How to use referral marketing to increase sales for your ecommerce store?

Referred customer is expected to have at least a 16% higher lifetime value than customers acquired through other means.
Image via Unsplash.

We all buy things, be it a ticket to a concert, new phone or a present to our friend. But what makes those purchases a secure, well-thought choice?

We are social creatures and we deeply rely on the feedback from our peers. That’s why the recommendations that we get from our colleagues, friends and family influence our decisions. The nature of these relationships defines the conclusions we make, positive and especially negative ones. We don’t even need to check anything ourselves, since “Bob said those burgers are the best in town”.

Since the beginning of trades, marketers have been leveraging this phenomenon, called “word of mouth”. It takes a great effort to make people talk about you.

What is Referral Marketing?

Referral marketing is a process to encourage and significantly increase referrals from word of mouth, perhaps the oldest and most trusted marketing strategy. One of the greatest examples of it is the word of mouth.

Word of mouth is basically sharing the information about an event, business, or even person. Using the word of mouth in the marketing strategy means promotion of a product, service or company via communication between people and groups of people.

Today’s branches of word of mouth would be the viral marketing, the extremely fast distribution of news throughout the internet due to a specific trait that creates buzz around the topic, and guerrilla marketing, the “cheap unconventional way of presenting a business in the offline world”. Getting familiar with and understanding these trends can speed up the awareness around your brand, as well as increase the trustworthiness of what you are doing and the values you stand for.

Why is it crucial?

The importance of the buzz around your brand should never be underestimated. The main marketing goal of your business could be the maintenance and development of the positive experience for your clients, starting from social media, presales, sales and, mainly, customer service. 
Take the example of Zappos, who invest their most dedicated resources to the client experience. Many of the cases already became legendary and canonical. 
Or Starbucks, that creates the scarcity trigger to generate the talking and content coming from their customers (do Red Cups, Unicorn Frappuccino or Pumpkin latte ring a bell?).

These companies build their reputation upon the great customer service. If you ask us how to make your sales through the referral marketing burst, this is the answer: treat your existing customers like kings and make them talk about you.

The main reason why businesses, especially the ecommerces, should invest their time and resources in the referral marketing is because it is the fastest and the most credible way to raise awareness around the product or service.

How to leverage it for your business?

To have the best results with what you are doing and use it to create a buzz around you, you may want to develop a strategy for your marketing in whole.

Here are some necessary steps to take to leverage the referrals around your business:

  • Engage greatly on Social Networks — Nothing is a better example and a tool of referral marketing as it is the social media. People talk about, share and find new products and services online daily, and missing this movement means missing losing a huge opportunity to showcase your business.
  • Invest in customer service — Your customer service must be, probably, the most important part of your business. Retaining a customer is much easier than acquiring a new one. And your existing users are more likely to talk about you than anyone else.
  • Create content — Solve the issues, show the new features, teach stuff around your area of expertise. People appreciate the value you give to them.
  • Run an exclusive promo — It can be something for the existing customers, or for the new ones, basing on the goals you have. Need more users? Run a referral campaign, like that legendary one of Dropbox.

How to measure?

The main distinguishing point of WOM marketing is that it’s is highly unpredictable and difficult to measure.

Indeed, how can you know for sure how many people talked about your product or service in the private dialogues, even in the Messengers? There is even a new phenomenon raising now in the marketing world called “dark social”, which means the conversation and referring to subjects within the networks that cannot be tracked, such as WhatsApp or Viber.

Referrals can be a great benefit for your business as they are the opinions and experience with your product by someone else, meaning that it’s not you to (aggressively) promote it, but the other people, which is more trustworthy.

Nevertheless, the volume and the potential virality of the content created by others around your business it way more difficult to control, as you are not the one owning it. Monitoring the social networks can be an effective way to “listen to” the crowd, but it takes a lot of time and effort.

This is why measuring the impact and the reach of your content, social campaigns and promotions is crucial. Of course, it would be hard to count the number of times when Bob talked to Mary about you. However, if Bob shared on Facebook the article that you posted in your blog, you will be able to measure the virality of your content.

There are great tools to monitor the effect your campaigns are making online, for example, SegmentOne. This growth marketing platform enables online businesses to set up the campaigns in basically 3 minutes and track the ROI with a easy-to-use dashboard.

The social referral programs are integrated on your website, landing page or in a newsletter. If you are an ecommerce store willing to give a discount for a Facebook recommendation, bringing 3 new users or posting a picture with your product on Instagram, you can easily create a coupon and land it on your website.

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