Referral Customer Adalah

Look at the average referral value

The third way to calculate customer referral value is by determining the average referral value. Start by determining the average order value of referred customers and multiplying it by the average number of years referred customers stay loyal. Subtract the average cost of the referral incentive. The following is an illustration of the formula:

Average Referral Value = [Average Order Value of Referred Customers x Average # Years Referred Customers Stay Loyal] – Average Cost of Referral Incentive

Case study: How Xoxoday helped Xero with customer referral program rewards automation

A global accounting software platform, Xero, saw an uptick of 25% conversion rates by automating rewards for their customer referral program.

Xero is a cloud-based accounting software platform that helps small businesses manage their finances. In 2019, Xero partnered with Xoxoday to automate its customer referral program and saw an uptick of 25% in conversion rates.

Here's how Xero used Xoxoday to create an effective customer referral program:

The Xero referral program was a great success, with the company seeing a 25% increase in conversion rates for referred customers. The program was also cost-effective, with Xero spending only a fraction of its marketing budget on the referral program compared to other marketing channels.

Overall, Xero's success with Xoxoday demonstrates how automating rewards for a customer referral program can be an effective way for businesses to acquire new customers and improve customer loyalty. By offering valuable incentives, personalizing the rewards, automating the rewards process, and analyzing the data, businesses can create a referral program that drives results.

A referral program is a system that incentivizes previous customers to recommend your products to their family and friends.

Retail stores create their own customer referral programs as a way to reach more people and grow revenue.

Compared to other types of marketing strategies (such as traditional television ads), referral marketing can be more cost-effective because you are tapping one of your most valuable resources: existing loyal customers. Incentivizing these customers to become brand advocates can benefit your business in the long term.

Considering starting your own referral program? Here is a deep dive into how these programs work, the benefits of having one, and a six-step guide to creating your own.

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Incentivized referrals

The most popular type of referral is incentivized, meaning a customer has a reason to refer your products to their personal network. In return for the referral, the existing customer may receive a discount on their next purchase, a complimentary product or service, or a cash incentive.

Lifestyle brand Erin Condren offers a double-sided referral program: giving a $10 coupon code for referred customers to use on their first purchase, and a $10 equivalent in 1,000 EC Insider points to the person making the referral.

Direct referrals are when your existing customer base actively refers your company to people looking for a product or service you provide. It’s the most traditional form of referral.

There’s not necessarily an incentive for the referrer to act; typically they are just genuinely happy with the product and are willing to share it with others.

Reputation-based referrals are when you have built a brand with such a strong reputation that people are confident in mentioning you to someone looking for the products or services you offer—even if they haven’t bought from you themselves.

While it’s a good target to aim for, it’s not necessarily easy to get these types of referrals. They happen as an indirect result of having great products and a strong brand reputation.

Make referring as simple as possible

Customers should be able to find your program and refer in as few clicks or taps as possible. Then, once they’re on the program page, clearly explain how the program works in just 3-4 easy steps. Ensure the sign-up form doesn’t demand too much information.

Even better, link the referral program to the customer’s brand login information so they can start sharing right away, without registration. Or, send them dedicated links for automatic access to the program, without the need for any manual login. Select referral software programs, like Referral Rock, have this valuable feature so you won’t miss out on referral opportunities.

How does a referral program work?

A referral program reaches out to loyal customers to let them know about incentives they can earn based on how many personal referrals they send to the company. Marketing outreach may start as an email exchange, SMS message, or pop-up on your website. The customer can opt into the referral program and then send their link or code to others to use; the referred customer may also receive some type of reward or discount.

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Invite previous customers to join the program

Loyal customers make the best referrers because they are already familiar with your brand and its reputation. Invite them to join your referral program using email marketing.

Start by sending a broadcast to announce your new program and any incentives. Most referral marketing tools have an email feature to send a customer’s unique referral code or link without participating in a signup process.

A best practice is to continue promoting your referral program by mentioning it in your purchase confirmation emails—when customer excitement is fresh. Consider using the footer of the email to invite new customers to join your referral program.

Understand your customers

What does your target customer value? Why do they purchase your product over a competitor’s? Which incentives drive the most referrals?

Knowing your ideal customers and what influences their behaviors can help you educate those joining your referral program—and give them the insights necessary to effectively connect with their networks.

You can collect this information by leveraging ecommerce analytics tools such as Shopify’s analytics and reporting and others available through the Shopify App Store.

Choose the right referral program for your business

Now that you know a referral program's value, it’s time to move forward and create your own. Understand what your target customer looks like (and explain that to referrers), choose an incentive, and make it easy for happy customers to recommend you.

The best part? With Shopify POS integrations, you can create an omnichannel loyalty program that rewards customers shopping in-store and online.

Unlock the full potential of your referral program with unified commerce

New research reveals how unified commerce helps retailers deliver seamless experiences across online and in-store channels. Learn how connecting all your sales channels can help you turn loyal customers into powerful brand advocates.

What makes a good referral program?

A good referral program is transparent about what it is and what it offers. It provides reasonable incentives for customers sending referrals its way and gives out those incentives in a timely fashion to maintain its reputation.

Compare customer lifetime values

One way to calculate the customer referral value is to find the average lifetime value of all your referred customers:

Here’s what this customer lifetime value calculation looks like in formulas:

Average Customer Value = [Average Purchase Value x Average Purchase Frequency] – Average Customer Acquisition Cost

Customer Lifetime Value = Average Customer Value x Average Number of Years Customers Stay

For example, if a business has an average purchase value of $10,000, an annual purchasing frequency of  3, and an average customer acquisition cost of $5,000, the customer lifetime value is [10,000 x 3] – 5,000 = 30,000 – 5,000 = $25,000.

The resulting figure is the average customer value. Multiply that by the average number of years individuals remain customers. That should give you the referral customer lifetime value.

For non-referred customers, the formula above is also applicable. Calculate the average purchase value and multiply it by the customers’ average purchase frequency. Subtract the average customer acquisition cost and multiply the resulting value by the average number of years a customer remains loyal.

Compare this figure with the referral customer lifetime value to see which is better. The same formula is also useful in calculating the overall customer lifetime value before and after starting the referral program.