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Sooner or later, when you get caught up in а constant battle to outbid others, you find yourself in a place where advertising expenses outgrow the revenue your newly acquired customers bring, and before you know it — buying ads doesn’t make sense anymore.
An alternative solution that Soko Glam’s marketing department developed was to try referral marketing. And (spoiler alert!) their experiment turned out successfully! With the number of A/B tests and adjustments they had to go through, here’s how their optimized referral campaign looks like now:
The advocate offer works for anyone who visits their website, not only for the customers who have already made a purchase.
Soko Glam has a two-part offer, meaning that both the brand advocate and their friend get a reward for participation in their referral program. In this particular case, the referral offer has two different incentives: advocates get in-store credits and their friends get 20% off their first purchase. If you want to learn more about designing offer incentives, what types there are, how they differ from each other, and which work best, we explain all that and more in Talkable’s Guide on Referral Marking [LINK TO REF GUIDE WHEN AVAILABLE].
When an advocate decides to share their referral code, they can choose one of four methods to do so: via Facebook Feed or Messenger, via email, or by copying the referral link. While you may think that such small details don’t matter, the results of A/B tests Soko Glam had run together with Talkable showed that offer pages with an option to share the link through Twitter had lower conversion rates on average 15%.
When an advocate shares their link with a friend via email, they receive a message with a coupon and a link leading to Soko Glam:
When they follow through with the link, they will be redirected to the referral offer landing page where they can claim their 20%-off coupon and proceed with shopping.
Finally, when the friend claiming their referral deal is ready to make their purchase, they will be able to apply their coupon to their order:
The power of referral marketing doesn’t end here. Today’s referred customers become tomorrow’s brand advocates.
To learn more about the key lessons of Soko Glam’s referral strategy, read our full K-beauty eCommerce Shop Case Study.
Why Referral Marketing is Effective
There are a few major reasons why referral marketing generally shows much better results and a higher return on investment than other types of user acquisition:
- Trust. According to a study by Ipsos Mori, 69% of people already distrust advertising, and this number continues to grow. The sources consumers still do trust are online reviews, influencers, and, more than anyone, their friends and family.
- Social Proof. We rely on social acceptance and approval more than we’d like. We often don’t recognize this habit, and certainly don’t want to be associated with it, but conformity is nevertheless vital to our feelings of belonging to a community. So, besides trust, what plays on our consumer beliefs even more strongly is the tendency to be like our peers, even when it comes to buying behavior.
- Relevance. If you’ve ever run digital advertising campaigns on your own, or have even seen someone else doing so, you should know that goal number one is to capture the right audience and deliver the right message. When it comes to referral marketing, we can explain the much higher conversion rates, CTRs, visits and most all the other metrics across the referral marketing funnel with one simple thing: your brand advocates simply know which of their friends will benefit from your product, and they deliver your message right to those potential customers.
- Loyalty. Referral programs serve as a way to reward your customers for staying with you and helping you grow. We design them so that each side of the deal gets value out of the promotion. The more subtle effect which referral campaigns have on your customers is to increase the cost of switching. The store credits they are getting, friends they bring on to you, additional bonuses, leaderboard campaigns, and the convenience of continuing to use your services instead of looking for an alternative solution are all things which increase the cost of switching. The result? You boost customer loyalty!
- Ripple effect. Referral campaigns have high viral coefficients (the number of new users an existing user generates). When you get a new customer through referral channels, they are likely to bring more users with them, creating viral loops.