Make it easy for people to refer you
In addition to designing incentives, make sure your referral process is seamless and engaging. There are a couple of ways you can do this.
First, make it easy to refer friends and family with templates customized to your brand voice. Templates could be for emails, social media posts, or direct messages—simply formatted and supported by software allowing customer referrals to be sent with a click of a button. Include key information such as brand name, type of reward (with reward value), and discount code or link.
You can also collect online reviews that can help improve your overall reputation and grow your community of brand advocates. Ask happy customers to share their experiences on Trustpilot, Yelp, or other credible review sites that your target customers are likely to visit before purchasing.
How to build a referral program
So how do you create your own successful referral program? Here are six simple steps to get started:
Add yearly revenue numbers
You can also check the referral value by adding up the total revenue from referred customers within a year. Subtract the referral program annual cost, which could include advocate incentives and referral software subscriptions. After subtracting the costs of acquiring referral customers, you will get the net referral revenue. Here is a simple formula:
Net Annual Revenue from Referred Customers = Total Revenue from Referred Customers – Annual Cost of Referral Program
For example, for a business with $100,000 in total revenue from referred customers and $25,000 in annual cost of the referral program, the net annual revenue from referred customers will be 100,000 – 25,000 = $75,000.
Compare the net revenue from referred customers to that from the non-referred customers. To calculate the net revenue from non-referred customers, subtract the acquisition costs from the total annual revenue.
Why referral programs are important
Referral programs can be extremely effective when strategically planned and implemented. Here are three benefits to referral programs for retailers:
Referral marketing is effective in optimizing conversions, with data indicating referrals are twice as likely to convert as leads from paid marketing channels, including social media marketing and traditional marketing like television and radio ads. New customers earned via referral have pre-established trust in your brand.
It’s expensive to market and promote your brand and products. The more you can reduce these expenses, the lower your customer acquisition costs become, and your profit margins grow.
Plus, many shoppers are willing and eager to share their experience on your behalf—at no out-of-pocket cost to you. More than three-quarters of customers are willing to refer a friend after a good experience with your business.
Case study: How Xoxoday helped Xero with customer referral program rewards automation
A global accounting software platform, Xero, saw an uptick of 25% conversion rates by automating rewards for their customer referral program.
Xero is a cloud-based accounting software platform that helps small businesses manage their finances. In 2019, Xero partnered with Xoxoday to automate its customer referral program and saw an uptick of 25% in conversion rates.
Here's how Xero used Xoxoday to create an effective customer referral program:
The Xero referral program was a great success, with the company seeing a 25% increase in conversion rates for referred customers. The program was also cost-effective, with Xero spending only a fraction of its marketing budget on the referral program compared to other marketing channels.
Overall, Xero's success with Xoxoday demonstrates how automating rewards for a customer referral program can be an effective way for businesses to acquire new customers and improve customer loyalty. By offering valuable incentives, personalizing the rewards, automating the rewards process, and analyzing the data, businesses can create a referral program that drives results.
A referral program is a system that incentivizes previous customers to recommend your products to their family and friends.
Retail stores create their own customer referral programs as a way to reach more people and grow revenue.
Compared to other types of marketing strategies (such as traditional television ads), referral marketing can be more cost-effective because you are tapping one of your most valuable resources: existing loyal customers. Incentivizing these customers to become brand advocates can benefit your business in the long term.
Considering starting your own referral program? Here is a deep dive into how these programs work, the benefits of having one, and a six-step guide to creating your own.
Instant demo: See Shopify POS in action
Discover how Shopify POS helps you manage in-store and online sales from one powerful platform.
Invite previous customers to join the program
Loyal customers make the best referrers because they are already familiar with your brand and its reputation. Invite them to join your referral program using email marketing.
Start by sending a broadcast to announce your new program and any incentives. Most referral marketing tools have an email feature to send a customer’s unique referral code or link without participating in a signup process.
A best practice is to continue promoting your referral program by mentioning it in your purchase confirmation emails—when customer excitement is fresh. Consider using the footer of the email to invite new customers to join your referral program.
Start with a great product
Develop a referral program with a great product by going through the product development process. This includes conducting market research, sourcing quality materials and finding reputable suppliers, and testing your product from prototype to soft launch before its full release to your target audience.
These steps are key to creating a product that is high-quality, reputable, and valued by your customers—the entry point to building a solid reputation.
Choose the right referral program for your business
Now that you know a referral program's value, it’s time to move forward and create your own. Understand what your target customer looks like (and explain that to referrers), choose an incentive, and make it easy for happy customers to recommend you.
The best part? With Shopify POS integrations, you can create an omnichannel loyalty program that rewards customers shopping in-store and online.
Unlock the full potential of your referral program with unified commerce
New research reveals how unified commerce helps retailers deliver seamless experiences across online and in-store channels. Learn how connecting all your sales channels can help you turn loyal customers into powerful brand advocates.
Promote the reward scheme
Customers won’t know about your referral program unless you tell them about it. You could use email, your website, or social media to promote your referral program. On social media, you could also encourage people to share your posts with their connections. And if you know customers are satisfied with your products or services, don’t be afraid to directly ask them to refer!
Examine the viral loop
You might also examine the customer lifetime value, or yearly revenue, specifically of referred customers who successfully bring in other customers. Add up the value of these customers and the customers they brought in.
This doesn’t show your business’ full referral value, but it does focus in on the impact of those referred customers who have become advocates and continued the viral loop.
