What drives you to buy a product or service? While you may claim that your decision is solely yours. Some factors may affect your decision. One of these is the opinion of your family and friends. Admit it. You cannot buy a product or service if your loved ones have something negative to say about it.

Likewise, they also encourage you to buy a product or service if they have a positive experience from it. The power of sharing also extends to you. You can also share your experiences, positive or negative, to the people who are close to you. Because of this, your customers are the best marketers for your business. What they have to say can translate into abandoned carts or sales depending on how they view a product or service. 


 referral marketing is so useful for eCommerce websites


This is the reason why referral marketing is so useful for eCommerce websites. Potential customers may be used to your marketing, where the product is displayed in a positive light with hopes of getting a sale. They trust real recommendations instead of promotions from the marketing team. Because of this, eCommerce websites are now implementing their referral programs where they allow existing customers and website visitors to promote the site.

With this, they can invest their time and money on a method that is far more effective when it comes to driving sales. Sales are significant in eCommerce websites, for it will determine if the store will survive or not.

You may not know how referral marketing can help your business. That’s okay. Here are some reasons why referral marketing may be the only key to your eCommerce success. 


Referral Marketing Improves Your Brand Image

Your image will dictate whether your potential customer will visit your site and buy from you. You need to have a pleasing brand image if you want to be on top of your prospect’s minds when they are ready to buy. Fortunately, referral marketing can do that for you. Since this will entail customers or website visitors promoting your website for you, it means that more people will get to know your brand. This increase in brand awareness will eventually lead to more sales as long as your sales funnel intact. 


Referral Marketing Brings More and Highly Targeted Traffic to Your Site

How much are you currently spending to get another person to visit your website? Your cost may be high if this traffic is hardly converting into a sale. Fortunately, referral marketing does not only bring more traffic. It also ensures that the traffic that it brings is highly targeted. This means that prospects have a higher chance of converting. Since referral marketing is a method that is based on trust, the chances of the target market converting are often higher. This is because their family and friends make recommendations. It’s a refreshing new way to get new leads to your eCommerce business without spending countless money on ads. 


Referral Marketing Creates Loyal Customers

What’s better than a new customer? That’s a loyal customer. A new customer may buy from you once. But a loyal customer buys from you again and again without fail. This means that the revenue that you generate from one promotion is higher because this person can convert multiple times. This is the power of social marketing.

When the customer realizes that he is not alone, he tends to act. Because of this, he doesn’t only buy from an eCommerce website. He also becomes loyal to the brand if he likes his initial transaction. This is the reason why big brands like Uber and PayPal use this strategy. It is this power of referral that allows the technology-based business to grow at a rapid pace. 


Referral Marketing is an Influencer Magnet

Influencer marketing is effective in getting more traffic and sales to your business. However, getting them on board is the most challenging part. This is because influencers already have so many brands approaching them to promote. So how can you stand out from the crowd? The answer to that question is simple. You need to do some referral marketing. You see, referral marketing gives your brand some solid social proof. This social proof can then be used for more than attracting new customers. It can also be used to attract influencers to promote you. 


Referral Marketing Allows You to Get Tons of Good Reviews

Ecommerce marketing can only be effective if your customers are saying good things about you. It is for this reason that you should value positive reviews. Fortunately, you don’t have to worry about any of these when you have a referral program. You need to wait for the good reviews to come in. This is because you will naturally get good reviews in exchange for your program rewards. And that’s not all. These reviews also encourage more people to do the same. So you will eventually get more reviews for your products and services once you see them coming in. 


Referral Marketing is Cost-Effective

If you have tried promoting your business through paid advertising, you’ll find that it takes a lot of effort and money to acquire a new customer. Sometimes, you may even find that your profit is highly dependent on your paid advertisements. This means that once your paid ads stop, your profits stop as well. This should not happen when you have a referral program. This is because customer acquisition is no longer dependent on your ads. It is dependent on your customers and website visitors. These are real people that promote your site for you. They only get the reward once their referral signs up or buys from you, so you don’t have anything to lose. 


Are Other Companies Using Referral Marketing?

Are Other Companies Using Referral Marketing?

As mentioned, several brands have used referral marketing to grow their business. From technology ventures like Uber and Airbnb, digital services like Dropbox and PayPal, and eCommerce websites like Harry’s, they have used referral marketing to get more customers in their business. 

