Discover the benefits of referral marketing for ecommerce stores.

Benefits of a referral marketing program for ecommerce

1. Cost:

Compared to ads, referral marketing can have minimal impact on your monthly spend while impacting your brand awareness, conversion rates, and lifetime value (LTV) of your customers.

While there are many ways to bring in new customers, such as pay-per-click ads or influencer marketing - these tactics can also drive up your Customer Acquisition Costs (CAC) if you’re experimenting and have not hit a clear pathway to new customers yet. Referral programs can offset your CAC as many work off a rewards-based system, meaning you only ever pay a fraction back into the revenue your referrers are generating.

2. Reaching the Right Audience:

With the changes in Apple IDFA, Facebook Privacy and its effect on ads targeting, and many other data privacy laws that are now in play (or soon to be), social media marketing is less effective than ever. Gone are the days where you could throw money into a prospecting or retargeting campaign and expect massive returns. In fact, many ecommerce stores are just bleeding money when it comes to Facebook ads and other social media platforms.

With a referral campaign, you’re activating customers who have found your product to be useful and beneficial, and activating them as a targeting campaign of their own. People are friends with people in the same demographics, whether that’s location, age, socio-economic status, or even just similar interests. This gives you a leg up because with each activated referral participant, you reach more and more qualified leads.

Because of this, you don’t need to spend a lot of money trying to use mega social influencers like the Kardashians, in fact, a study found that 81% of US consumers’ purchase decisions were influenced by the social media post of their friends and family.

3. Social Proof and UGC

As a natural part of your referral program, your participants will create social proof and User-Generated Content (UGC) on their own as they share the virtues of your company and product with their friends and family. This can come as a static photo post, a blog review, a video review (such as on Youtube, Tiktok, or Instagram Reels), or even just copy.

Working with a referral app (which we will be discussing in an upcoming blog) can make it easy to collect these pieces of content with the correct permissions for reuse. But if you don’t plan to use an app, be sure to equip your referrers with a unique-to-this-campaign hashtag so that you can easily search and collect the posts that are shared.

Sharing UGC as ads, specifically on platforms like Tiktok, work especially well because the endorsement comes off more genuine than content directly from the brand itself. Plus, UGC shared by your referrers makes it easier to test which creatives perform best on which channels. By tracking the engagement and performance of each piece of media, you can better understand what your customer base responds to and see where you should be doubling down in your own content creation.

4. First-party Data

Remember those privacy law changes I mentioned earlier? First-party data is the gold mine because not only are you free to use it to your advantage, but it’s also data that your competitors will never have access to, giving you a clear advantage over them to best reach the right audience for your specific products.

Using the conversions from a referral campaign to build a lookalike audience can help you reach more people who are more likely to buy your product so you can enhance any successes that you find from your referrals.

Post purchase surveys and interviews are another great way to tap into this type of data. By talking to new customers, you can discover why they were interested in your product, what drove them to buy, and most importantly what they have in common and how to reach more people like them. This data fodder is enough to keep your marketing team busy for their next few campaigns, and greatly increase their chances of success with them.

5. Easy to Get Started

You don’t need a hundred referrers to get started, you can begin with a small number (this under 10) and grow over time as your internal team grows or you free up some cash to be able to grow with the help of a referral app.

All you need to start are a few customers who love your brand and valuable, yet attainable rewards that they want to earn. The most popular are store credit, free products, commission on sales, or even discounts - both for the referrer and the referee.

As mentioned earlier, it would be best to start with some simple guidelines to share with referrers about what type of content you are looking for and anything they should avoid. Lastly, equip them with a hashtag so you can collect UGC and a unique promo code so you can track performance and you’re good to go. Of course, there are a myriad of apps, both free and paid, that can help you easily launch your program as well. This is a great choice for people who have small internal teams and lack the ability to free up too much time. Be sure to check back in a week or two to learn about the different types of referral programs and the apps our referral program experts at Baotris recommend for Shopify stores.

In the meantime, if you’re looking for inspiration on programs you can launch, check out this extensive list of 63 case studies put together by one of our favorite referral apps, ReferralCandy.