Why You Need Retail Referral Programs to Improve Retention

Updated on August 14, 2021

Retail Referral Program: “Get $75, give an extra $50”

Don’t jump the gun, that ain’t ours, ‘tis Amerisleep’s!

Well, Amerisleep is an Arizona-based mattress retailer that implemented this results-oriented customer referral program. So, if you gave a referral you would have gotten $75 while the referee would have been gifted $50.

This referral marketing campaign certainly prompted wonderful results. A click-through rate of 150%. (Translation: Every referral link generated at least one impression successfully).

“But how did Amerisleep generate such lucrative results?”

I can hear your mind voice :) That’s why I’ve written this blog - to help you get a deeper understanding of how to create a customer referral program, with lots of ideas and examples that you can learn from.

Let’s get this show on the road.

Table of Contents

A retail referral program also called word-of-mouth marketing, is a form of marketing that encourages your customers to advocate your brand on your behalf.

The simple goal behind this exercise is to attract new leads to your retail store. With a referral program, your happy customers would invariably bring in prospective customers who would benefit from your products. So, the leads that you amass this way, would eventually drive home profits.

Into the bargain, the referee would be familiar with your brand and reputation. So, it would be facile for your marketing and sales teams to nurture them and transform them into loyal clients.

1. Opens door to easy marketing opportunities
2. Builds a connection with your brand
3. Shows that your company is healthy
4. Valuable to your company
5. Drives retention and repeaters

In most cases, you promote your own brand. But let’s imagine a scenario wherein you are already Brand A’s loyal customer. No matter the promotion from Brand B, as long as you have a great shopping experience with Brand A, you’ll turn a deaf ear to Brand B.

But imagine how recommendations from friends would turn the situation around when they advocate Brand B. Won’t you at least want to give it a shot?

It’s an opportunity for Brand B now!

After all, Nielsen has it that approximately 92% of customers believe folks in their circles. So, word-of-mouth marketing is something you can’t afford to ignore.

Let’s explore other reasons as to why you need a retail referral program.

1. Retail Referral Programs Open Doors to Easy Marketing Opportunities

Social platforms are essential tools for promoting your retail referral programs. Studies reveal that 65% of social media users discover brands through social networks.

And believe it or not, 76% of individuals surveyed say that they are most likely to trust the messages shared by normal people as opposed to brands themselves.

So, the more you favor a referral marketing program, the more the leads will favor you.

2. Retail Referral Program Builds Connection With Your Brand

When your current customer refers to kith or kin, he would explain why purchasing from your brand is the best option.

With your retail referral program, you give your customers a reason to scout for potential clients. As you reward brand advocacy, the customer and the referee would both be delighted. Because the simple gift or an extra incentive like cash or giveaways that you give your customers would help them feel valuable to your business.

3. Retail Referral Programs Show that Your Business Is Healthy

Not all businesses can easily afford successful referral programs. Only when your business is performing well, will you be in a position to invest in referral marketing.

Alternatively, from a customer’s perspective, it’s easy to refer someone to a good retailer than one with a poor product and a bad reputation. So, when customers speak well of your retail business, it will encourage others to try your brand.

So, leverage the power of happy customers to grow your business. After all, 83% of delighted customers will agree to refer others to your business.

4. Referral Customers Are Valuable to Your Business

As I mentioned previously, you are already in the good books of your referred customers. And the greatest benefit is that these clients have an average lifetime value that’s 16% more than that of your other customers.

Therefore, you can create a separate funnel for your business and maximize the return on investment (ROI) of your retail referral program.

5. Drive Customer Retention and Repeat Purchases

First off, your customer will refer you because he really loves your brand and is excited to share the news.

Contrarily, as is the case most often, your customer simply wants to earn the promised incentive.

Leverage it!

For, when you offer a discount or a coupon or a gift card, your customers and referrals are most likely to come back to you and shop. And oftentimes, it’s easy for your customers to think of someone rather quickly to refer. So grab the opportunity to bring in more sales.

Now that you’ve understood how vital retail referral programs are for your business, let’s see how to build one.

