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Referral Marketing in Retail (with 4 Easy Strategies)

Marketing and AdvertisingStarting a Business
Business owner set sup referral marketing program at their store

The world of retail is more competitive than ever, making it increasingly difficult to get people through your doors or onto your website.

One important way that many businesses can generate more traffic is through referral traffic. And this can come in many different forms. From simple word-of-mouth marketing to more advanced SEO strategies, referral marketing must be at the front of every retailer’s mind.

This blog will explore several important ways to generate more referrals to your retail store.

What Is Referral Marketing in Retail?

Referrals can take many different forms. But, at the end of the day, a good referral program is incredibly productive. After all, consumers trust the opinions of those they know more than any marketing. In fact, 88% of all people trust recommendations from friends and family.

Overall, referral marketing doesn’t require a large cost for the merchant. And done right, it can bring in large amounts of new revenue.

Merchants can incentivize referral programs in various ways, including cash, gift cards, loyalty points, and free products.

Creating a formal referral agreement that is advertised to all existing customers will increase the referral program’s engagement and attract more new shoppers.

Older man smiles as he checks out at a small retail store

How Does Referral Marketing Work?

There are several simple steps to get started with a simple referral program:

  • First, a merchant must establish a referral program with explicit benefits for the person making the referral, the person receiving the referral, or, ideally, both.
  • Next, a shopper must recommend someone they know to shop at a particular store. 
  • The shopper who was referred to the store makes a purchase that meets the minimum stated quantity in the referral agreement.
  • Any rewards are handed out to either or both of the involved parties.
  • The business gains a new customer and rewards the loyal customer, fostering a stronger brand identity.

What Are the Benefits of a Referral Marketing Program?

A good referral program can spread rapidly, solidifying strong relationships and positive brand identity among existing customers while also bringing in many new shoppers.

There are even more benefits beyond that:

Referral marketing is low-cost

It’s pretty easy to get a referral program set up. And even easier to keep it up and running. Plus, merchants only have to reward shoppers once a new customer is signed up, so they’re never paying for something that doesn’t have results.

Referral marketing is always simple to track and measure through a POS. Merchants can easily get a clear look at the ROI (or lack thereof) of any campaign, allowing them to make adjustments when necessary.

Builds positive brand association

Referral marketing also fosters important brand trust for your shoppers. Rewarding loyal shoppers makes them feel appreciated and rewarding new shoppers instills in them a stronger desire to return in the near future.

Inside of a small boutique apparel store in Japan with a sleek clean design

Reach shoppers ready to purchase

An existing shopper is only going to recommend your brand to friends or family who they think would be interested in buying your product or service. Any referral program is reaching a group of highly motivated buyers.

4 Referral Marketing Strategies

There are several ways to structure referral marketing rewards and incentives to encourage your existing shoppers to refer you to friends and family. Remember, it’s important to make the offer attractive but not cut too deeply into your margins.

Cash Rewards

The easiest way to get your shoppers on board is with some cash. Shoppers love the instant gratification of getting more money in their pockets and will respond the best to this strategy.

The downside is that this strategy comes at the highest cost to your business.

Store Credit

One similar alternative to cash that might help your margins a bit is to offer store credit instead. This can still feel like cash to the shopper but it ensures that that cash is being spent at your store rather than elsewhere.

Loyalty Credits

Similar to store credit, a credit to your loyalty system offers the shopper more access to free products or services at your store.

Giving them credits through your loyalty program gamifies the process and also encourages shoppers to use your loyalty program more frequently, something that’s proven to drive more spending at your business.

Free Merch

Everyone loves getting a free gift. Make your loyal shoppers feel special by gifting them a free product. Make sure to choose a product that carries some actual value so that it’s noteworthy enough for them to mention to their friends.

The downside of offering a free gift is that it’s hard to choose which item will resonate with the majority of your shoppers. You also don’t want to choose something that your customers are going to buy regardless. Instead, choose a gift that isn’t commonly purchased and maybe it’ll turn into something they regularly buy going forward.

Referral Marketing: Physical Retail vs. eCommerce

There can be some big differences between your referral marketing strategies for in-person shopping and online stores.

The biggest difference lies with your visibility strategies. For in-person shoppers, it’s easiest to highlight referral opportunities when the shopper is checking out. You can also reach them through SMS or email marketing after the fact.

But with eCommerce, it’s important to generate more website traffic and build your referral program there. In order to do so, you’ll need to focus on building a great website, optimizing it with modern SEO, engaging with linkbuilding agencies and strategies, building influencer referrals, and so much more.

Overall, getting traffic to your website or through your front doors is the hardest step. Once there, implement some of the referral ideas above and you’ll be off to the races.

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Written By

Michael Chalberg

Michael has long focused his writing on the world of retail and small businesses. He's been a part of the KORONA POS team since 2018 and loves helping entrepreneurs find ways to adapt and succeed. In his spare time, you'll likely find him hiking somewhere in the Southwest.