Creating A Referral Program That Will Grow Your eCommerce Business With Raul Galera

Andy Splichal 0:07

Welcome to the Make Each Click Count podcast. This is your host, Andy Splichal. We're happy to welcome this week's guest to discuss today's topic, which is Creating A Referral Program That Will Grow Your Ecommerce Business. Today's guest is the Chief Advocate at ReferralCandy. The number one referral program platform online. Since its launch in 2009, ReferralCandy has had over 30,000 paying users with over 10 million in annual revenue. Since 2009, they paid out over 300 million and referral commission to clients. A big welcome to Raul Galera. Hi, Raul.

Raul Galera 1:27

Hey, how's it going?

Andy Splichal 1:29

It's goind well, it's going well, thanks for joining us today. Now to start, referrals are different than affiliates. With referrals, you're using existing customers to recommend their friends and associates to your products while affiliates are using other businesses to refer. Is that right in a nutshell?

Raul Galera 1:49

Yeah, I would say that's pretty much the main difference between the two. I would say that affiliates are typically kind of founder maybe the B2B category in the sense that like you mentioned, there's there's a business that's promoting another business and getting paid for it, whether it's a some sort of media company, or just somebody that has some sort of like online presence, and it's using, its leveraging that presence to to promote a business and it's getting paid for it. On the other hand, referrals are more personal, I would say. So like, like you also mentioned, it's, it's, it's a matter of people referring their friends, it's more of like a friend recommendation, something that can probably come up in just a regular conversation with a friend, you might be telling them that, hey, I'm thinking about buying X product. And then your friend says, Oh, I actually bought from this brand a few months ago. And it's really good. And you know, this is why I recommend this brand. And so you're getting a personalized recommendation from somebody you trust. And you trust that person because it's part of your, of your connect very close network of friends and family. So I think that's what makes the main difference and the value behind referrals.

Andy Splichal 3:05

Now your bio says you have over 30,000 paying user. Now are the payin user. Are those companies that are using you or are those the the people referring?

Raul Galera 3:18

Right, yeah, so over. Yeah. So just to clarify, over the past 10 years, we've worked with 30 30,000 brands. Right now we have yeah, right now we have over 3000 that are currently using ReferralCandy to run the referral program. And yeah, those are brands that are using referral candy to run our referral program on their online store.

Andy Splichal 3:40

And then the bio also said, over 10 million in annual revenue is that is how much did they the 30,000 companies have generated? Or what's 10 million?

Raul Galera 3:50

Rignt. So we so the way we charge basically, so brands that work with us. So we have our pricing module that's based on a fixed cost, like a fixed base fee that we charge, which is $49 a month, and then a commission on referral sales. So this commission goes from 5% all the way to 0.25% as the referral sales grow. So in a nutshell, brands that use ReferralCandy to run the referral program are are basically paying based on performance. So based on how much revenue they generate from the referral program, that's how much they'll pay for the tool. And so that 10 million $10 million, that that's over $10 million, that's ReferralCandy's revenue's company.

Andy Splichal 4:39

Okay, so that's your your revenue offer what the clients made, which is a huge amount more?

Raul Galera 4:47

Right, exactly. So I think I don't have the number in mind, but I think we've generated over $300 million in revenue

Andy Splichal 4:55

Got it. Got it.

Raul Galera 4:56

for for our clients. Yes.

Andy Splichal 4:57

Okay. So why should a ccompany who's not using a referral program now, why do you think they should use it to grow their business here?