1. Getting started
2. Design a results-oriented retail referral program
3. Structure the rewards for your retail referral program

Step 1 - Getting Started

To encourage your existing customers to send out a referral, you need to first give them better than the best products, 24 - hour customer service, and memorable experiences. So, before planning the wireframe of your rewards program, strive to engage your customers to the greatest extent possible.

Do this by:

• Delivering exceptional products
• Keeping your customers at the heart of your business
• Sketching a clear goal

1. Deliver Exceptional Products

Yes, offering the best products and services is the first step to building a retail referral program. If your offerings aren’t going to stand out, your customers aren’t going to take the pain of recommending you.

You get referrals not because you are lucky, but because your offerings are par excellence. So, be passionate about the product you sell. Have only the highest quality in stock. Let your sales employees then treat your customers with the best shopping experience possible.

2. Keep Your Customers At the Heart of Your Business

Sans customers, nil referral program. To bring your referral campaign to fruition, you need to establish healthy customer rapport.

As is the case with all good relationships, communication is the chief stone. So, allocate the time to converse with your customers. Listen to their sentiments and act with empathy. After all, the referee would be a cohort audience of the existing clientele community.

So, be deliberate with the experience you endorse in-store. Ensure it inspires a positive brand affiliation. Then automatically, your customers would be delighted to spread the word.

3. Sketch A Clear Goal

While the first two points of the discussion revolved around your customers, let’s now introspect how this referral program would impact your bottom line.

So, ask yourself these questions.

Why am I creating this retail referral program?

Do I want to increase growth and revenue?

Will I bring retention to the mix of profits?

Besides these questions, here are other goals that you could set:

• Build brand awareness
• Drive customer acquisition
• Run successful customer loyalty programs
• Augment retention rate

By setting these goals, you can measure how your retail referral program is performing. Otherwise, how would you reach your target?

Step 2 - Design A Results-Oriented Retail Referral Program

You need to keep your referral messaging clear and easy to understand. So, the design of your retail referral program must look, sound, and feel in line with your brand. Since this will be the first time a lead will interact with your brand, you need to be prepared.

Here are the fundaments:

• Write a catchy headline
• Craft a compelling referral message
• Let it be easy for your list of customers to refer
• Track with analytics

1. Write A Catchy Headline

Before getting a referral, you need to get your customer’s attention. And headlines play a crucial role in enticing your customers to join. The general rule of thumb is to present your entire referral program in a single catchy headline.

What’s more, this headline should convey what your retail referral program is about and also explain the benefits of joining.

Here are some examples of headlines to get you started:

• Spread the word for $50
• Help us to help you!
• Refer a friend for free shipping
• Call on your friend and both of you can enjoy $25
  

Further Reading: Catchy Referral Slogans to Use

2. Craft A Compelling Referral Message

Besides revealing the various means by which your customers can share your retail referral program, consider writing a referral messaging that your customers can leverage.

These pre-filled and ready-to-use messages would make it very easy to get recommendations from friends and family. A good practice would be to give customers the option to edit the existing message or even pen down a few lines on their own.

Since your business is new to the referee, the referral message might be your brand’s first point of contact. So, ensure to cover the following as you craft the referral message.

• Benefits of switching to your brand
• A clear action
• Highly personalized message
• Must be easy to understand

3. Let it Be Easy for Your Customers to Refer

Your referral process must be easy for your customer to share. Your customer would definitely give up early in the game if he has to jump through hoops to send his personal referral code to a friend.

So, open up different gateways that facilitate sharing of the personal referral code. And this will increase the likelihood of sharing too. In fact, if you use retail referral software, you’ll have multiple convenient options. While you can include traditional methods by giving out flyers, a better alternative would be to include digital communication.

Let me tell you what American Apparel, a clothing retailer, did. This brand offers 20% off for both the customer and the referee.

But understand this, the success of the program cannot be totally attributed to its enticing offer. Part of the success is thanks to how easy American Apparel made it to refer a friend.  

The retailer allowed its customers to share the coupon via social channels, email, and even direct links. Its pre-filled message box was a cakewalk for American Apparel’s customers to share the message.

4. Test. Launch. Track.

Before you launch a retail referral program, you need to do a bit of testing. You need to check what words resonate with your customers. Then, you should also discover what type of reward would entice them.

