How To Create A Referral Program In 2024

A referral program is a method that motivates past customers to suggest your products to their loved ones.

Retail stores establish customer referral programs to expand their reach and increase profits. Referral marketing, compared to other marketing strategies like traditional television commercials, can be more budget-friendly as it involves leveraging your dedicated customers. Encouraging these clients to become brand ambassadors can positively impact your business in the long run.

Thinking about initiating your referral program? Here is an in-depth exploration of the inner workings of these programs, the advantages of having one, and a six-step tutorial on creating your own.

What Exactly is a Customer Referral Program?

Client referral programs utilize positive word recommendation since customers are advised to recommend their relatives, friends, and friends on social networks to use the firm’s products. Unlike other types of marketing, this method can be relatively inexpensive in terms of the costs of referring software or giving rewards.

Rewards for the participants may be free samples and registration in special newsletters and events. Word of mouth stimulates the number of customers to stick by improving lifetime customer value since loyal customers are considerably more valuable.

Word-of-mouth advertising can also go a long way in increasing sales and profits with little difficulty compared to other forms of advertising. The former should be distinct from affiliate marketing primarily because the referral program is based on customers.

What is the Significance of Referrals?

Data shows that referral programs are more successful at increasing conversions compared to social media marketing and traditional methods such as television and radio advertisements, with conversion rates being three to five times higher. For what reason? Since new customers acquired through referrals have existing trust in your brand. As stated in a Nielsen study, 88% of survey participants worldwide have more trust in recommendations made by people they are acquainted with than in recommendations from other sources.

What is the Functioning of a Referral Program?

A referral program functions by asking your existing customers to act as brand ambassadors. Once they become a part of your referral marketing program, they are given a special code or link to distribute to their connections. The software for your referral program monitors the engagement of customers using their code or link. If someone utilizes the shared code, the referrer will receive a reward.

Steps to establish a customer referral program in 6 easy steps

Begin with an excellent product.
Gain insight into your customers
Identify rewards
Select a referral marketing platform.
Extend an invitation to former clients to participate in the program.
Facilitate others in referring to you.

How can you establish a successful referral program of your own? These are six easy steps to begin with:

1. Begin with an excellent product.

Create a referral program for an excellent product by following the steps of the product development process. This involves carrying out market research, sourcing high-quality materials, identifying trustworthy suppliers, and testing your product from prototype to soft launch before its official launch to your desired audience. These steps are crucial in developing a product that is esteemed, trustworthy, and appreciated by your customers—the starting point in establishing a strong reputation.

“I am unable to attend the meeting tomorrow due to a prior commitment.”
“I can’t make it to the meeting tomorrow because I have a prior engagement.”

2. Understand your clients

What is important to your target customer? What makes them choose to buy your product instead of a competitor’s? Which motivations lead to the highest number of recommendations? Understanding your target audience and the factors that impact their actions can assist you in teaching new members of your referral program, enabling them to engage with their contacts effectively. You can gather this data by utilizing e-commerce analytics tools like Shopify’s analytics and reporting and others found in the Shopify App Store.

The book was so interesting that I couldn’t put it down.

3. Identify Motivations

Rewarding the customers to recommend the program to others can be useful in enhancing program usage. Ensure that there is a well-thought-out plan for the identification of potential customers who can be rewarded; ensure that you post this online. Some other companies give both the referrer and the new customers some form of reward. This helps to make new purchases through the referral links, and at the same time, the person who is referred is also given their kickback.

Some of the incentives commonly used include dollar credits, x% off, freebies, a one-month free subscription, and xx points to redeem later. As stated earlier, your incentive should depend on the type of customer you’re dealing with – new, prospective, or returning, etc.; however, it is mandatory to evaluate your customer’s CLV. Assure that the expense of gaining each customer referred is lower than the cost of the incentive rewarded.

4. Select a Referral Marketing Software.

Choose a referral marketing tool that manages sending out referrals, creates one-of-a-kind codes or links, and monitors conversions. Several choices that are compatible with Shopify stores are:

Referral Candy and the Affiliate Program
Retainful: Email Advertising
Rivo: Dedication & Recommendations

Afterward, develop and construct a landing page that details the operation of the updated referral program (as well as any available rewards). Include a membership form on this page. That individual will then be sent their distinct referral link via email. Top referral marketing platforms allow you to track the performance of your referral campaigns while providing referrers with a dashboard to monitor their number of referrals.

5. Encourage past clients to participate in the program.

Dedicated clients are the ideal advocates as they are already aware of your brand and its image. Send them a marketing email to encourage their participation in your referral program.

Begin by transmitting a message to inform others about your fresh project and any rewards available. The majority of referral marketing tools come equipped with an email function that allows users to send their unique referral code or link without needing to sign up.

It is recommended that you consistently advertise your referral program by including it in your order confirmation emails while the customer’s enthusiasm is still high. Nearly 60% of recipients open this kind of email.

Additionally, you can use the footer section of your order confirmation emails to encourage new customers to join your referral program.

6. Facilitate individuals in recommending you.

Besides creating rewards, it is important to ensure that the referral process is smooth and interesting. There are a few methods you can use to accomplish this.

Initially, create templates that are tailored to your brand’s voice to simplify referring friends and family. Templates are available for emails, social media posts, or direct messages; easily formatted and enabled by software for quick referral sending. Provide essential details like brand name, reward type (along with value), and discount code or link.

Gather online reviews to enhance your reputation and expand your brand advocate community. Encourage satisfied clients to write and post their feedback on Trustpilot, Yelp, or other trustworthy review platforms that your potential customers are likely to check before making a purchase.

Conclusion

Once you understand the importance of a referral program, it’s time to take action and develop your own. Comprehend the appearance of your desired customer, inform referrers, select a reward, and simplify the process for satisfied customers to refer you.