It seems that it is very effective if you want your customers to get used to doing a particular action. So if you want your prospects to try out an app, you can set up a referral program just for that. You can create one with referral marketing software easily. Also, you can encourage them to buy from a brand new eCommerce store. There is some specialized referral software for Shopify, WooCommerce, BigCommerce, and other online store platforms. Even new eCommerce stores like Best Hunting Bow Labs can use referral marketing effectively for their business if you know how to implement it with strategy. 


Why does Referral Marketing Work?

From here, you are probably wondering what makes referral marketing so effective. Let us breakdown how referral programs work in bringing more traffic and sales to your business.


Incremental Nature

Referral marketing works in networks. As one person promotes you, he unlocks a web of opportunities for promotion. This means that even if you only get to promote the referral program to one person, that person can also promote the business to other people. It is this incremental or web-like nature that makes referral marketing effective. In traditional marketing, sending a message is often linear. Referral marketing is different. It has a continuous flow of information from one person to another. This results in more traffic and sales. 


Hyper Targeting

The great thing about allowing your customers to promote you is hyper-targeting. Since the referrer will only be eligible for a reward once he made a successful referral, the referrer will try his best to look for the best target for the promotion. The result is hyper-targeting. This means that the program is only promoted to the most relevant audience. Because of this, the chance of conversion of higher.


Power of Trust

But it is not just the intention of the referrer that matters; it is also the relationship of the referrer with the referral. This relationship is often based on trust. This may be because the referrer is a close friend or a family member. Because of this trust, the chance of conversion is higher. It is easier to convince a person you trust to buy from an eCommerce website than someone you don’t know. This is the reason why referral marketing is more effective than other forms of marketing. Other methods focus on getting brand new leads from cold prospects. But referral marketing gets its prospects from warm leads.


How to Create a Referral Program for Your eCommerce Store

Now that you understand the value of referral marketing for your eCommerce business, it is time to create one for your online store. Here is how you can create a referral program in 5 easy steps. 


STEP 1: Get to Know Your Target Market

You must know your target market before you attempt a referral program. This is because they will be the ones who will benefit from your program. If you launch it without doing your research, you’ll find that no one will sign up. So it is crucial to learn how to create personas and understand your customers before you even begin. There are several tools that you can use to understand your audience. If you have a brand new website, you can always look at the audience of a similar site. 


STEP 2: Provide a Suitable Reward

Once you understand your target audience, it is time to provide a suitable reward. There are different forms of rewards in referral marketing. There is a classic cash reward that is used by brands like PayPal and Amazon. This is where they give away some cash for every sign-up to their website. While this can be quite costly, it is very useful in driving new sign-ups. Also, there’s the discount code. This is often used in eCommerce websites. It is important to differentiate between cash and percentage discounts. The type of discount that you should give away ultimately depends on the type of item that you are selling. So if you are selling an item that has a high price and the customer will only buy it once, a cash discount may be more suitable. But if it is an item with a lower price and is bought repetitively, then a percentage discount is more appropriate. You also need to consider applying a threshold. This is where discount codes can only be used if the customer reaches a purchase limit. On top of all of these, you can also give away freebies with every order. A good technique is to give away limited edition freebies. This will encourage more customers to buy from you to have that chance to get that freebie before it runs out of stock.


STEP 3: Choose Who To Reward

Every referral program has two actors: the referrer and the friend. While it is ideal for rewarding both, you may not be able to do that due to cash constraints. If this is you, you may need to choose between the two. The referrer is the person who will do the promotion, and the friend is the person who will sign up as a result of the promotion. What you should choose will ultimately depend on the nature of your target market. 


STEP 4: Launch Your Referral Program

Once you have the details, it is time to create your referral program. Fortunately, creating one is easy if you have software. This offers a plug-and-play mechanism that allows you to launch a referral program in a matter of minutes. Plus, you’ll be able to track your results in one convenient dashboard. In here, you’ll be able to see all the new referrers that come in and how well they are performing. You can also pay their commissions or distribute their rewards using the software.

Referral marketing is the secret to getting more people to your website. It increases your brand recognition and recall, and it strengthens your brand through reviews. It utilizes the power of people to share information about products and services that they like to their family and friends, and it works. 


Article by Arlen Robinson is the co-founder and VP of Business Development at OSI Affiliate SoftwareHe is also the host of The Ecommerce Marketing Podcast where he discusses marketing strategies with experts from all over the world.