Science & Logic Behind the Referral Program

To remain relevant and seen, it's crucial to promote yourself. Visibility is key! Only when you are seen will you be asked for! Or as they say, out of sight, out of mind! Now comes the question: how? Marketing is the answer. 

There are numerous mediums available such as email, SMS, push notifications, SEO optimization, print media, and more. In the past, before the existence of these mediums, people used to engage in self-promotion of their products or services. They would discuss and advertise their offerings with others and request their acquaintances to spread the word. To ensure that people talked about their product, they would offer incentives such as discounts and freebies. This method of marketing is also known as ‘word of mouth’.

The ultimate aim of any marketing strategy is to expand your reach and attract new customers through referrals, starting from acquaintances to their friends, their friend's friends, and soon. 

A kind of chain is formed in the following way → one person refers to two of their friends, who in turn each refers to two more friends. This is illustrated in the image below: 

Using a referral program to market oneself is an effective strategy. The only expense involved is when a sale is made, and a discount is given to the new customer. This method is widely used in modern times and is commonly known as the ‘Refer a Friend’ program or the Referral Program. It's a powerful marketing tool that doesn't require any additional expenses. 

It's easy to see how effective this tool can be, as it helps to drive traffic to your store and generate revenue without incurring any extra costs. If you operate an online store, you likely use a Loyalty app, which typically includes a Referral Program feature. Your main task is to set it up and let it do the rest. 

The Loyalty program is a great way to promote loyalty and retain valued customers. But that comes later. The very first thing that we need to have is a huge bank of store visitors. Not everyone who comes to your store will end up making a purchase. So, if 100 leads visit your store, only a few convert into buyers. The term that best describes this is sales funnel.

A sales funnel takes in many leads and prospects and narrows them down toward the bottom, giving you a smaller number of paying customers. What we are trying to imply here is the higher the number of leads (broader mouth of the funnel) the greater the chance of a higher conversion. 

Recently we encountered a situation where our customer requested sending reminder emails to come and shop in her store to her existing visitors. We questioned the effectiveness of this strategy and pointed out that their current customers are already aware of the store and products. Instead, we suggested focusing on reaching out to new potential customers by implementing a referral program. This recommendation is based on our experience and the sales funnel principle, which emphasizes reaching out to as many new prospects as possible. 

The success of this strategy relies on two factors: maximizing outreach and generating interest in the store. Both of these objectives can be achieved through a referral program. Existing customers can refer their friends and family to the store, and everyone involved can benefit from rewards and incentives. This created a win-win situation for the referrer, the referee, and the store owner. 

For example, if you aim for a lead vs buyer conversion rate between 2-5%, having only 10 visitors to your store may not yield a single buyer. However, if you can reach out to 100 visitors, you could potentially convert 2 to 5 buyers. 

By implementing a referral program, you can leverage the power of word-of-mouth marketing and incentivize customers to refer new potential customers, thereby maximizing your reach and generating interest in your store. 

Growave Referral Program 

Growave Loyalty Program offers three ways to reward its users and the referral program is one of them. It's a great marketing tool for which you do not have to pay separately. A by-product for which we don't have to pay a huge amount of money, but which we tend to underestimate. Very human of us😁. 
Growave's referral program is very easy to set up and use. All you have to do is decide what kind of reward you want to give to the referrer and the referee. There are several ways to reward them. We will start with the Receiver since our intention is to convert them into buyers. 
So let’s look at the options. We have 4 options to select from: 
  • The first option on the drop-down is ‘Discount’ and on selecting a discount, you get two options to select from. Either the Percentage Discount or Amount Discount. 
  • Percentage Discount - Most users prefer to select a ‘Percentage discount’ of 10%-15%. This is an attractive offer for a newbie as they are getting a straightaway discount without doing anything. 
  • Amount Discount - Our personal favorite. If your product’s average cost is more than $200, we would suggest using this. Because a 10% discount would mean $20 off which looks and sounds more than %10. Human psychology! 
  • Free Shipping - Suggested when your shipping cost doesn’t exceed more than $10-$15. Works on the very same logic of ‘Amount Discount’. 
  • A Gift card worth anything above $15 sounds good. If your product’s average cost is on the higher end (above $500) and if 10% off doesn’t hurt you then go for it. 
  • Free Product - Suggested when you are a new launch or launching a new product and want your users to experience it. If you have a free sample or created a miniature of it, you can always try this option. It is especially effective in the health, beauty, food, and drink industries. The benefit is multiple-creates brand and product awareness, conversion to sales, creates a buzz, and word of mouth among customers. 
  • Points -This option is only available for the Sender but not the Receiver. Since we want the Referee to take immediate action that is why it is advisable to give many Reward but points. 
You can also add conditions to the ‘Discount&FreeProduct’ type of reward. 
On Product types - whether you want the discount to be applicable on all products or just specific collections. We suggest keeping it applicable to all products. 

Minimum Purchase Amount - We suggest this, as it is always advisable to create a minimum purchase amount if you have a range of products and the price range starts from very basic. 

Free product discount value -If the product you are offering is worth a lot of money then giving it entirely free is not advisable. In that case, you can set the % OFF value. This would mean that a certain expensive product is available at a bare minimum payment. For example, in a home appliance store, one decided to give cookware worth $50 in Free products. They can select 90%. That way the user will avail of this product by just paying $5. 

So how does it work? The Referral Program is shared via a link to make the job easier. You can choose from any of the options. Customers can share directly from there. All in just a couple of clicks✨. We also have the option of simply copying and pasting the link to the medium we want to use, which could be Line, WhatsApp, Messenger, and so on.

Change the image with your own favorite one that goes well with your brand. In addition to this, you may play with words and add your style to appeal to your users.

To edit it go to Growave App → Settings → Select Language Editor → No win the Search field type your search word and the relevant result will show up. Edit the text and see the effect on the front end. 

You are done setting up the Referral Program and you have invested your precious time to modify and design the page to make it look awesome. 

  • You can start with a floating banner running across your store talking about the Referral program.  It is one of the best ways to promote any new offer or program that you launch on the store. 
  • Share about the Referral Program on your Instagram page. 

  • Run promotional campaigns occasionally to remind your members of the Referral Program and how it can benefit them.  Being consistent is essential here. Once you start your ‘Referral Program’ make sure that you keep refreshing the promotion periodically and remember visibility is the key! 

If you still have any further questions please contact us 🤗