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In this week’s podcast, Trevor talks to Raul Galera from Referral Candy about how to set up a successful online referral scheme.
What is an eCommerce referral scheme?
If your service is good, word-of-mouth marketing will already be happening for your store. A referral scheme encourages this behaviour by incentivising your customer to sell your brand to their friends. An existing customer will click on a link, send a referral code to their friends, and receive something, e.g. discount on a future purchase, a gift or a payment.
How do eCommerce referral schemes work?
Raul recommends the following steps to launch a successful referral scheme:
- Invite past customers
- Create automation to invite customers automatically after purchase. This could be a popup or an email
- Make your programme public. Advertise it on your site by displaying it prominently and creating a sign-up form
What is the difference between affiliate marketing and referral marketing?
There are two main differences between affiliate and referral marketing
- Relationships. In an affiliate programme, publishers will have a large audience to which they promote affiliates. This is a one-to-many relationship where the publisher does not know the person to which they are promoting. Referrals happen with a close circle, e.g. friends and family. Being more personal, these recommendations have a lot more power.
- Rewards. Affiliate programmes typically give most of the reward to the referral. The buyer may not get a discount. Referral programmes typically give a similar reward to both parties.
What makes a good referral scheme?
The best referral schemes reward both the referrer and the new customers. This incentivises the referrer to work hard on your behalf and the new customer to buy.
What kind of verticals does referral marketing work best for?
Referral schemes work well across many verticals but work especially well for direct-to-consumer brands as they are trying to build a community. Also, products which have a sharable component, e.g. fashion, technology.
How to run a referral scheme?
The steps to run a referral scheme are:
- Platform. You will need a platform to track referral sales, e.g. Referral Candy
- Design referral structure. Look at customer behaviour and think about what will incentivise them.
- Promotion plan. Think about how you are going to promote your plan. Just telling people once is not enough. You need to be reminding your customers regularly.
- Build a community around your customer base. In the long run, this will be hugely beneficial to your brand.
How to measure success?
Referral Candy uses a metric (referral rate) which is the ratio of referral order to the total number of sales.
A good referral scheme should generate at least 2% of a company’s revenue, with some companies generating 10% or even 33%.