It is in this A/B testing process, that you’ll learn that what works for Retailer X might not be working out for you.

The next phase to testing and launching is tracking. You need to have a tracking system in place to measure the success of your retail referral program. Again, here is where a referral program software would come to your rescue.

These software solutions would have in-built analytics, testing ability, tracking metric, link distribution solution, and more. Besides, only when you use a referral program software, will you be able to understand the message that works best, and the metrics on the number of referral links that are getting clicks, and so on.

Step 3 - Structure the Rewards for Your Retail Referral Program

While one minuscule part of your customer base would take the effort to refer you, the other would need a little push to do so. Therefore, aside from being a great retailer and asking for a referral charmingly, you need to have an incentive that will nudge your customers to go out of the way for you.

While unraveling the reward structure, be sure to embrace the following guidelines.

• Make sense of who to reward
• Determine what to reward
• Settle on how to reward

1. Make Sense of Who to Reward

In the first place, determine who will receive the reward. Establish whether if you would reward only the referrer or the referee or both. And based on this, you could have two common types of referral rewards.

• One-sided referral rewards
• Double-sided referral rewards

One-Sided Referral Rewards

As you might have guessed, a one-sided referral reward would incentivize either your existing customer or the referee. And definitely not both the parties.

By rewarding your customers, you could enhance the motivation to share and also make the referral seem self-serving. On the flip side, if you incentivize the referee, there’s greater scope for a sale. But here’s a caveat: You might not see as many referrals as desired.

Double-Sided Referral Rewards

It is these two-sided incentives that hold the highest engagement. You can either choose to incentivize both the referrer and the referee similarly or distinctly.

Examples:

Similar rewards - ‘Give $25, Get $25’

Distinct rewards - ‘Give $20 to your friends and avail a free product in return’

Pro-Tip:
It’s often best to reward both your existing customer and the new customer. For if you reward only the former, the latter might not be persuaded to purchase right away. And if you reward only the latter, he might not feel appreciated. Takeaway: Embrace double-sided referral rewards!

2. Determine What to Reward

All retail businesses are unique. What works for a fashion retailer might not work for a grocery retailer. So, to figure out the type of reward that will fare well, consider exploring what your customers value the most.

For illustration, a fast-food retailer might consider offering his customers free samples or a discount for sending a referral. The options are endless, but understand that they must be of good value to your customers.

Here are a few questions to ponder to determine the right kind of incentives for your retail referral program.

Who are my present customers?

What kinds of incentives or gifts would my present customers enjoy?

Will the chosen referral rewards make sense for my business?

Should I go with monetary to non-monetary rewards?

If you are only a start-up retailer, you might not have the liberty to monetize your rewards. But you could surely consider gifting as opposed to hard cash. You can give away a coupon or a gift card, boost loyalty points, giveaway freebies...

Hold a brainstorming session, you’ll see umpteen reward ideas popping up.

3. Settle On How to Reward

Once you’ve concurred upon who to reward and what to reward, it’s time to structure your rewards. This will determine when and how you reward your customers. To do this, you’ve got three different options: standard, tiered, and multi-step reward.

Let’s look at all three briefly.

Standard Incentives

This is the simplest of all reward structures. Here, you basically reward the same incentive for every first successful transaction. This will be automatically sent to your customers once the referee makes a purchase.

While the standard structure does not call for you to keep close track of the incoming referrals, it can lose its motivating factor over time.

Tiered Rewards

You can reward your customers based on the number of successful referrals they bring in. For instance, for the first three referrals, your customer can win $20. Then, for the next three referrals, he can earn $40, and so on.

Alternatively, you can start with a bigger incentive for the first few referrals and then bring it down to a smaller incentive once a certain number of referrals has been made.

Multi-Step Incentives

As the name suggests, you break your rewards structure into multiple steps. As a result, your customers would be rewarded as and when they complete each of these steps.

For instance, maybe with the first purchase, your customer can bag a reward. Then, with the referee’s fifth purchase, the referrer can win another reward. And finally, when the referee becomes a repeater, the referrer can be incentivized.

No matter how well you formulate the plan to launch your retail referral program, it’s all as good as your technology.

So, here are five referral marketing software that you can choose from to get your referral program up and running.

