Referral Marketing: Here’s Why Ecommerce Marketing Agencies Need to Add It to Their Services

How many products have you bought because a friend recommended them? Which services did you sign up for because a colleague posted raving reviews

Congratulations, you’ve been pulled in by referral marketing!

As the influence of digital platforms continues to strengthen, referral marketing is a service that marketing agencies should consider offering. Here’s what you need to know to get started.

What is referral marketing and how does it work?

Put simply, it’s when a brand’s existing customers bring in new customers via word of mouth and recommendations. Essentially, customers become loyal fans and advocates who help grow the brand’s business. 

Check out some of our favorite numbers here:

• 74% of online users share that recommendations from people they actually know help drive their buying decisions (Hubspot)
• Referred customers have a 16% higher customer lifetime value and convert 30% better (Business2Community)
• 92% of consumers trust recommendations from people they actually know (Nielsen) 

The process is actually very simple, but let’s break it down:

1. The drive to refer. ​​The customer would be encouraged to share about their experience through any of the following means: they were super happy with the experience, they received a request to review the product via SMS campaign or a post-purchase nurture workflow.
2. Sharing and referring. Customers share their experience with a product or service. Thanks to the digital world. this can be done by posting on social media platforms. Online users would usually post a link to where interested shoppers can buy the product or sign up for the service. 
3. Purchasing. The interested online users then continue and complete the purchase. 
4. Receiving rewards. The existing customer gets rewarded when a new customer converts because of their recommendation.

6 reasons to add referral marketing to your agency’s services

Whether you’re an email marketing agency, SMS marketing agency, or even a performance marketing agency—it’s time to start thinking about adding referral marketing to your ecommerce agency’s services.

Adding this service is easier than ever with the presence of referral marketing software like ReferralCandy, which is a Shopify Plus-certified app.‍

"ReferralCandy is our go-to choice to increase revenue per customer by evolving them into ambassadors and their partnerships team is always pushing for results." -Jesús Orozco, Consultoria.io

Remember, if your clients’ ecommerce businesses grow, your business will grow.

It’s basically a win-win situation you’d definitely want to be part of. Here’s a breakdown of more reasons why referral marketing should be part of your service offerings.

1. It fosters greater trust within your clients’ target markets

People trust other people’s feedback over advertisements and sales pitches. According to Nielsen, referrals are actually the most trusted form of advertising. 

Referrals can come from different channels:

• Friends and family
• Customer reviews and testimonials
• Content from influencers
• Online magazines and publications

If your clients have a referral marketing strategy in place, their customers will be encouraged to spread the word about them. When online users see that real customers trust an ecommerce brand, this will increase their brand’s authority and credibility within their niche.

2. Referral marketing is a great alternative to paid ads, given the rising ad cost

Business owners will know that customer acquisition is challenging. They will often have to spend to get new clients through any of these channels:

• Paid search ads
• Paid social ads (Facebook, Instagram, and now TikTok)
• Email marketing software
• SMS marketing software

How much are ecommerce businesses spending on acquiring new customers anyway? Business Insider breaks down the status as of July 2021.

• Facebook’s CPM (cost per thousand impressions) prices were up 89% year-over-year
• YouTube’s CPM skyrocketed 108% year-over-year
• TikTok’s CPM price hiked 92% year-over-year

With referral marketing, new customers are generated by word-of-mouth marketing which is essentially free. Brands will only pay for the referral tracking software and the rewards which only occur after purchase. 

Since referral marketing costs less than other customer acquisition channels, your clients will be able to get new customers and more business. They will be more than willing to invest in your agency’s referral marketing service instead of taking a step back and cutting down on their marketing budget—which might mean having to lower their budget for your agency.

3. Adds exposure on platforms where your clients’ target markets are

Did you know that 71% of consumers are more likely to buy a product if they saw the recommendation on social media?

A referral marketing program brings brands closer to where their target consumers are. Whether it’s on Twitter, Facebook, Instagram, or TikTok, a brand’s existing customers can share about products and services with like-minded people who are most likely to buy.

Instead of spending more budget and resources to widen reach and exposure, brands can simply let their customer base do the job. This will allow your agency’s clients to widen their reach, translating to an increase the need for your services so they can keep up with their market’s demands.

