Customer Referral Program in eCommerce

Customer Referral Program in eCommerce

Sales gurus have always taught us that as a business you need to focus on

  • first getting a customer,
  • then getting them to buy again,
  • and then getting them to refer others.

Each one of these steps helps in reduction of cost of sales per revenue metric. Since customer referrals are so important, they have to be thought through strategically.
eCommerce store owners sometimes tend to concentrate on the tactic of a referral. There is also a confusion between customer referrals and affiliates. This blog post lists some ideas on how to structure your referral program and try to link the tactic back to a strategy.

Why are customer referrals important?

  • Customers that come through referrals are generally prequalified and ready to buy.
  • Referral customers motivation to buy often times is not the discount and hence also offer a higher lifetime value.
  • If you have not paid for the referral they are free to acquire.
  • The referring customer has a reason to be pleased with what you have to offer.

How would a referral look like – or how do I ask my customer to refer?

  • Social share
  • Email
  • Review and rating on your site

It is not always a pure financial reward

Most sales people feel that what motivates them will motivate others. They offer a financial advantage to a customer to buy their referral. This probably works for selling at the low end or to people whose primary motivation for purchase was financial. Jon Jantsch the Duct Tape Marketing guru and a huge referral advocate says : “The problem with this approach (offering financial benefit for customer referral) is that it forces the customer into making a financial decision when referrals are fundamentally social. It forces the customer to think ‘what can I get’ rather than ‘what can I give'”

But thank the referrer

Even though it may not be financial, learn to thank the referrer.
Editors Note : A future blog post will cover this topic.

Get innovative

customer referral example
Example referral program : B Dancewear’s “Dancer of the month”.
Travis Marziani reports that this tactic has generated huge referrals. Imagine you are featured on a article – you are obviously motivated to share it. The blog is on the home page of the eCommerce site. Great free advertisement for the dance clothes store.

Customer referral as a sole sale strategy

OnePlus gives exclusivity to a referred customer. You can buy a new model before it opens to the public, only if you have a referral key from a previous buyer.

Gamify your referral program

Gamification is a good way to get a customer referral program working. Promote the game among your customers as well as on the site.

Games could be as simple as take a selfie with your product and upload to your fb page. The picture that gets the most likes or shares gets a prize.

Reward can be a charitable donation

While a financial reward may not be the right motivator for a customer referral, try using a charitable donation to reward your customer for a referral. Select a charity that may be right for your audience.

Email customer referral program a few days after the purchase

Not a one size fits all email campaign but focused on the product that was purchased. Find out how they would refer you on email and make it easy from the email to act. For example, if you are selling fashion a pinterest page you create for that line of fashion or a blog. Or a link to write a review.

Segment your customers (even for referral)

Segment based on first time vs repeat customer, no of items purchased, type/price of items purchased, etc. Based on this information, set up referral campaigns. For example, if you feature a customer on the site, you might want to start with someone who is a regular buyer on your site. If you are looking at gamification, a younger audience may be a better target.

Track the success rate of each customer referral tactic – right down to the conversion

There is no magic formula that applies to all – you need to find what works for your store and audience. Hence it is necessary to track each tactic tried. Put your social share on different pages and see which one works via google analytics. Run a best liked photo campaign on your fb page and then run an ad campaign on fb targeting the likers and measure their conversion.

References – some of the ideas in this blog were influenced by :

3 eCommerce Metrics every online business should be monitoring


We will study 3 eCommerce metrics every online store must measure to increase sales and profits. Ofcourse defining the objective of the business may be important. For example if you are a funded startup you may be willing to concentrate on traffic over other metrics. Some metrics drive others, so understanding which metrics to measure will be important.

There are many eCommerce metrics defined for the online business world, some for example Pete Williams’ 7-levers of business give a numerical method to grow your business. In this article we will look at what we think are the top 3 metrics every ecommerce business needs to monitor to make a successful profitable business online.

eCommerce vendors also need to understand the sales funnel and which metric is more meaningful in what part of the funnel.

eCommerce Metric 1 : Traffic

eCommerce vendors spend a lot of time figuring out what will drive traffic. Traffic is a metric that represents the bottom end of the funnel. While it follows that larger traffic will lead to more sales, optimizing higher ends of the funnel is more critical than the lower end.

The problems of concentrating on increasing the lower end of the funnel – traffic.

  1. Ads are expensive and continue to drive up costs of customer acquisition.
  2. Some traffic sources will drive traffic and conversions but not long term retention – flash sales sites or coupon sites for example.
  3. If you depend on growing traffic for increasing your business, your growth will be constrained by the count of new customers you acquire.

When measuring this metric, ensure you measure a secondary parameter with this – conversion. This will give you attribution for each source.

eCommerce Metric 2 : Lifetime value of a customer

Repeat customer is the key requirement in any business that wants to grow. It represents a metric in the very high end of the sales funnel. A 10% increase in average lifetime value of your customer will increase profitability by upto 30-50%, depending on your cost of customer acquisition as a % of your profits.

In order to improve this metric, you can consider some of the following strategies

  1. Customer profiling and personalization. In an earlier article we had shown that customers buy from you based on a 80/20 power curve – the top 20% customers give you the most returns. If you improve the experience of these customers, the average lifetime value of your customers will grow.
  2. Using remarketing on google or facebook. But ensure you retarget with products that will drive them to the site – for example, do not show products to customers who have already purchased. Refer this list from google.
  3. Send the customer back to the shopping after checkout! Using the success page or the order confirmation email, drive the customer back to the store to purchase more. This strategy may include coupon codes that are customer specific and time bound. Amazon does this very well. Their success page is almost bottomless.


eCommerce Metric 3 : Value of a cart or a checkout.

Having spent the money to acquire a customer it is very important to help the customer buy more from the store on the visit. This metric is also a top of the funnel metric and an increase in 10% in the average value of the cart can increase your profits by 20-50% depending on your cost of customer acquisition. Some of the strategies to improve this metric

  1. Up sell. 80/20 tells us that 20% of the people visiting your site would be interested in a meaningful upsell. The keyword here is meaningful though. If the product you sell can be sold in a bigger size for a higher price, that is a natural upsell. However, other upsells may include bundles.
  2. A high quality suggestion based on the buyers known interests is key here. With today’s technology it is not very difficult to give a custom featured products list. Zullily ( is possibly the best example.

In this article article we talked about 3 eCommerce metrics every online store should have.