Referral Marketing Strategy
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People place a lot more faith in the advice of close friends and respected online influencers than they do in sponsored advertisements that appear when browsing the internet. 88% of respondents worldwide, according to a Nielsen research, place more faith in recommendations from people they know than any other source. Referral Marketing.

As a result, word-of-mouth marketing, sometimes referred to as referral marketing, is a potent marketing medium, particularly for developing ecommerce firms.

Continue reading to discover the advantages of referral marketing and how to develop a referral marketing plan for your small business.

What is referral marketing?

Referral marketing is a promotional approach that uses an incentive to encourage current consumers to suggest new ones.

What are the benefits of referral marketing?

A referral marketing strategy may serve as the cornerstone of your marketing strategy and increase brand recognition. It helps to reduce your acquisition expenses, draw customers with a strong desire to buy, and establish a relationship with new clients at a greater level of trust because it depends on word of mouth rather than paid approaches.

Lower acquisition costs and raises lifetime value

The process of bringing in new clients for your company is known as customer acquisition. The cost of acquiring new customers is the amount you pay to do so. The cost for organizations to attract clients has increased by around 60% over the last five years.

Many businesses rely significantly on sponsored advertisements to attract new customers, but they are a channel that is rapidly losing effectiveness and becoming prohibitively costly due to privacy restrictions and a diminishing return on ad expenditure.

A productive referral program may reduce acquisition expenses and boost a client's value for their whole customer relationship. A recommendation is a more cost-effective method of obtaining consumers than other channels, according to 54% of B2B marketers. Additionally, they probably have a lifetime value that is 16% greater.

Attract high-intent people

Potential clients with a strong willingness to buy are attracted by the recommendation procedure. These clients have a four times greater likelihood of converting, according to a study.

Consider it this way: A person tries out a new brand that they are curious about. They may have read about it in a blog post, seen it in an email newsletter, or heard about it on social media. They choose to place their first order anyhow, taking a gamble. They had a wonderful time and end up being satisfied customers.

They see that the company has a referral program whereby they can receive a bonus for each new client they introduce. They share their referral link to their buddy who has been hunting for a similar product for a while. Their trustworthy pal buys something.

The individual who makes the initial purchase probably has a friend who would appreciate or profit from the same product. This is a typical referral marketing cliche. So the company may rely on its client base to complete the task instead of a sponsored advertisement.

Build a higher level of trust between business and customer

Your trust gauge with a potential consumer is practically at zero when you offer them a sponsored advertisement, create a blog post, or send them a direct-mail campaign. However, this trust will flow over to your company when you can contact your target audience through a person they believe in.

Referral marketing operates as follows. Customers who have already purchased from you fall in love with the goods and discover your referral program online or through advertising. Your referral program creates a special referral link just for them. They forward that connection to a pal who might like your goods. You or you and your buddy each receive incentives for referring customers who make purchases. That might be anything, such as a discount code good for $10 off their subsequent purchase, a free sample, or a comfy pair of branded socks.

Typically, both parties end up with happy consumers as a consequence. Because they encourage existing consumers to promote your company loudly, these initiatives increase customer loyalty (even if they were already going to do it anyway). Repeat purchases may result from it as well. Let's explore how to design a program that your clients and potential clients will adore.

1. Decide what referral incentives you’ll offer

To build your referral reward, first determine your budget for client acquisition.

The next step is to select if you'll compensate both the new and existing customers for the recommendation. For instance, MeUndies, an underwear company, rewards customers who recommend friends with a 20% discount and a $20 bonus. Once the buddy makes a purchase, they receive 20% off their first transaction, and the returning customer receives $20.

Alternatively, this might be a gift with the purchase rather than a percentage discount. If money is scarce, one option is to limit the gift to the individual who made the recommendation, which can help keep expenses down.

2. Choose your referral marketing software

You'll need a solution to manage referrals and provide prizes if you want to keep track of potential customers who arrive as referrals (and if you want to thank your devoted customers who send them).

These referral marketing tools are all accessible through the Shopify app store if you run your business on Shopify.

