Best practices for setting up Referral program rewards
The Referral rewards section in the Growave admin panel allows you to create incentives for both Referring customers and Referred friends, turning your existing shoppers into brand advocates and helping you attract new customers.
IN THIS ARTICLE:
Choose appropriate rewards for referring customers
Set up effective rewards for referred friends
Please take a look at the Referral program set-up guide for more details.
Below are some best practices to follow when setting up Referral rewards.
Choose appropriate rewards for referring customers
Referring customers are motivated to share your brand with their network when rewards are appealing. Here are some strategies:
Points-based rewards
Offer points that can be accumulated and redeemed for discounts, products, or other perks. Learn how to set up ways to earn and redeem points in this guide.
EXAMPLE: a customer who refers a friend might receive a 500-point fixed reward, which they can later redeem for a $10 discount or an equivalent free product. This encourages ongoing engagement as they work towards higher rewards.
Discounts and free shipping
Provide a fixed amount discount, percentage discount, or free shipping to thank your existing customers for their referrals:
EXAMPLE: Fixed amount discount
Offer a $10 discount for each referral. If your average product margin is $50, offering a $10 discount retains a significant profit while incentivizing referrals. If 100 referrals occur, you would be discounting $1,000, which should be compared against the revenue generated to ensure profitability.
EXAMPLE: Percentage discount
Provide a 15% discount on the referrer’s next purchase. If the average purchase is $100, a 15% discount ($15) can be impactful. Consider your product margins; if margins are 40%, a $15 discount reduces profit but may still be sustainable.
EXAMPLE: Free shipping
- You can offer free shipping as a reward. If shipping costs are generally low and absorbable within your margin, this can be a cost-effective incentive, especially for products with high margins.
- Set a cap on the shipping cost that will be covered by this discount.
- Select the countries where free shipping can be applied.
Margin calculation: To manage margins for a large number of referrals, calculate the cost of discounts (e.g., 100 referrals at $10 each = $1,000) and ensure this cost is less than the profit generated from those referrals. If necessary, adjust discount values or eligibility criteria to maintain profitability while still encouraging referrals.
Gift Cards
You can consider giving gift cards as an alternative, especially if you want to encourage future purchases.
EXAMPLE: For a business with an average profit margin of 30%, a $10 gift card as a reward for a successful referral is suitable if the referred friend's first purchase is around $50 or higher.
It ensures that your cost of acquiring new customers remains balanced with the profit while incentivizing the referrer to return and use the gift card themselves. You can adjust the value based on your product prices and margins.
Set up effective rewards for referred friends
Referred friends are new to your brand, so it’s crucial to make a strong first impression:
Sign-up incentives
Offer a compelling reward for signing up, such as a percentage discount, fixed discount, or free shipping. A 15% discount on their first purchase, for example, can effectively encourage a first-time buyer to complete their purchase.
Product-specific discounts
Tailor the discount to specific collections to guide new customers toward your best offerings. If you’re promoting a new collection, you might offer a decent discount on items from that collection for newly referred customers, steering them towards specific products.
Leverage flexibility of your Referral program
Growave’s Referral program is designed to be flexible to meet your business needs:
Adjustable rewards
- Change reward types: For referring customers, you can switch between rewards like gift cards, amount and percentage discounts, or points. For example, you can offer a 15% discount initially, then switch to a $20 gift card if data shows better engagement.
- Use additional parameters:
- Applies to specific collections: Set the referral reward to apply only to high-margin or new collections, boosting sales for specific products.
- Allowed discount combinations: Enable order, product, or shipping discounts to combine with the referral reward.
- Set discount lifetime: Offer a reward with limited validity, like 30 days, to encourage faster conversions.
- Add prefix to discount codes: Customize referral discount codes with prefixes like “REF-” to track them easily and make them personalized for your customers.
Reward based on purchase amount
For referring customers, consider offering rewards that scale with the spending of the referred friend. For instance, you could offer 100 points for every $ 10 spent by the referred friend, encouraging referrers to bring in high-value customers.
"No reward" option
For both referring customers and referred friends, you have the option to offer no rewards, though offering at least a small incentive is generally more effective in driving referrals.
If you opt out of offering a reward, focus on other elements of your Loyalty and Rewards program like Points and VIP Tiers to keep existing and new customers engaged.
Monitor and adjust
After setting up your rewards, continuously monitor their effectiveness:
Track engagement
Use analytics to track how often rewards are being claimed and which rewards are most effective in driving referrals. Navigate to Analytics → Rewards → Referral program:
Adjust Referral program as needed
Based on performance, you can tweak the reward amounts or types to better align with your business goals. For instance, if you notice that a 10% discount isn’t driving enough referrals, consider increasing it to 15% or offering other perks instead of discounts.
By following these best practices, you can effectively set up your Referral program to maximize customer engagement and acquisition.
Hope it was helpful! If this inspires any questions — feel free to reach out to us at support@growave.io or use the chat icon in the bottom-right corner. We are always here to help 😊