Raul Galera 5:10

I would say because it's a, it's a natural step in any company's growth. So this is something I tell companies all the time whenever I'm either running a demo, or maybe I'm having some sort of consultation with them, if you have a business, and mostly, I mostly talk about Ecommerce, but this doesn't necessarily just apply to Ecommerce. But if you have a business, and you've been around for a while, and you have recurring customers coming back for for more, and you have new customers also buying from you every day, and you know, the business is growing. In a nutshell, you already have referral sales happening, you already have some sort of word of mouth machine, that it's organically bringing new customers to your store, it's also probably encouraging your existing customers to come back for more. So word of mouth, I mean, word of mouth is probably the oldest form of marketing that exists. It's literally the the main way that we humans communicating. And like I said earlier, we love recommending products and experiences to people that we care about. I mean, I'm sure we can all remember, what was the last time that somebody recommended a restaurant or a vacation spot. So those recommendations are happening, happening organically now, why referral program, because by having a referral program, you are incentivizing your customers even more to make those recommendations. What before was just kind of like an organic type of recommendation or referral. Now you are given them an incentive to go out and spread the word about your your business. But also, you are also allowing them to give something to their friends. So we've actually seen that in a lot of referral programs, sometimes, given a bigger incentive to the refer friend, it actually works out even better, because the customers are happy that they can give maybe a very nice discount, or maybe some sort of free shipping or something along those lines to their friend, rather than, you know, maybe getting $10 in cash or getting a discount on a future purchase. So it's kind of give value of given.

Andy Splichal 7:21

So when you set this up, you decide is the business owner, whether who you're going to reward whether it's the referral or the referee, or both?

Raul Galera 7:30

Yeah, exactly. So every business can decide whether they want to reward both sides, which is what we typically recommend us to go with with both, and also what type of reward they want to give to each one of them. So whether it's a discount on maybe a percentage off or a fixed dollar amount, or maybe it's cash, or maybe it's some sort of custom reward all that they can they can set it up. And yeah, it's it's up to the business to decide what they want to give to their customers and their friends, and also change at any time. So if they if they see that maybe a reward structure is not working as well as they would like to they can change it for something different.

Andy Splichal 8:07

So what type of Ecommerce platforms does ReferralCandy integrate with? And how hard is it to set it?

Raul Galera 8:14

Yup? Yeah, so we have native integrations with all the major ones. So Shopify, Bigcommerce, WooCommerce, Magento, all of those, we have integrations built for those. For most of those platforms, integration doesn't take more than a few seconds, it's literally just have to install it from the App Store, in the case of Shopify, or install the plugin from from WooCommerce. And you're pretty much ready to go, you just need to, again, set up the rewards, maybe make some changes to the to the email templates, and the pages and all that. But you can get a referral program up and running in just a matter of minutes. We also have several ways that stores that are not on any be supported platforms. We have three different integration methods for them to integrate with, with ReferralCandy that requires a little bit more kind of technical work on them on their engineer side. But it's not it's not extremely complicated. We actually have quite a number of customers that are on these. Maybe they have a custom store setup. And they need to kind of code in the the integration themselves.

Andy Splichal 9:25

And how does I guess it's just a button that most people put on their website, you know, referral friend and earn rewards. I mean, what what does it look like on the front end?

Raul Galera 9:37

Yeah, so there's several different ways that you can promote a referral program. One of them is the one that you just mentioned, having some sort of call to action on the website that says refer a friend or says get get rewarded get $10 Something along those lines. And then from there, if you click on that, it can take you to a landing page which you can build inside of ReferralCandy in which you can sign up as a as an advocate and get your referral link, we also have a few widgets that you can implement on the site. So we have what we call the referral widget, which is something that kind of looks like one of these customer support bubbles that sits in one of the corners of the screen. And you can click there. And that kind of shows information about the referral program, or a post purchase, pop up something that that can you can show your customers after they make a purchase before they land on the thank you page, while you still have their attention, and you can say, hey, thanks for your purchase here. So you can reward your, how you can, how you can incentivize your customers to to buy again, and also to how you can get some sort of reward out of it. But honestly, the best way, in my opinion to to inform customers about the referral program, it's with our purchase email. So we have a very simple, very simple email tool that sends post purchase emails and reminders to new customers, and basically incentivize them to join the program get rewarded, and also reward their friends for their first purchase.

And so let's say you're given, you know, I don't know, make it easy $10 Off to the person who is referring as well as refer E is an Ecommerce merchant, I just would upload a list of unique coupon codes, is that how that would work? And then it would be automatically sent out through your system?

So for some integrations, yes. For Shopify and Bigcommerce, we automatically create the coupon codes ourselves.

Oh, really?

Yeah. So the the merchants don't have to worry about copying and pasting coupon codes or anything like that for other platforms or, or for those that are only kind of like us.

