Referral: AARRR metrics for ecommerce Part 4

We’re continuing with the AARRR Metrics for eCommerce. So far, we’ve explained the first 3 – acquisition, activation and retention. This week it’s Referral time! (For a quick recap, see this infographic.)

What’s referral as an AARRR metric?

Dave McClure, who coined the framework, doesn’t set strict limitations on what it is and what it isn’t.

In his original presentation of the concept, he puts it broadly: it’s when someone refers someone else to your website and the new visitor takes some action. Just that. They don’t have to be a customer to do the referral, and the action is not necessarily a purchase.

Of course, in terms of e-commerce, we’re always aiming for a sale, but it doesn’t have to happen right away. In this case, referrals work the following way:

1. Someone tells me about an interesting product/ great resource/ good offers/ a website that might have what I’ve been looking for.
2. I visit and browse around. I might download a resource or sign up for their newsletter/ weekly offers because I like what I find. I’m generally interested in their products and note that they might be my first stop when I need to buy such items.
3. I keep on receiving updates from them – useful information (broadly related to the product, I’m still generally interested in clothes, food, personal hygiene, etc.) or offers. I might connect with the brand on social media. I identify with the brand and the value it projects, although I haven’t bought anything yet. My impression so far is as good as my friend said it would be.
4. The time for me to buy what they have has come and they’re my top-of-mind choice. I’m glad my friend told me about that company. She knows what I like.

Why am I going at such length here? Did you notice that the referral started a new conversion funnel for a new lead? A new cycle?

A referral for one is an acquisition for another.

Referrals act both as a confirmation of satisfaction of the currently activated lead or customer and as an acquisition of the new lead.

Why is it an important step of the AARRR Metrics?

The framework includes all absolutely vital steps towards the end goal of a business – sustainable revenue. If all steps work correctly, you should achieve a state where your inflow of new customers is constant, they get hooked on what you offer (for free or not) easily, and remain your loyal customers for long, giving you a stable revenue.

We’ll be looking at referrals as the basic word-of-mouth spread of your brand because it’s older than the Internet and yet the best and cost-effective way of ensuring that constant flow of newcomers.

Why does it work so well?

It’s a fact people like to appear cool and knowledgeable. That’s why they show off their new purchases. They want to be the ones to let their close people on trendy stuff and beauty secrets and be seen as influencers (it’s only natural!).

On the other hand, people trust their family, friends and close network better than any solicited reviews, expert recommendations and so on. They subconsciously adapt their tastes and behavior to the group they associate with in attempt to be never left alone. So they’re times more likely to take their suggestions than those of a stranger.

So it’s a win-win. The first group has a strong inner tendency to share good products and experiences with others – for the benefit of the ego, and the latter is inclined to take the advice.

A prerequisite for referrals

Before you ever hope to get people spreading word-of-mouth about your shop, ask yourself if they can say anything bad about the experience with you?

Just a few ideas what can be off-putting and cost you those referrals:

• no valuable information provided aside from sales offers
• too many emails
• irritating social media presence
• overuse of remarketing
• your site is uncomfortable to browse or doesn’t have a wishlist option.

Think of anything that might make your leads say, “Well, this store might be nice, but I don’t feel it’s awesome…better not tell my friends, it might be a complete BS.”

This leads us to the basis for referrals – “exceptional customer experience”. They have to be so delighted by your products, brand, values or additional materials provided that they say “wow” and paste your link to their friends.

Nobody says, “Well, there’s just the next clothes shop online. Why don’t you check it out – I’m sure you’ll find something nice.”

AARRR Referral Tactics

In our Growth Hacking Examples post, we talked about shareability and virality as key ingredients to exponential growth. You have to make it easy for people to talk about you – even if they want to, it doesn’t mean they’re going the extra mile.

Content for fun

Hiking gear seller REI even has an app for hikers

Games, quizzes, travel guides, recipes, videos – anything that calls for a share and can keep the new lead coming back. Provide free resources or features for visitors to enjoy and forward to their friends.

People love talking about themselves. Offer them a fun short personality quiz with customized styling/ exercise/ diet/ reading/ listening/ etc. recommendations (whatever makes sense for your product).

Plus, this later will help you for customer segmentation and tailoring your offers to their needs and tastes.

stylecaster.com

They’ll have a good time and ask friends to fill it out too to see what they get – it’s not a passive referral, they have to actively engage with the page to satisfy their own curiosity.

What’s the most popular video content on the Internet? Yes, cat videos! They’re cute and hilarious.

IHeartcats.org has created a whole business catering to the cat-loving community. And you bet they use videos – who wouldn’t forward a panty-wearing kitty to family and friends? The bonus is people discover the website.

Another example – remember how everybody was taking the VisualDNA personality tests? Although not the best example because most of us didn’t know at the time what the company was selling, it’s a good idea of free access to part of your product to get people hooked.

Referral programs

We’d like to look at those from a different angle. Most probably, they’re the first and sometimes only association with referrals. Granted, they do work.

With the right incentives for both sides and convenient invites/ links, you should be able to turn it in one of your main acquisition channels.

Richard Lazazzera lists a few tools you can use to build a referral campaign and Optimizely has some tips how to improve the one you already have, but that’s not our idea here.

How about а referral campaign that triggers sharing even before people have bought from you?

Do you believe you can get them so excited about your products, mission, and brand, that they’re willing to share before they actually have your products? (Note that we’re not talking about formal programs, but merely people sending traffic to your store.)

What about your brand and products stands out and is worth some time engaging with – even if people are not in a shopping emergency?

iHeartDogs

This is your point of reference you should focus on utilizing even more, your attention-grabber, your signature. It’s something people can talk and feel positive about even if they’re not your customers (yet).