Referral Candy

Referral Candy counts referrals, compensates consumers, and interfaces with some marketing tools, including Mailchimp and Klaviyo. On Shopify's app store, it presently has a five-star rating and has received over 1,500 reviews.

Cost: There’s a 30-day free trial; it costs $49 per month afterward.

Yotpo Loyalty & Rewards

Yotpo gives clients the motivation to refer as many people as they can by delivering multi-tiered benefits that encourage (and even gamify) loyalty. Additionally, you may provide incentives for certain behaviors, such as a product review or an Instagram follow.

Cost: For establishments with fewer than 100 monthly orders, the Bronze plan is free to install; the Silver plan costs $29 per month and 35¢ for each order after that; the Gold plan costs $249 per month and 20¢ per order after that.

Bloop Rewards & Referrals

Bloop is a full-service referral program that is less expensive. You receive a conventional referral program with a pop-up and referral page with the free version. For additional services like a custom domain, watermark removal, bespoke branding, and 24/7 support, you may also subscribe to the $20 monthly plan. On the Shopify app store, it currently has a rating of five stars.

Cost: The free edition comes with basic referral options; the $20 monthly fee gets you rid of the watermark, more sophisticated branding, and usage of a custom domain.


ReferralYard is unique since it is a fully configurable platform. Add your brand's colors and change the typeface to reflect your brand. It comes with everything you need to run a successful referral program for a set monthly fee that is not depending on how many orders or clients you have.

Cost: After a 30-day free trial, the Growth plan is $49 a month and includes a referral network for a limitless number of clients and orders, as well as insights and reporting.

3. Provide a best-in-class product experience

To create a terrific customer experience, you need excellent branding, an incredible unboxing experience, reliable customer service, and of course, a fantastic product. And that is what will have a long-lasting impact and motivate people to gush about your company to their friends.

The ability to consistently deliver a positive customer experience is another factor in retention; if customers feel confident doing business with you, they are more likely to return.

Fewer Finer offers several touch points at each stage of the consumer experience as it sells handpicked new and vintage fine jewelry. The company looks after consumers no matter where they are in the customer experience, from monitoring a text line for addressing inquiries to giving adjustments for each piece to the dark green boxes with handwritten comments that components arrive in.

4. Communicate your values

Customer loyalty emerges from a connection that customers have with a company—whether that connection is based on the company's goal or values, the excellence of its goods, the kind of customer service it offers, or all of the above.

You may develop a relationship with the consumers who share your brand values by outlining them clearly and frequently. This will increase their affinities and decrease the possibility that they will recommend you to others. Saie, a skincare company, for instance, explains its standards and principles on its website. It highlights the fantastic components it uses in its goods and why, as well as the ingredients it will never use. It also displays its environmental certifications.

saie standards

5. Advertise the program

Inform your clients about your referral program once you've decided on its parameters. Disseminate information through your primary marketing platforms, such as social media marketing, email marketing, and content marketing.

Additionally, you should communicate program details via a readily accessible landing page on your website.

Customers may, for instance, reach Saie's referral landing page from the website's footer.

saie refer - referral marketing

You may also use referral marketing efforts to get the word out. Send out a social media campaign, or a series of SMS and emails informing them of the benefits they may get.

How referral marketing fits into your overall marketing plan

By paying your target audience for spreading the word about you, implementing a referral marketing program may be a terrific method to promote growth. It helps spread the word about your company naturally and may be an important strategy for acquiring clients at a cheaper cost.

Referral marketing FAQ

What is a referral in digital marketing?

Referrals in digital marketing commonly referred to as word-of-mouth marketing, occur when customers make purchases based on the advice or influence of others.

What are the benefits of referral marketing?

A referral marketing channel rewards word-of-mouth recommendations with incentives as a technique to attract new, high-intent clients more affordably.

What are 4 types of referrals?

There are several locations where referred customers may appear. These areas consist of:

1- Friends and family
2- Social media and influencers
3- News publications or blog posts
4- Customer reviews and testimonials

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