How Can You Design and Run a Successful Referral Program for E-Commerce?

August 16, 2021 Written By Hemant Parmar

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You can’t find a better ally than a satisfied customer for your business. It’s for this reason that referral programs are effective. By referring your service to their friends and colleagues, existing customers are letting other customers know how valuable your company is.

Throughout history, referrals have been a part of life. Back then, villagers used to tell their neighbors about the best things on the street. They’d say, just tell the seller my name, and he’ll take care of you. Retail businesses rely on referrals generating sales, and eCommerce stores are now using this well-known method for driving sales.

PayPal adapted this old tactic and brought it into the digital realm for online businesses in the early 2000s. People used to be paid to invite friends to join the company. Within a year, they had one million users by March 2000, and five million by summer 2000.

How Can You Benefit From a Referral Program?

Business owners face the issue of finding a solid customer acquisition channel, or, more simply, of attracting new customers. You allow your existing customers to promote your brand to new buyers, however, when you have a strong referral marketing program. By doing this, you will not only save a lot of money on bringing new customers into your shop, but you will also increase customer retention.

What’s the reason?

Since loyal customers buy more per transaction than new customers, customer referral programs are inarguably one of the most profitable and cost-effective marketing strategies for your business. There is a seemingly endless amount of information available online today, which can make it difficult to tell out facts from fiction. Thus, consumers ask their trusted friends for recommendations. Marketing can play an active role in formalizing and leveraging these types of recommendations, which usually happen naturally.

Referral marketing is crucial for ecommerce professionals that want to increase sales and remain competitive. Find out how to start earning more customers by using referral marketing today.

1. Decide what you want to achieve

A clear understanding of your goals for the ambassador program is crucial prior to launching any kind of marketing campaign (of any kind). As you think of referral marketing ideas, you can follow this guide. You may want to consider these questions:

  • What do you hope to gain from your rewards program?
  • Is it your goal to attract more customers? Are your customers just buying more from you?
  • Would you like to increase your conversion rate and sales?

These may be all achievable, but you might have to run different referral campaigns for each one. Before you start, it’s important that you know what goals you want to achieve.

2. Use existing customer referrals to grow your business

Customers, friends, and family who are happy with your services are your referral sources. The referral marketing program would not function without them as the biggest champions. Create an extensive list of these groups and how you can easily contact them.

3. Make a plan to reach out to people

Make a thoughtful outreach plan now that you have a list of referral sources. Referral incentives are not as obvious as sending a mass email or including a generic link. You can do this by researching the best methods to use when reaching out to each type of referral.

For example, new customers shouldn’t be notified about your reward program right after their first purchase. It may not even be necessary to provide an incentive to close family and friends! Planning accordingly is essential because the type of referral program you use will greatly depend on your list.

4. Identify referral incentives for your business

The most obvious cash incentive is to offer cash incentives to your existing customers, but that might not be the best approach. Referral marketing is more effective with non-cash incentives than cash incentives according to one study. To keep your customers coming back to your shop, you’d better offer them something of immense value.

5. Let your customers know about it

Your referral programs and incentives are in place. Now it’s time to get your brand and reward program out there! Various ways can be used to target different segments of potential customers in this way.

Referral program details could be included in your newsletters, opt-ins could be available on your website, or you could show a pop-up right on your homepage to capture customers. Take the time to research the most effective ways of growing your lists, and then test them out for yourself.

6. Keep track of referrals and rewards

Keep track of all referrals made in order to run a successful rewards program. In addition to keeping track of who referred whom, the date on which it was done, and whether the conversion occurred, you also need to know how to follow up with them both.

You will be able to understand exactly how successful (or unsuccessful) your referral program is with a system that not only facilitates rewards within your shop, but also provides accurate referral data.

Let’s examine the referral programs of major e-commerce brands and learn from their success tips now that you know what referral programs are.

7. Choose Your Incentive

It is almost always necessary to provide an incentive. For every new customer an advocate brings in, you can reward them.

Regardless of whether your current customers are satisfied and happy enough to recommend you, the incentive may encourage them to tell others about how great your business is. Accordingly, eCommerce referral programs typically provide one of the following types of incentives:

  • A sampling of the products
  • Store credit
  • Offer

You should use incentives of this type to ensure that your business gains profit from them.

8. Keep track of your results

Tracking your results despite any incentives you receive is a must. Both you and your customers will benefit from this. Tracking referrals is primarily accomplished via the following methods:

  • Share URLs that are unique
  • A coupon codes

Coupon codes are great if you want to offer a discount to new customers.

In the examples of the above section, the most popular option is to generate a unique sharing URL for each user. For each user, you add a lengthy string (usually the username hash) that is unique. As a result of a shopper visiting your eCommerce website, a cookie is stored with their information and it is recorded at the point of sale.


It might seem daunting to set up an ecommerce referral program, but if you choose the right strategy, you will find it easier. There are some tricks we have created to benefit you and your business. We hope you will find it insightful and helpful.

Do you want to run a successful referral program for your eCommerce store? M-connect Media can help you. With our in-house eCommerce experts, we can help you set up your store from scratch to run it successfully. For more information, please contact us.

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