Here are a few suggestions what you can offer plus what you might want them to say to their family or friends when referring to you:

• a charitable incentive (e.g. get one, donate one to people in need, think Toms and Warby Parker)

“They are so cool, I really love they actually do it. Next time I need X, I’m getting it from them.”

• a freebie (e.g. an invitation to an event you’re organizing, a downloadable recipe book, a style test with recommendations, a travel cheat sheet, printables, etc.)

“Oh, I got X from their site – it’s free, no purchase required. It was really helpful. I like the company a lot.”

• access to a member area with educational videos/ other resources

“I’ve been watching their X free courses, they seem very professional. I’m thinking about signing up for their seminar as well. Wanna join?”

See, all these are activation approaches, but if the experience is great, it’ll stick and become that point of reference you need.

 Take advantage of eye-candies

In general, all visually appealing products can benefit from beautifully curated social media profiles, style books, recipe boards and so on. Nobody would put their name under an ugly directory-like sales page, but eye-candies are awesome for sharing and stick to the mind.

Modcloth’s customer-generated style pictures

Do you run a niche clothing e-commerce?

People spend so much time on the Internet reading what the famous do and wear, or just looking for inspiration for their own style (we’re vain creatures).

That’s the appeal of Pinterest and fashion Instagrammers – we need ideas. So it’d be a loss if you don’t turn this pass-time activity to your advantage.

ModCloth, a vintage and quirky fashion online store, has a whole Style Gallery with user-generated pictures featuring their products (shown above). Customers get exposure as fashion influencers they can share with friends and the store gets the credibility and displays positive feedback to newcomers. Sounds great to us!

See what Yumi is doing (they sell bottled fresh veggie juices)? Sure you want to tell your gym buddy/ best friend/ mom/ college daughter about them!

Did we give you another angle to look at referrals? We hope so. The trick is to always be working on your brand and products so that they’re likable and a great conversation starter. This will make spreading the word a breeze 🙂

Check out the next article in the series, too, in which we discuss the last of the AARRR metrics – revenue – the Holy Grail, the aim, the prize for all your hard work.

AARRR Referral Case Study: The Fish Club

Not so long ago we published our first interview with Xing Xian, owner of The Fish Club, an online seller of fresh seafood in the Pontian region, Malaysia, in which we talked about the way he analyses his ecommerce data to run his business.

In an attempt to connect local fishermen with end consumers, they modernize food delivery in a region still stuck in its traditional open-air fish market trade.

Xing Xian comes from a family of fishermen himself and knows a thing or two about seafood. However, Malaysians are not used to buying their food online when there’s an abundant supply at local shops and markets.In order to win them over, he has to get the younger generation’s attention first, the early adopters of technology and online shopping.

Competitive advantage

Convenience, freshness guarantee and less hustle for busy customers.

Reviews on Facebook show the company has found the sweet spot: all customers praise the quality of the seafood, its freshness and the professional methods they use to preserve it without artificial additives.

Personal attitude and advice, fast delivery, and the fact that it saves them the effort to go to the wet market early in the morning for the best catch were also greatly appreciated.

It turns out people were ready for the service.

What’s the catch?

Xing Xian believes quality is his competitive advantage on the current market and would not compromise it. That’s why a full-time company employee drives the delivery refrigerator truck.

However, in order to continue providing the same level of quality product and service, transportation costs need to be optimized. And this is how the real referral program was created.

After realizing word-of-mouth is both the most powerful and the cheapest way of attracting new customers, the Neighborhood Program came into being.

How does the referral program work?

The company sends out ambassadors to local communities to promote the service and help people place their first orders. As mentioned before, eCommerce is underdeveloped in the region and initial resistance needs to be overcome. 

The aim of the ambassadors is to get neighbors to order together to optimize delivery costs. It’s a win-win: the company is able to deliver for free in exchange for a stable amount of orders coming in.

Why referrals are so powerful

First, the ambassadors are not sales reps. They get paid in company discounts and special rewards once they reach 20 percent market share and 50 orders a week in their Neighborhoods.

So they have to use friendly connections in the beginning and not sell but recommend.

Word-of-mouth works miraculously because people trust their friends’ and family’s opinion and see their recommendations as benevolent. Even if it’s about a product, they believe close ones wouldn’t praise anything that’s bad or hurtful in some way.

In smaller and tightly-knit communities, especially in Asia, personal communication is even more powerful – it’s what these people are used to.

They put the group before the individual and have a strong sense of belonging to that group. That’s why a group persuading – and service from then on – works so well. Those people don’t want to be left out.

And once you get the neighborhood hooked up and cooking with your catch…do you smell the fantastic dishes? That’s an offline viral spread 🙂

Back online, on social media

Food is a great conversation starter and people are generally interested in it. Also, the experience is great for sharing – cooking provides beautiful images and everybody has an opinion.

Customers share what they cooked with the catch

The founders realized the potential of recipes early enough and turned them from a simple traffic-driver into a reference point for seafood lovers and an inspiration for purchases.

They’re easy-to-share materials that customers can use for referring friends while boasting their own cooking skills and healthy eating habits (admit it, we all snap pictures of granola with fruit and eat junk food away from the camera).

The referral as part of the AARRR metrics framework

Both offline and online, the company has found a way of making people spread a good word about it – great customer service and product that exceeds expectations. Granted – they played on local culture and turned it to their advantage, but nobody has complained of their freshly-caught prawns yet.

One possible takeaway is that

The connection between retention, referrals, and revenue is clear – happy customers tell their friends and buy repeatedly, generating revenue with fewer worries about acquisition and activation.