I'm sorry. You said big, BigCommerce and Shopify, you do?

Yes. Exactly.

What about WooCommerce?

So for WooCommerce, it's a little bit different. So yeah, they will have to either upload a list of coupon codes, or they will have to maybe create a multiple use coupon code that we can, that we can distribute, there's a couple different options there, we also have the option of setting up a permalink, which basically allows you to send new customers to a specific landing page on your site where they can apply the promo without using a coupon code, that's a different option. So yeah, it's it depends a little bit between between different different platforms, but But again, for for Bigcommerce, and Shopify, its whole, fully automated on on our end.

Now, are there any challenges in general that you have struggled with and getting results for clients wanting to use referral program?

I would say the main bottleneck that customers that merchants find when running a referral program, I would say it's, it's honestly, lack of promotion. And I really can't stress this enough, when when I talk to merchants is they need to promote the referral program to their customer base, that the more promotion that you do, the better results you're gonna get, obviously, and obviously, the bottom line of all of this is assuming that you have you have a good product, you're you're getting good reviews, your customers are happy, you know, you're not getting complaints or customer support is not number one low with with complaints or anything like that, just the bottom line is that you have a product that your customers love. And then on top of that, if that's in place, which as I mentioned earlier, if you've been around for a while, as a business, that I'm assuming that all those things are in place. On top of that, it's just a matter of promotion. So having some sort of call to action on your website, maybe notifying customers on newsletters, adding some sort of call to action on the newsletter, letting them know about the the referral program or promoting it on social media, all of these things are really helpful also, because for for the customer, it's it's something that benefits them directly. When they see a message on social media about a referral program, they're not necessarily seen, here's a coupon code so you can get 10% off or here's how you if you if you go to a store, we'll have a flash sale now you can make a purchase now and save money. There's a little bit different this is something that they can benefit from themselves directly and their friends as well. So the messaging is a little bit it's a little bit different and typically connects very well with with the audience.

Now, have there been any types of products that you have found don't lend themselves very well for referral program?

I would say anything that's on subscription tends to work extremely well.

No, I'm sorry, that does not, does not.

Does not? Ah, that's a good question. Um, I, I haven't really found haven't really found any of that that do not work. Well. I would say maybe for us. Mostly because we work with Ecommerce brands. And so we went don't necessarily work with, with, like, B2B, or, or yeah, or kind of like maybe SAS software, which I mean, I know that they're, you know, they're very successful SAS referral programs out there as well. But in our case, B2B we it's not something that we've seen a lot of success with. But again, it must be because just because we're biased because our our solution works with Ecommerce, but

It it makes sense. Because if you are buying something, you probably have friends that are like minded. I guess my thought is, is there something that you found isn't but it would make sense that there is so um, you know, you've talked about subscriptions. And And I'm curious, do you have a favorite success story of one of your clients, you'd be willing to share, and is it with subscriptions?

Yeah. Oh, absolutely. I mean, there's one. I mean, there's several that I particularly love their story. But for one of them, and to start talking about subscriptions, there's company called branch basics. And in the US, and they, they sell, like the sustainable and not harmful cleaning supplies, home cleaning supplies. And the reason why I like their story so much, it's because they they use referrals, as a way to tap into a very crowded and competitive market, which is cleaning supplies. Cleaning supplies, is that it's something that we don't necessarily think about before we make the purchase, we just know that we need to buy something, we go to the store, and we and we buy it, and that's it. But they came up with a way of kind of revolutionizing that that industry and they had to use referrals to, to get into that market. Basically, what they sell, is that they they figure it out that the two main ingredients that we buy, when we buy cleaning supplies are plastic and water. Whenever you buy a detergent or this soap, you're paying plastic for the bottle, and you're also paying water because sometimes most of the time it's it's sort of concentrate that's diluted in water. And first of all the plastic, you don't really need to buy plastic every single time that you buy cleaning supplies, and water, it's something you can get from your tap. So they said, Well, why don't we create a subscription business in which we give bottles, reusable bottles to our customers. And then every month we send them concentrates that they can diluting water and refill it. And that's it, you know, there needs to they need to buy a plastic every single time they need to pay for water because they already have it at home. What happened with it? So obviously, this had a really good reception with their customers. But as I said earlier, it's a very competitive market. It's a very competitive industry. There's massive companies that that control this, this field. And so referrals worked really well, because their customers became such happy advocates that were so happy that they made the change. And now they're they're using sustainable products and products also that don't

Now how, how well they work? Do you have any numbers you could share?

