How to Create a Successful Shopify Referral Program

Acquiring new customers is a constant challenge for businesses of all sizes. Creating a Referral Program can attract new customers and significantly increase sales rates.

A Shopify Referral Program offers a cost-effective way to increase your customer base through the trusted voice of word-of-mouth marketing. Referrals are fueled by one of your most valuable assets, the existing customer base. It turns your actual loyal customers into brand advocates who will spread the word about your products or services in exchange for rewards.

Why Referral marketing is effective in optimizing conversions? New customers acquired via referrals are presold to your brand due to the trust inherent in recommendations from friends and family. Comparatively, referrals are more trusted than traditional advertising. And studies show that customers acquired through referrals not only convert at a rate three to five times higher than traditional channels, but they also generate 20% more revenue on average.

While Shopify doesn't offer a built-in Referral Program, there are several Loyalty and Referral apps available in its App Store that will allow you to set up a referral program within your Shopify store easily. So, are you considering starting your own Shopify Referral Program? Here is a deep dive into how these programs work, the benefits of having one, and some valuable advices to take into account when setting them up.

What is and what makes a successful Referral Program?

When your existing customers join the Referral Program, they receive a unique link to share with their network. This link will allow their contacts to complete a purchase or first purchase using a pre-set discount. Your Shopify Referral app will track the activity of a customer's unique link. And if someone in their personal network uses the shared code to complete a purchase, the referring customer will also earn a reward.

While different apps can offer different types of discounts, its always advisable to offer double-sided discounts. Double-sided discount programs offer benefits to both the existing customer who is referring and the referred friend, giving both parties a convincing reason to be part of the program.

The best referral programs include persuasive rewards, a transparent and simple referral process, and a clear system for tracking referrals and issuing rewards. Ultimately, the goal is to create a satisfying experience for referring and referred customers. A well-crafted Referral Program must also take care of other key aspects of its planning:

• Establish clear goals, such as boosted sales or a larger customer base, that will help you with the further design of the program and to measure its success
• Personalize the rules and messaging to align with both your brand and the customer's interests
• Streamline the referral experience, make the process user-friendly, with clear instructions for sharing referral links, the rewards and a log of all of their referral activities
• Monitor and use tracking features in your app to measure the program's success and identify areas for improvement
• Regularly optimize the program based on feedback and data. Keep participants interested with updates and public recognition
• Last but not at all least, work on promoting the program and its benefits using different channels. Don't forget customers must be fully aware of the program for it to be successful

A key aspect, announcing and promoting your Referral Program

Consider this: 80% of your customers are willing to refer friends, but only 20% of them actually do.

A successful referral program is transparent in its purpose and offers reasonable, well-timed incentives to encourage customer participation. However, transparency alone doesn't guarantee success or conversions. Overcoming low program awareness is critical. Potential customers need to be aware of your referral program's existence, the more consumers understand your program, the greater the chance of achieving desired results.

Effective communication and program promotion are crucial to make sure customer will be aware and willing to participate in the program. Here are some strategies to consider to promote your referral program:

1. Make sure to have a good dedicated landing page containing the program details and incentives, the unique referral link and the activity logs that referring and referred customers need to monitor their referrals
2. Invite previous customers via email marketing to join your program. As they are familiar with your brand, they make excellent referrers
3. Promote the program on your website and newsletters, on conversion pages of your store, blog posts, social channels, YouTube comments, or even on your invoices
4. Train your staff and support to let your customers know how to effectively use your program
5. Consider contacting influencers or individuals with strong presence in Social Media to talk about your program

Understanding customer behaviors, preferences, and motivations is fundamental. Such insights assist in educating new referral program participants and choosing incentives. Retaining a strong understanding of your customer lifetime value (CLV) is essential, making sure the cost of the incentive is less than the total revenue brought in by the referred customer.

Choose a Shopify referral app with a user-friendly and clear interface

So why spend money on ads to acquire new customers when you can use a Shopify referral program and get them through trusted word-of-mouth marketing?

Shopify has various referral apps that let you set up and manage a Referral Program. Research and pick an app that fits your specific needs. Consider what features it offers, how easy it is to use, how much you can change it to fit your brand, and the price. And most importantly, remember everything we've talked about in this article.

With Froonze you can set up a Referrals Program in just a few minutes. You can customize double-sided incentives for both the person referring someone and the person being referred, and promote your referral program to customers on your website.  Customers will have a clear Referrals panel and pages where they can see all of their referral activity, whether they're referring someone or someone referred them. All activity can be seen in the Activity panel as well as the Admin Settings activity panel. The Referrals Program is included in our Loyalty Program subscription plugin. You can read more about the Referral and Loyalty programs here.

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