Word-of-mouth or referral advertising is a powerful tool rooted in authenticity and trust. Referral advertising is actually the most trusted strategy among millennials, Boomers, and other age groups. In fact, Nielsen found that 83% of consumers trust the recommendations of friends and family over other forms of advertising.

Selling more and empowering your loyal customers to share their voices is a strategy that works, but with some initial strategy and effort, you can build a referral engine that drives repeat business.  

Choosing Your Ecommerce Referral Strategy

A referral program helps to amplify and incentivize an already good customer experience. It also has to suit your brand messaging and intended audience. There are referral strategies that may suit a specific type of business better than others. Here are common strategies to consider:Discounts and RewardsDiscounts and rewards are ideal for customers whom you want to reward for making a purchase. These encourage them to re-purchase and help build loyalty while helping you move products that need to be sold. You can structure your e-commerce referral program to incentivize customers based on the number of new clients they bring in. Discounts, exclusive deals, or free gifts can push your existing customers to refer new people to your service. This is a great strategy to keep your loyal customers engaged.

Rewards make bigger purchases enticing, especially if they want to make use of the discount. And as an added bonus, you gain a new customer—the referred friend.When it comes to discounts, consider whether you will be setting a fixed discount or percentage discount.

For more expensive products costing more than $100, going for a fixed discount sounds more impressive. Meanwhile, for cheaper products, a percentage discount will look more appealing. Cash IncentivesAside from rewards and discounts, you can adopt a cash-based referral program to grow sales and fan base. You can offer cash rewards for advocates who promote your brand to their peers.

Another consideration for both rewards and cash incentives: should you incentivize both referrer and the referred client? Or just reward the referrer?Research suggests that for stronger brands, rewarding both parties works better. Existing clients are not too price sensitive and are more likely to repurchase even without referring a friend. Meanwhile, for the newer brands, rewarding the referrer gives slightly better returns compared to rewarding both equally. Deepening brand loyalty for existing customers and motivating them to refer should be your priority.

‍Make it personal, and skip the discountCash rewards and referral programs can be terrific, but they always impact the bottom line. Instead of offering lower prices and cash incentives, high-growth brands are using UGC and community engagement to improve brand favorability and boost referrals.

For example, HYLETE, an athletic apparel retailer needs to sell to their community of loyal fans multiple times per year to reach their growth goals. Instead of offering significant discounts to grow their community, they feature their fans in their product pages and use UGC in abandoned cart emails to convert their audience who were close to purchasing.

Identifying brand advocates

Every one of your customers can potentially engage in a referral. But if you want to optimize your referral program, you have to pinpoint who among your customers can help you that much faster.

One way to determine your best advocates is through a Net Promoter Score (NPS) survey. Simple questions, such as, “How likely will you recommend our product to a friend?” can give you an idea about your customers. Here’s a breakdown of NPS:

• Promoters are those who score 9 to 10. They are brand enthusiasts guaranteed to repurchase and refer your business to other people
• Passives score 7 to 8. They feel relatively satisfied with your brand, but might be susceptible to other competitive offers
• Detractors get the lowest scores of 0 to 6. They are generally unsatisfied customers who can spread negative comments and damage your brand

Companies like Airbnb track their NPS metrics and found that the closer to 10 a customer replied, the more likely they would rebook and also recommend the service to others.

Creative Ways to Promote Your Ecommerce Referral Program

To make your program as effective as possible, here are key steps to consider:Engage your social communityCommunity engagement is key to building a favorable brand. You can use a social contest to gain engagement and use as a part of your referral program. Encourage your followers to submit UGC of themselves using your product for a chance to win a reward. This works two-fold because you’re able to utilize this UGC for later marketing promotions, and your customers grow more connected with the brand.

‍Look to influencers within your communityInfluencers can drive real business results for your brand. Most people assume that the best influencers have a massive following, but sometimes the most impactful influencers can be micro or nanoinfluencers. You can use software to help jumpstart influencer marketing within your community and incentivize them highly with your rewards program so they attract new customers.

Get Your Ecommerce Referral Program Started Today

A referral program just sweetens the pot; it makes it that much more worthwhile for customers to tell their friends about you. But the core point of a referral program is that incentivizes customers who are already loyal to your brand. Competing solely by offering the lowest possible price is hard to sustain.

Remember to drive community engagement and offer real value for your customers to make the rewards program worth the effort!Danielle Canstello is part of the content marketing team at Pyramid Analytics. They provide enterprise-level analytics and business intelligence software. In her spare time, she writes around the web to spread her knowledge of marketing, business intelligence, and analytics industries.