Yeah, so I mean, the referral program managed to to get over 10% of their new orders every every single month. So that's 10% of new customers joining the company every single month, which is honestly one of the best results that we've that we've seen.

And what kind of incentive were they were they offering to get those kinds of results?

So that we're getting there, we're given friends a discount on on their first subscription. And then for existing customers, they were adding a discount automatically to their subscription every single month. So the good thing about subscriptions, and the reason why I like them so much is because it's so automated that you know, the customer just sees that they're paying less on the following month. And you know, the discounts are applied to their subscription. It's it's all very, it's it's very frictionless, the way that rewards are applied.

Yeah. And %10, I mean, that's that's nothing to yeah, that's great, for what you're getting. Now, personally, let me flip the page a bit. Are there any business books out there that you can attribute to your success as an entrepreneur?

I would say one of the probably one of the best books that I've that I've ever read, and mostly because it's opened me multiple doors. It's Pitch Anything by Oren Klaff. I mean, it's a classic for anybody that come from a sales background. So obviously, anybody that's working in sales, this is not a surprise. But if I had to recommend one, that will be the one it really gives you a framework on how to how to express things that create interest and how to keep your audience engaged. And yeah, I totally recommend it to anybody.

Yeah, that's a great one. Have you read the sequel Flip The Script?

No, I haven't. Is it good?

Yeah, no, that's kind of starts where the other one leaves off. So I'd recommend that as well. So back to Referralcandy, what problems do you believe that you are saw have been better than the competitors? I'm sure there must be others doing this as well.

Oh, absolutely, yeah, there's a there's several other players in in the referral marketing space I, what I think that we that we do very well. And I think it's one of the reasons why brands choose us when whenever they think about running a referral program is because we've, we've been doing this for a long time. I mean, I joined the company five years ago, but the company's been around for for 10 years. So we've built a brand for ourselves, we've built a name for ourselves, and and whenever a Shopify merchant thinks of referral programs, they immediately think of Referralcandy. And I think the reason or one of the main reasons behind that is because we've we've remained niche as a very niche solution that focus 100% on referrals, a lot of our competition has decided to kind of like expand out, say, horizontally in terms of adding different different features and can like, ways of running different programs, maybe like, loyalty points, or maybe kind of like more into the actual kind of like loyalty space, and not necessarily just referrals, or maybe adding referrals as a feature and not as a core product. And so for, for brands that are looking for loyalty solutions, that's, that's great, because there's definitely options out there for them. For those that are serious about creating a referral program that generates consistent and recurring revenue, they tend to come to us and I think that's one of the reasons why.

Now, you said you've been with the company five years, and the company has been around 10. Do you know? Because I love the name ReferralCandy. Do you know how it got the name?

I don't really know the what what we got the name, I know the story, why the company? How the company started it because it was based on on on a merchant problem. But I don't know exactly why the candy came about.

But it works. It works. So we talked a little bit about the fee structure. Is there a minimum that a company like if somebody is just starting out, would it make sense to use ReferralCandy? Or should you have a minimum number of sales before you use your program?

Yeah, good question. So I would say I would say that's never, it's never too early to, it's never too early, never too late to be honest to launch a referral program. But what's going to what's going to be different from maybe a startup that's launching a referral program, or or established business that decides to launch a referral program after they've been around for several years, it's how long it's going to take to each one of them to get the program up to speed and turn it into a recurring revenue channel. And this is because referral programs are a numbers game. So if you run a net promoter score, across your company, sorry, across your customer base, and you ask them, would you be willing to refer us to your friends and family? Again, if your products good, if your customers are happy? Let's say 90% of them will say yes, I'm likely I'm likely to refer this product to my friends and family. The reality is that only a fraction of those will actually end up referring doing the action of referring their friends and family, that doesn't mean that they don't like the product. That just means that there's a lot of things that happens in our data lives.

