ReferralCandy is one of the original referral program tools, and oldest apps, in the Shopify app store. They only care about the referral, which keeps the tool extremely focused on one functionality, which you know I love.

When dealing with referral tools, fraud can quickly become a tricky topic. Are customers actually referring new business, or is someone just pushing their code on a coupon or discount site, or trying to take advantage of you in a different way?

With ReferralCandy you have an internal fraud detection system to help notify you if they believe someone is misusing your referral program. For the most basic example, imagine someone has the same device or IP address being used on multiple referrals. Clearly this is the same person or a close family member and they shouldn’t be getting referral credit for that. You also have a dashboard that allows you to see who your top referrers are and if you notice a large discrepancy between the top two or three referrers, you can dig a little deeper into each of their profiles to determine if something is going on.

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ReferralCandy is designed to drive revenue. Based on industry standards, referral programs usually generate about 2.35% of top line revenue and ReferralCandy has performed studies to offer standards for your specific industry to help you see how your program compares.

You will want to understand your referral coefficient, is it better or worse than that 2.35% and how might you be able to improve it by tweaking incentives, promoting the program better, etc.

You want to understand the cost of acquiring a customer from this channel. Since you didn’t have to spend any ad dollars to get them, you might think it's free, but then you have the cost of payout to the referrer, and the discount you gave the referee. How does that affect your overall margin? It’s probably better than paid ads, but may not be in some cases. It’s important to know.

And down the road, you will even want to understand the difference in lifetime value and average order value from this channel. It’s quite common to see a higher Lifetime value from referrals because the referrer has helped you break through that like, know, trust barrier better than you could have done yourself.

ReferralCandy can be setup in minutes and does not have to require much in the way of resources. The more customization you want for your account the more effort you will have to put in. As mentioned, you need to integrate your referral program into the rest of your marketing mix to get as high of an adoption rate as possible. Then you need to tinker with the incentives in order to find what works best. And you may need to come into your dashboard monthly to review referral cases and approve payouts, ensure there isn’t any fraud, and also potentially go reach out to your high performing customers and make them a special deal, ask for UGC, whatever the case may be, they are awesome and you want to empower them.

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ReferralCandy works best for established brand with a great product experience that people love to unite around. The stronger the existing brand relationship, the more likely they will tell their friends. Think about it this way, you want to be fostering the existing word of mouth marketing going on around your business, as opposed to forcing it to exist in the first place.

A referral program is only part of your overall marketing plan, you want to make sure its integrated into the rest of your strategy, for example by promoting the plan via email, on-site, even maybe by giving customers a postcard with their product.

Companies that have target markets like moms, kids, millennials or younger generations will have an easier time creating successful referral programs as they tend to participate more.

At the end of the day, any referral program is better than no program at all because even getting 1% lift in your referral rate can mean big business. Most of the time a referral program doesn’t work, it’s likely due to poor promotion or oversight by the merchant. Oftentimes you need to tinker with the incentives and levers in order to see what people really respond to. Testing multiple offers and tracking your conversions are the most important thing you can do to blow out your referral program.

All stores should build some kind of referral program as word of mouth is the best form of advertisement. That being said, referral programs are only as good as the revenue you have coming in. It won’t magically jump start your sales, but it will amplify what you are already doing.

Companies that struggle the most with referral programs are those with weak brands, pass-through traffic or one-time purchases, and also those that can’t really offer any valuable incentives to their customers, like maybe you can’t give a discount or cash incentive because of your margins.

Also worth noting, referral programs can work in B2B Ecommerce, but the incentives typically need to be quite different (because when you’re buying for a company, you aren’t always as price sensitive and most businesses don’t let you sneak a referral commission under the table).

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