The Science Behind Referral Marketing: Why Should Your Customers Refer You?

Have you ever bought something because your friend recommended it?

Most people will answer “yes” to this question and the reason is simple – we trust the recommendations we receive from family and friends.

For an ecommerce business, this sounds great – Just get your existing customers to rave about your company to their social circles. But is referral marketing really that simple? Well, not quite. Nothing is simple when it comes it comes to human beings.

You see, just because you provide your customers with great service, doesn’t necessarily mean they’ll recommend you to their family and friends. People are a lot more complicated than that.

So, what is it then that encourages your customers to speak positively about your company to their social circles? What motivates them?

In this post, we’ll explore referral marketing in ecommerce and help you understand what drives customers to not only buy from you but to also recommend your business.

What reasons will you find in this article?

How Effective Is Referral Marketing in Ecommerce?
People are Social Beings
People Base Their Decisions on Logic and Emotions
Three Ecommerce Sites With Successful Referral Campaigns
1. Love With Food
2. Harry’s
3. Sprint
Ultimately, Referral Marketing Is All About Understanding Your Customers

Sounds good? Let’s dive right in!

How Effective Is Referral Marketing in Ecommerce?

If you’ve been doing some research, you might have come across a lot of articles about how the likes of Airbnb, Uber, Dropbox, and other online businesses have thrived from referral marketing strategies.

But what about ecommerce?

Well, Ambassador conducted a study and found that the average referral marketing revenue for ecommerce was $155 000 per year.

Although the numbers are smaller compared to B2B and financial services industries, they do indicate that it does work for ecommerce. (Source: Ambassador)

Studies have also shown that 83% of people trust the recommendations they receive from family and friends.

The value of referral marketing in the ecommerce space can’t be denied. So, how exactly can you get started with it?

While the mechanics of referral marketing are important – the user experience, identifying the right incentives, etc. Before any of these can be successful, it all starts with understanding your customers.

People are Social Beings

Humans, because of necessity, evolved into social beings. Dependence on and cooperation with each other enhanced our ability to survive under harsh environmental circumstances. Although the survival threats of these circumstances have lessened in today’s world, people continue to have a need to affiliate with others. ~ (Source)

A company that’s made great use of understanding this is The Clymb.

Throughout the buying process, their customers are constantly reminded that they can “invite a friend.”

The Clymb enables its customers that they can invite a friend at all times. (Source: The Clymb)

There are two reasons why this works:

• The customer receives a monetary reward for the referral
• Because we’re social beings, the customer will also feel satisfied that they’re referring a great product or service to a friend

Incentives are a crucial part of any referral marketing program. However, before you decide on the incentives, you need to understand the reason why people make purchase decisions.

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People Base Their Decisions on Logic and Emotions

Both logic and emotion play an integral part in our decision-making. To understand this better, let’s pretend that you own an online store that specializes in healthy foods for babies and children.

Your customers (parents) will buy from you based on two main factors:

1. The logical: These products are in my price range. I can afford it. My partner and I both work and preparing fresh meals every day for our little one is no longer practical.
2. The emotional: I want my baby to eat healthily. I work hard and don’t have the energy to cook every day. I want a break from the kitchen without compromising my child’s health.

The above, coupled with other factors such as your recipes and how easy your site is to navigate, will help them decide to buy from you.

What will help your customers refer your business to their friends and family? The same key factors.

1. The logical: This company is reliable. They have reasonable prices.
2. The emotional: I trust my friends will be treated well here. I’d like my friends to associate me with this brand.

So, when you really look at the science behind referral marketing, you’ll understand that:

• People are social
• People are emotional
• People are logical

Knowing this about your customers, how can you make the most of it? Let’s look at companies who’ve managed to successfully implement referral marketing.

Three Ecommerce Sites With Successful Referral Campaigns

1. Love With Food

Love With Food delivers healthy snacks directly to their customers’ homes.

Customers can earn a free box of snacks and points (to the value of $10) by using a referral link.

Love with Food offers a free box of snacks and points (to the value of $10) for using a referral link. (Source)
As you can see, it’s not all about the monetary incentive.

The first line states: “Help a friend…” This connects to human beings being social.

Because the business focuses on healthy eating, the emotional reward of knowing that you’ll be adding value to a friend’s health is also appealing.

And of course, the logic that you’ll be receiving $10 for this referral is the cherry on top.

2. Harry’s

Harry’s is a men’s grooming brand that managed to gather almost 100,000 email addresses in a single week, before their launch!

Harry’s offers you a product in exchange for inviting friends (Source)
You can read more about their referral campaign on this blog.

In a nutshell, they found that:

• People felt “special” because they were the first ones to sign up. Making people feel special connects to emotional reward.
• The referral page had a tracker and this allowed their customers to know how many of their friends had signed up and the rewards they earned because of this. This made the campaign fun and encouraged them to be social and refer more of their friends.

They also have one of the best landing pages I’ve ever seen in a referral program. The mammoth calls the visitors’ attention and then naturally drives the focus to the call to action, which is the text block with the referral link and information about the program.

3. Sprint

Sprint is a popular brand that still makes use of referral marketing. Why? Because no matter how large or small your business is, word of mouth marketing is great for business.

Depending on the number of referrals, customers can be rewarded up to $500 per year.(Source)
This referral campaign has worked for many reasons, including:

• The considerable monetary reward. This appeals to the logic. Who wouldn’t want $500?
• If the customer’s social circle thinks highly of companies such as Sprint, they’ll get both social and emotional rewards. The customer will feel that their association with the business will impress their friends and they will add value to their social circle by referring this business.

Ultimately, Referral Marketing Is All About Understanding Your Customers

There’s no doubt that referral marketing must be part of a bigger, consumer-centric growth strategy and can’t be executed alone. You have to make sure that you have a good product, a great support team and your customers’ overall purchasing experience is flawless from end-to-end. Creating a successful referral program for your ecommerce business starts with understanding your customers. Who are they? What drives them? What need is my business fulfilling? Once you have the answers to these questions, you’ll be able to connect them to the three factors that make us human beings: social, emotional, and logical.

This science and art will help you to confidently move forward with a sound referral program strategy.

Author bio:

Khanyi is a freelance B2B writer and digital marketer. She specializes in blog posts, case studies, and website copy, currently writing for ReferralCandy and CandyBar.

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