Sure.

And just forget, right? So we need to, you need to keep that in mind. So if you're a small company that maybe has maybe 50 or 100 orders a month, it's going to take you multiple months to get to the point in which you have a fraction of customers that are referring their friends and family on a recurring basis. On the other hand, if you're a company making, let's say, over 1000 orders a month, you're in a perfect spot. That's that's where it's probably going to take you maybe less than a month to start seeing referral sales and start seeing your referral program growth. So it's really a matter of numbers.

And the fee structure, so you charge a base fee and then a percentage? Is that how it works?

Yeah, exactly.

And it just depends on on how much is how much you're paying, right?

Yeah, exactly. So our so our base fee is $49 a month. So we have a 30 day free trial, first of all, and then we charge $49 plus a commission on referral sales. And so that commission starts at 5% on the first $1,000 in referral sales, and then it goes all the way down to zero point 25%. So it's 5% on the first $1,000 3.5% on the on the next 10k. Then it's one 1.5% on the next 100k. And then everything on top of that it's 0.15%. So we have a good number of merchants that their average commission that they paid to referral can be at about 3% based on the on the level of work referral sales that they're getting every month.

So with the program, so you're you, as a merchant, you're given, you know, a commission like 5% to ReferralCandy. And then you need to give, you know, you're given it to the referral, you're given a discount to the referral E. What kind of, I guess profit margin do you need on your products? And what what is the profitability that you really find? I mean, how does it compare to like your paid ads or your Facebook ads? If you're given up, you know, 20, let's say 1010, and five, right, you're given up 25% of the sale. Right? So I guess you would at least need a fit probably a 50% profit margin to make that'd make sense.

Right. So I mean, yeah, it really depends on on the margin that the merchant has, and obviously how much you're willing to spend. But the main difference between referrals and ads, is that here, you're only paying based on performance. So you're only paying that customer reward and the friend discount, you're only giving out those for the first purchase. So after that, you know, the customer that made that recommendation is not going to get paid again, the customer that you just acquire, they use their coupon code on their first purchase. But that's it. Now they're their customer, they're your customers, and they're likely to come back for more. And so it the profitability, you can see profitability, maybe not in that immediate first purchase, but it's definitely

lifetime value

Exactly, it's a lifetime value. But it's also a lot more cost effective to acquire a customer from a referral program than pretty much any other form of ads, because on an ads, you need to have a budget setup. And then results may arrive or may not. But here you're only paying, you're only paying the discount, you're only paying the referral reward and you're only paying the referral commission to ReferralCandy. If the friend makes a purchase, if that purchase never arrives, then you don't have to pay for that. So I think that's that's the main difference, especially for those companies that and that's actually something that we saw a lot during during 2020, when when Ecommerce stores were kind of trying to figure out how to adapt themselves to this new scenario. And they were looking for ways to improve the bottom line of their business and become more profitable. We saw a lot of them coming to ReferralCandy, because they wanted to figure out a way that they could attract customers, and also retain existing ones without really having a lot of risk involved. So in terms of how much money that we're spending.

So how can an interested listener, learn more about working with you at ReferralCandy?

Yeah, so they can check out our website on referralcandy.com. That's where we have all the information they can also see how to install the app based on which platform they're on and if they have any questions for me I'm always happy to take questions over email so it's raulg raulg@referralcandy.com.

Well, this has been great. Is there anything else you'd like to add before we wrap it up today Raul?

No, thank you so much for having me. Just wanted to thank you for the opportunity.

Well it's great. Well, thank you for joining us again today. And for listeners, remember if you liked this episode, please go to Apple podcasts leave us an honest review. If you're looking for more information regarding ReferralCandy or connecting with Raul, you will find the links in the show notes below. In addition, if you're looking for more information regarding growing your business, check out our all new podcasts Resource Center available at www.makeeachclickcount.com. We have compiled all the different past guests by show topic and include each of their contact information in case you would like more information on these services regarding any of the previous topics in any of the previous episodes. That's it for today. Remember to stay safe, keep healthy and happy marketing and I will talk to you in the next episode.