5 Ways an Ecommerce Business Can Earn More Sales Through Referral Marketing

If you are running an ecommerce business, you may be thinking of running a referral marketing program on your website. However, you may want to know its benefits before you take the plunge. Don’t worry. I got you covered. In this article, I’ll cover the main benefits of referral programs and why they work so well on ecommerce websites.

Here are some ways on how referral marketing can help you.

You Don’t Do The Marketing Yourself

Referral marketing is a form of affiliate marketing. It is where you enlist the power of your customers to promote your site for you. Affiliate marketing is popular for a reason. It allows business owners to reach new financial goals than if they did the marketing themselves. It works because it taps the power of other people in spreading the word about your website. This quadruples the power of the marketing that can be done by just one person.

You don’t have to do the marketing yourself. You may have tried that already and failed miserably. Gone are the days where you can submit your website to an online directory and see it rank and get indexed by the search engines. Now that the Internet has become more advanced, you’ll also be facing tons of competition for that slice of the traffic. So if you don’t up your marketing game, you could get left behind.

The good news is referral marketing is just what you need to overcome your competition. The secret is in the automation. You only need to decide on your referral incentive and launch your campaign one time. From there, you only need to continuously inform your prospects that you have a referral program in your website. You no longer need to do anything else. With the right software, you can easily gather new affiliates into your site and be able to pay them their designated commissions with a click of a button.

Plus, you give influencers a reason to share your business with their followers. Having a referral program means that you offer some reward for people who are willing to promote your site to other people. If this reward is enticing enough, you can easily get the attention of influencers in your niche. In fact, some attractive giveaways can easily get referrals from influencers in a snap. This is because influencers are constantly in the lookout for offers that are valuable to their audience. If they find that your offer is something that their audience will like, they have a greater likelihood of sharing it.

You Gain New Traffic Exponentially

Referral marketing works by enlisting your customers as an army of marketers who will promote your site for you. It works incredibly well in increasing your website’s traffic. Think of it this way. Let’s say you have a license to sell your product and for every person you meet, you give them the same license to do that. If you meet one person, that person can meet another and another. And it becomes faster as you meet other people. As more the number of people selling your website increases, so does your traffic.

It is similar to multi-level marketing. In multi-level marketing, you have downlines who promote the product for you. The downline can recruit their own downlines and their downlines can also get their own downlines. Since the promotion is done this way, the growth is exponential. You get more and more people into the funnel.

The power of referral marketing comes from the exponential traffic increase. This means that you get double the amount of traffic for every referral that you make. The best part is that this compounds over time giving your website an explosion of traffic.

And what can this do with your sales? It helps, of course! Usually, an ecommerce website runs at a certain conversion rate. So if your website converts at 20% and your site has 1000 visitors. That means you get 200 new customers. Now, if 20% sounds too ideal, you can even lower it down to 5%. Still, you’ll get 50 new sales for your site.

Now what can you do with this traffic? You can use to refine your conversion rate. How? You can do that through AB Testing. Now that you have the traffic, you can now start editing your pages to see which converts better. You can start altering the design and implementing pop-ups. Then, you can track your conversion rate, traffic and sales.

Similarly, you can also examine the traffic that comes to your website. You can examine the source, location as well as how they behave on your site. You can do this even with just Google Analytics. This will allow you to see what type of people visit your site and where they’re coming from. Moreover, you’ll understand their needs. This will allow you to choose products and services that they will be interested in.

You Give Your Prospects a Reason to Promote You

Here’s the sad truth. No one is going to promote your site unless you give them a reason to do that. It is like asking people for a favor with nothing in return. This is the problem with people approaching influencers asking for a link. They don’t offer anything in return and they ask the favor as if they are entitled to it. Don’t do that.

It’s the same with cold calls. When marketers call you asking you to buy a product that you don’t need, you become hesitant. Other times, you can even become defensive and shun these marketers away. The problem is that they have not given you a reason to help them. This is enough for you to turn your back on them and move away.

But in referral marketing, it is totally different. A referral program will not be complete without an incentive. An incentive can be a simple cash or percentage discount code or it can be a free item. But there is a clear reward for every referral that the referrer will make.

This makes referral programs very effective. The reason is already on the front page of the program. It is the reward. Often, referral programs are evaluated solely on the reward. If the reward is attractive, you’ll find hordes of people excited to promote your site. But if it is simple, the impact may not be as massive.

