Frankly, consumers are bombarded with promotional messages in their inboxes and are surrounded by ads all over the internet. This has, in turn, raised questions over the effectiveness of traditional marketing methods. For this reason, marketers have had to find new ways of reaching their potential customers effectively. 

One of the best solutions has been using referral programs. Retail stores on Shopify, for instance, are increasingly creating their own referral programs as a way to reach potential leads and nurture more repeat customers. According to a HubSpot study, 81% of people trust recommendations from friends and family over those coming directly from brands. 

Well, in other words, a referral program is one of the most effective ways to secure new customers for your Shopify store, bolster up your customer loyalty, and retain existing customers. Today, we will walk you through what a referral program is, how it works, some of its benefits, and how it promotes customer loyalty. Let's dive right in! 

What Is a Referral Program? 

A referral program is a marketing strategy that encourages current customers to recommend your brand and its products to their network. Ordinarily, this network includes their friends and family as well as their social following. And in most cases, this program requires some incentives or rewards to motivate the customers to recommend you even more. 

And other than acquiring new customers, referral programs improve the overall customer lifetime value and also increase your ability to retain more customers. And guess what? The chances are that you have a group of happy and satisfied customers who are already recommending your brand to their peers. 

If you aren't still convinced why you need referral marketing for your Shopify store, below are some benefits a referral program brings to your business. 

Benefits of a Referral Program 

It is no longer a secret that consumers are more likely to trust recommendations from their networks than sponsored ads. However, a referral program is not only limited to attracting new customers; there are numerous benefits it provides, including: 

1. Customer Retention 

It's simple; a customer who refers their friend is likely to visit your store more often, and in turn, purchase more frequently. A referral program drives more repeat sales and helps boost your customer retention rate, mostly due to the incentives it usually comes with. 

Referral programs are incentivized with different kinds of rewards that make your existing customers stay happy and loyal to your brand. As a results-driven entrepreneur, you understand that repeat customers are essential for your business's success.   

2. Brand Credibility/Trust 

Today's consumers, especially the younger generation, want to trust a brand before they can shop with them. A referral program gives just that! When a customer recommends you to their network, the network is more likely to trust you as a credible seller since they've already heard or seen from a customer they know. 

Creating brand credibility and trust is instrumental for your customer loyalty – you will be surprised by how many new and repeat customers you can get with a customer referral program. 

3. Cost-effective 

The beauty of a referral program is that it significantly reduces your customer acquisition costs. From a simple word-of-mouth form of marketing to using your existing customers, a referral program can prove to be less expensive than you can imagine. What's more, word-of-mouth recommendations are even more persuasive than many other forms of marketing. 

According to a report by Review 42, referral leads have a 30% higher conversion rate than other ad campaigns and also account for 65% of companies' new deals. So, apart from cutting down on costs, it's worth noting that referral programs have higher conversion rates that lead to increased profits. 

4. Valuable Customers 

Referred customers are more valuable than customers acquired through other forms of marketing. This is especially true since these customers already have a positive view of your company, primarily because they heard about it from friends and family (people they can trust). For this reason, they tend to spend more than customers acquired through other avenues and also become loyal to your business. 

In short, referral programs produce valuable customers who have a higher lifetime value, hence, beneficial to your business. 

5. Brand Loyalty 

Through a referral program, you get to identify your most devoted fans and customers to continue spreading your word down the road. Referral marketing creates a sense of trust, thereby building brand loyalty among the referred customers. 

In other words, it is easier to create brand loyalty through your existing customers rather than doing it all alone. With a referral program in place, your loyal customers will always grow. 

Boosting Customer Loyalty With a Referral Program 

Customers acquired via a referral program usually have a pre-established trust in your brand, making it more likely for them to become loyal and repeat customers. Remember that these programs are run by your genuinely happy customers; hence, they may even make the recommendations for free. When you have brand advocates and ambassadors from your inner circle, the results exhibited are new and loyal customers. 

On the other hand, you may consider offering incentives to reward those that refer your products to their network. Incentives and rewards such as exclusive discounts, free shipping, and coupons for future purchases will motivate your customers to refer you even more, and in turn, remain loyal to your store. 

Generally, referral programs are one of the most effective strategies to boost customer retention and strengthen the overall brand/customer loyalty. 

Parting Shot 

Since there are good chances that you already have some happy customers spreading word about your business and its products, why not integrate a referral program and incentivize those customers to do even more? Customers love rewards and loyalty programs– it is a beautiful way to connect them with brands they love! 

In doing so, you'll not only be increasing their lifetime value but also strengthening your overall customer loyalty and retention rates. Here's something to remember: customers are your greatest asset, so invest in them through an excellent customer loyalty program! 

Get in touch with us to learn how it is easy to launch a loyalty program on Shopify and run a successful customer loyalty program.