Why Every Ecommerce Business Should Engage in Referral Marketing

By Rodney Laws | Ecommerce

Oct 06

If you run an ecommerce business, you know all it takes is a few quick messages and clicks to make a sale. The same can be true to gain a new customer —  if you use referral marketing.

Referral marketing is the process of motivating customers to share your business with others. By utilizing existing relationships, incentives, and word of mouth, an ecommerce business can see exponential growth by using this tactic. 

Below, we go over a few other reasons why every ecommerce business should engage in referral marketing.

Referral marketing works alongside your current operations

Take a look at your existing customer communication. Do you post on social media, conduct customer surveys, or send transactional emails? These are all perfect opportunities to include referral marketing. 

The best time to ask a customer to recommend your business to others is when they’re at their happiest — usually after a purchase or standout experience. 

Make the most of these moments by including a catchy call to action at the bottom of your emails. Something like “Share the love,” “Tell your friends,” or even a straightforward “Give £10, Get £10.” A brief mention of your referral program and its benefits is enough to continue the relationship with your customer. 

Referral programs are easy to start

Thanks to specialty software, an entire referral program can be set up in just a few weeks. This is less than the amount of time it takes to conceptualise most other types of marketing campaigns. 

Not only can the right referral software tool integrate into your ecommerce site without any difficult coding, it can also track the program’s progress and referral rates. 

Many steps can be automated, including sending out the reward incentive or adding new referrals to a list of leads. Plus, all the collateral can be customized with your brand for a completely seamless experience.

Referrals are one of the most cost-effective marketing strategies

Think of referral marketing costs like commission —  you only have to pay when you make a new sale. 

Aside from any software and management costs, referral marketing is pay per performance ( therefore, low risk). Most of what you spend for are the referral incentives, which are only paid once you make a sale. 

For example, say you offer £20 for every successful referral and receive 20 referrals in the first month. The amount you pay for incentives (£800) is only given after you’ve already closed those 20 new customers. If you don’t get a new customer, you don’t pay a thing. 

In fact, discounts, store credit, and even non-monetary incentives can be enough to generate referrals. Plus, they encourage repeat business from your customers.  

Referral marketing shines on social media 

Whereas word of mouth originally took place offline, from person to person, much of today’s word of mouth happens through social media and online communications

Referral marketers know this, and allow customers to send messages through their preferred social media or messaging platform. 

A good referral campaign will include a pre-drafted message that can be customized or used as is. It will also offer a range of social share buttons so customers can easily and quickly send the message to their friends and family. 

With businesses inviting their customers, and customers messaging their family and friends, referral marketing maximizes your presence on social networks. 

Referrals add to your social proof 

Referral marketing also builds social proof. And  for an ecommerce business, this can be what leads a potential customer to your business. 

It makes sense: When others hear about your brand from their family or friends, they’ll automatically see it as one that’s trusted and valuable. 

In fact, 83% of respondents across the globe trust recommendations from friends and family — much more than commercial ads, online review sites, or email campaigns. 

And since your customer’s network is likely to have many others in your target market, these referrals will be more inclined to check out your business. 

Referrals lead to long-term customer relationships

A goal of any retailers is to form long-term relationships with their customers. Referral marketing helps do that, with rewards that encourage goodwill and repeat business. 

Most successful referral programs offer discounts or store credit, which incentivize customers to stay loyal to the business. The referred friend often also gets a similar incentive to increase the odds of a first purchase.

Referral marketing works because in addition to spreading the word about your brand, it forms a mutually beneficial relationship between ecommerce businesses and its customers. 

Referral marketing software makes data easy to track

If you run an ecommerce business, you know how important it is to track data. Click through rates, average order value, conversion — these all help inform you about the customer’s shopping experience. 

Well, referral programs help round out the picture. Referral marketing software tracks the number of successful referrals per customer, what platforms they use to share, and which rewards encourage the most referrals. 

Many marketers even send out an initial survey to see who of their customers are most likely to refer others to a business. These are the best customers to invite to your program and get the referrals rolling.

Plus, if you notice one of your customers is especially active in referring their friends, you can develop the relationship even further and ask them to be a brand ambassador or influencer. 

Expand your ecommerce business 

The benefits of referral marketing have helped a number of ecommerce businesses expand their customer base. 

If you already see some customers recommending you to others, it’s a good time to try referral marketing. The reward incentives and easy ways to share will only help build on that organic word of mouth.

And since referral programs can run completely online, they can be integrated and managed alongside your ecommerce store with ease. 

About the author: 

Kat Dalao is a content manager for Referral Rock. She’s spent her career in publishing, first as a writer and then as a creative director for a magazine. She’s currently based in New York, where she enjoys doing random projects, exploring the city, and cooking.