4. Drives repeat purchases and improves customer retention 

Aside from pulling in new customers, referral marketing programs also encourage existing customers to buy again. 

Of course, this also depends on the incentives that brands hash out with their customers. Some of the most popular ones include:

• Points for rewards
• Store credit 
• Discounts for next purchases
• Actual cashback 

Figure out what works best for your clients’ customers and you’ll be on the way to increasing their customer retention rates.

Additionally, customers love it when they are recognized by brands they love and personal support. Referral marketing allows brands to identify returning customers and loyal advocates. This allows brands to reach out to them or initiate exclusive rewards to strengthen the customer relationship even more.

Returning customers also mean improved lifetime value (LTV). Improved LTV for your clients means that their business will also be more sustainable in the long run. This will decrease the likelihood of your clients canceling or downgrading their contracts with your agency anytime soon.

5. Encourages the creation of User-Generated Content (UGC)

Willingness to recommend a product or a brand is different from actually doing it. While 83% are willing, only 29% do it. 

Check out this example of UGC posted on the Instagram account @ganderflight. 

It’s a very quick video that gives opinions about the product plus shows actual products. Digital content creators can get very creative and come up with videos like this or even tutorial videos, unboxing videos, and how-tos. 

Since a referral marketing program rewards customers, this motivates them to create User-Generated Content (UGC) to promote your brand and products. Some benefits of this include:

• Lower marketing spend since customers create UGC for free
• 90% of consumers say that UGC influencers their buying decisions more than promos, branded content, and even search results
• More than half (56%) of online users discover products from their friends and 32% rely on customer reviews

In a nutshell, brands can spend less on branded marketing efforts, get new customers, and get a variety of UGC that they can repurpose and use over and over again. As a marketing agency, you also get access to these valuable content which you can repurpose to help your clients on the marketing front.

6. Generates great ROI

Basically, referral marketing requires minimal resources but the returns are great. For example, check out some of these success stories from our clients:

• iWader Fishing generated a 2600% ROI
• For Love Yourself, referrals contributed 5.35% of sales and generated a 10x ROI 
• Branch Basic had a 41x ROI in a little over two years
• Critical Pass generated 24x ROI and contributed 10.42% of revenue

These results are pretty amazing, but the best thing is that they are totally attainable and possible with the right strategy and software.

Best practices and tips for referral marketing

Of course, referral marketing is an entirely different system and it requires strategies, systems, and processes in order to be effective.

Here are some ways to ensure that your referral marketing service will be a success. 

1. Help your clients create a customer rewards and loyalty program in parallel

Aside from a referral program, brands will benefit from having rewards programs or loyalty programs. Members of these programs are actually 75% more likely to buy again due to the incentives.

The benefits don’t stop there. If customers enjoy the loyalty program, they will be even more motivated to share this with their network. 

2. Use a trustworthy referral marketing software to scale effectively and efficiently

Although referrals can happen organically, businesses can also use dedicated referral marketing software like ReferralCandy for efficiency. A software like this is able to track each and every successful referral by customers—whether it’s through a referral code or a link. 

The referral marketing software then manages the tracking and reward system in the background—allowing ecommerce businesses to manage the rest of their business. To get a better idea of how this works, check out these 70+ examples of referral programs in various niches that use ReferralCandy. 

3. Remind your clients to provide their customers with ammunition every now and then

So your clients already have a referral program and software. Then their first few affiliates. What’s next?

Your clients can sit back and just let their customers do their thing—promote their brand and products whenever they want to.

Or you can also help your clients provide their customers with additional assets or ideas so they are armed with ammunition and encouraged to promote more often.

Ensure that your clients’ customers have access to branding collaterals as well as UGC and other content that they may find useful. You can also help provide scripts and spiels which they can edit to sound more like them.

Wrap Up: It’s time for revenue to come to you without chasing 

Referral marketing programs work because people trust other people. It’s as simple as that. 

Offering this service to your clients will help them attract more revenue. And as you set up your clients for success, your marketing agency will grow.

With the right strategy, process, and software, you’ll have referral marketing as a service in no time. Join our Partner Program and become one of the first marketing agencies that have partnered with us so you can start growing your clients’ businesses via word-of-mouth marketing.

If you have any questions or would like to know how this collaboration will work, feel free to contact us and one of our experts will personally reach out. 

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