number each customer selects is their Net Promoter Score. Contact people with an NPS of 8, 9, and 10 and pitch them your referral program.

If you have been in business for a while and you have a large customer base, you might also want to consider segmenting customers based on lifetime value (LTV) and taking the time to personally contact customers with the highest LTV and ask them to participate in the program.

You can ask these people to be your brand ambassadors and offer them additional benefits, such as free products, sales commission, or even a monthly retainer.


Promote It

If you want your referral program to succeed, you also need to spend time promoting it. Here are some places where you can promote your referral program and get more people to participate:

  • Email list – Send an email to the customers who have subscribed to your email list and let them know about your referral program and how they can benefit from it. Transactional emails such as payment confirmation and shipping confirmation emails are also good places to include a link to your referral program.
  • Website – Feature your referral program on your website by creating a dedicated page and pointing to it with banners and text links on your homepage. You might also want to consider using the post-purchase page to ask customers for a referral.
  • Social media – Share the details of your referral program with your social media followers and invite them to participate. You can also include a link to your referral program page in your account bio.
  • Blog – Write a blog post explaining your referral program and link to your referral program page from other posts on your blog. Not only will this help to inform your regular customers about your referral program but it might also introduce first-time visitors to potential benefits of shopping with your business.

Successful Referral Programs

Blinds Successful Referral Program Example

A number of businesses run referral programs that have helped them increase their sales substantially. Here are some examples to inspire you:

Okabashi – The footwear brand Okabashi offers a discount to customers who refer their friends to the Okabashi store. Their referral program is one of the top 10 sources of referral traffic to their website. They’ve found that their referred customers spend 13.2% more, on average, than their non-referred customers.

Leesa – Mattress retailer Leesa gives customers a $50 discount for each friend they refer to the store. Their friends aren’t left out of the deal either, receiving a $50 discount for themselves as well. A whopping 33% of Leesa’s sales comes from their referral program.

Hanna Andersson – Kids’ clothing brand Hanna Andersson gives a 20% discount to both the people who refer their store and their friends. After implementing the referral program, it took Hanna Andersson only two months to reach their yearly new-customer goal.

American Giant – Apparel brand American Giant offers their customers $20 in store credit for each friend they refer to the store. Their friends get a 20% discount on their first purchase. American Giant’s referral program drives 10% of all transactions for the brand.

Blinds.comBlinds.com is the largest online seller of window blinds. Their referral program offers customers an opportunity to earn a $50 discount on their next order as a reward for referring a friend. Blinds.com reports that 60% of their customers are referrals.


Referral Marketing Software

How To Start a Successful Referral Program and Boost Sales 1

To start and run a referral program, you will mostly likely need referral marketing software. There are a large number of options when it comes to choosing software for your referral program. We recommend any one of the following:

ReferralCandy – An affordable referral marketing platform that integrates with most ecommerce solutions, including Shopify, WooCommerce, BigCommerce, and Magento.

Ambassador – Referral marketing software used by brands such as Shinola, Logitech, Hulu, Madison Reed, and Mizzen+Main. Includes solutions for influencer marketing and affiliate marketing. Offers three different packages: Starter, Professional, and Enterprise.

Buyapowa – Trusted by large businesses such as Expedia, ASOS, and Gap, Buyapowa is a premium referral marketing solution for businesses with a larger budget.

Referral Saasquatch – An all-in-one platform for creating and managing referral programs. Referral Saasquatch customers include businesses such as Typeform, LogMeIn, 99Taxis, and inVision. Plans start at $699/month.

Extole – An enterprise platform for brands looking to incorporate a referral program into their marketing strategy. It includes advanced features such as fraud protection and A/B testing. Extole is used by brands such as Timberland, Rebecca Minkoff, bareMinerals and Intuit.


Conclusion

A referral program has the potential to substantially improve brand awareness and increase revenue. With the right incentive and promotional methods, you can make your customers happy and increase sales at the same time.

Question: What software do you use for your Referral Program?

How To Start a Successful Referral Program and Boost Sales 2

Drew Parker

Customer Acquisition Expert - I’ve spent years building software, selling physical products online and providing my expertise to companies such as Disney, Paramount Pictures and many more. Throughout my career I have learned extremely powerful marketing and sales strategies to help grow businesses online.

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