It Uses the Power of Trust

Word-of-Mouth marketing is more powerful than you think. More people act on referral or word-of-mouth marketing because of one thing: trust. Who would you listen to? A person you hardly know or a close friend or family member? I am sure that you’ll choose the latter.

True enough, 92% of consumers trust referrals from people that they know. That’s according to Nielsen. On top of this, 77% of consumers have a higher likelihood of buying a product if it is recommended by a family member or friend and 84% trust recommendations from these sources completely. This means that they don’t even second guess or look for reviews. If a product has a massive impact on a friend or family member’s life, they trust it right away.

The impact of trust from close friends and relatives seem to be more powerful than influencers. While 70% of consumers trust influencer recommendations, 80% trust friend and family recommendations. The gap is close but friend and family recommendations win by 10%.

How can you use this trust to your benefit? You can trigger it by allowing your prospects or customers to promote your website for you. First, make sure that you have an amazing product. Follow that with reliable customer service and go out of your way to meet your customer’s needs. And get recommendations from them. Usually, a customer who is happy with your products are already ready to promote you. But if you’re willing to give them a reward for doing that (as what you’ll do in your referral program), they will be more than happy to promote you.

Since people tend to believe referrals from people they are close to, the response to this type of promotion is massive. This would be different if you did all the promotions yourself. Since they don’t know you, your prospects will probably be hesitant in buying from you. But if someone close to them promotes you to them, they are 80% more likely to buy.

It is the Secret of the Biggest Brands in the Industry

Let’s take a closer look at some of the biggest brands in the world for a minute. Brands like AirBnb, Uber and PayPal did not grow overnight. It is because of a clever referral marketing program.

Uber, for instance, started implementing free rides and driver incentives. To get more people to use their app, they give their drivers tons of incentives. This allowed their app to get more drivers. More drivers mean more customers for Uber. Since they earn by taking a fraction of the cost of the ride, they earn as more people use their app.

On the surface, the referral program may seem simple. New riders get free rides while new drivers get incentives. But this allowed the app population to grow at such an amazing rate making the company one of the biggest unicorn startups in the entire world.

Next is AirBnb. Right now, AirBnb is paying people to get new hosts and users. They pay both the referrer and the referral. When you promote their site to a friend, that friend will instantly get free credits for their future stay. Alternatively, you’ll also get some credits when they start using the app. The rewards for host is another topic. They give triple the money for new hosts. This goes to show how aggressive AirBnb is in their expansion. Again, this is also one of the best unicorn startups in the world.

And then there’s PayPal. PayPal is the classic referral marketing story. It was able to grow its site to a billion users through a generous referral marketing program that they have launched years ago. This program pays people just for inviting people to sign up to the site. How much did they pay? They paid them $50 for each referral. Now that’s generous! From here, you may be wondering if they lose money along the way. Well, they did. But this allowed them to gain traction and make them one of the biggest brands online today.

So what can you learn from these stories? It shows that referral marketing is the secret behind the expansion of the biggest brands on the Internet. It is not SEO or influencer marketing. It is having a referral program in your website.

The good news is that creating a referral marketing program is easy. First, choose your reward. You must determine if you will give away cash or percentage discounts for your site. Next, you should use referral software to set it up. This will allow you to easily create signup and affiliate pages with ease. Third, you must put your program in a prominent place in your site. This can be the top bar, a pop-up or a separate page. Similarly, you must also promote your program to your list. This will get your existing customers into your program. And the rest will pick up from there.

Running an ecommerce business on Shopify, WooCommerce, or other platforms without referral marketing is like forgetting to use the innate power of your customers to promote you. Often, your customers will ‘forget’ about this power as well. That is until you remind them that they can do it. A simple reward is often enough to transform your customers from users to marketers.

So if you currently feel stuck in the old ways of marketing your online store, you may want to give referral marketing a try. It may be the only boost you need for your site to get over its traffic or sales rut. If you have existing customers, then that’s better. It means that you already have people waiting to promote your site.

Arlen Robinson is the co-founder and VP of Business Development at OSI Affiliate Software. He is also the host of The Ecommerce Marketing Podcast where he discusses marketing strategies with experts from all over the world.


Tags: digital marketing, ecommerce.
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