1. Ingage

Ingage is a wholesome omnichannel customer engagement platform that allows you to design, test, launch, manage, track, and improve your retail referral programs.

Since it is an AI-driven platform, it stands as the top choice of big retail brands like Al-Ghurair, Aster Pharmacies, Salman Stores, and others. And it works perfectly well for both your physical and e-commerce stores.

Request a Demo.

2. Yotpo

Yotpo is an e-commerce marketing platform that assists your referral marketing strategy. Some of its features include visual marketing, SMS marketing, customer reviews, and so on.

So, if you have an online store, Yotpo can be of great support to you.

3. Genius Referrals

Genius Referrals is yet another great referral platform that makes it easy to create and operate your referral marketing ideas. This is helpful especially when you run campaigns with multiple restrictions and tiers.

4. Talkable

Talkable is a referral solution that helps you understand your target market, determine what they like and dislike, and more. Similar to Ingage, this also helps you to do A/B testing to scale ongoing campaigns in real-time.

5. Friendbuy

Friendbuy is quite distinct from the referral software we saw earlier. While you can launch your program swiftly, you need to be aware of some lightweight code snippets to do so.

If you have technical talent, then Friendbuy is all you need to configure various types of referral programs.

Here are five referral program ideas for you to try out. Go ahead, and cut the traditional marketing channels and promote heavily with personalized email marketing campaigns.

1. Run a contest or a game
2. Practice social gifting
3. Offer referral discounts
4. Hold seasonal campaigns
5. Give access to exclusive events

1. Run A Contest or A Game

A contest is a great way to incentivize customers to refer new leads with a gamification rewards program. For illustration, let’s say you host a contest. You can set the rules such that only those customers who refer x number of leads can participate and win free goodies. 

The only caveat with contests is the quality of leads. This is because customers would be randomly selecting their peers. So, your marketing and sales employees will have to spend time segregating potential customers from the rest.

So, ensure to run a contest and referral incentive that will encourage customers to refer high-quality leads.

2. Practice Social Gifting

When you outrightly say ‘Refer three people and get 10% off’, your customers can feel like you’re trying to manipulate them. So, try to be diplomatic with social gifting.

Something in the lines of ‘Give friends 10% and get 10%’, is a great way to encourage referrals without directly asking for the same.

3. Offer Referral Discounts

If you sense your customers yearning for a direct return on their referrals, differ discounts. This can vary with the number of leads they bring to your store.

After all, remember that it is expensive to acquire a new customer than to retain an existing one. So, think of it this way - the money you lose on discounts can be made up with the leads you convert.

4. Hold Seasonal Campaigns

Festive times are time-sensitive in drawing new customers. Be it a holiday discount or an annual sale - these can be opportunities for quality referral marketing.

The best part, if you run these campaigns consistently, your customers would be eager to participate in them and await them year-round.

5. Give Access to Exclusive Events

If you’d like to make your customers feel special like as if they’re a part of a community, try giving them access to exclusive events.

You can easily capitalize on customer advocacy by hosting events that are reserved for customers belonging to your loyalty program.

1. Amuze
2. Wool Overs
3. Okabashi

1. Amuze

Amuze belongs to the fashion space. It encourages customers to win $25 while the referee is also rewarded $25 on the next flash sale. While the referral incentive might not seem like much, it still is enticing considering that Amuze sells luxury items.

So, this discount referral program, while not only drives the prices down further, it also gains more customers in the process.

2. Wool Overs

WoolOvers is quite benevolent in its referral program. While it offers the referee 20% off, the advocate gets £50 when the referee makes a purchase.

This is a winsome referral program for everybody wins an incentive when a conversion is made. Instead of simply giving a discount to the advocate, WoolOvers ties the reward to the outcome, which here is a purchase.

3. Okabashi

When you render a great product or service, you might not necessarily give away incentives. That’s the case with Okabashi, and you know what, this brand has consistent referrals spending 13.2% more on an average.

Successful referral programs will help you effectively increase retail sales with cost-efficient marketing campaigns. This will augment retention rates and also scale customer lifetime value.

Reward your customers. Reward your referees. You then get satisfied customers who love spending on your products and services.

Need a hand in ensuring your referral program success? Get in touch with us!