Jay is the CEO and Founder of CloudSponge, a SaaS company that sells software for your website that lets your users view, select and share contact records from their address books without leaving your website.
Welcome to the podcast Jay. What's going on, Arlen? All right, nothing too much. Just trying to try to get through this Friday. All right. Well, yeah, we definitely appreciate you coming on today. We're going to be talking about something that's close and dear to my heart and I don't think I've ever had an outside guest talk about referral programs for a marketing before so that's always really excited to have you on because I'm always.
I hope to get other people's take in the area. That's kind of close to me. So I'm really excited to talk to you about your take on referral programs and and how eCommerce businesses can take advantage of them. But before we get into all of that, why don't you give us a little bit of background on?
How you got into what you're doing today? Yeah. Yeah sure. So I think my story is actually kind of similar to yours. You know, I've been I've been in the in the agency Dev shop game for about 20 years and you know at some point I think everybody does that for long enough kind of wants to get into the product game and pivot into something where that you know, they actually have instead of building stuff that makes everybody else a bunch of money.
They build something for themselves, right? So, That happened to us at the agency, which is it's still an it is still a going concern now is called Arizona Bay. Yeah, we started building our own, you know, trying to sort of launch and release our own products back in 2009. We started with a product that musically we're talking about here.
But one of the features of the product was we needed to give our users a way to. Upload, their address books to our service to our website. And so, you know, we did the same thing that every good developer does really is we started off with a builder by and we went out and looked at all the different ways.
We could buy Solutions. So the open source scripts and the and the different companies that were providing this type of functionality. And bottom line is nothing was good enough. It was a lot of ab and abandon open source packages or you know companies that had really complicated or sort of bad fit software.
You know, that was that was nine years ago. And now we're you know that little thing turned into a thriving business that you know, we're working on. Okay. All right, great. Well, that's awesome in your correct. We definitely have a similar background. We at Omni star interactive here. We started off really as a full-service.
Steph shop, and we're in the game for a number of years developing custom web apps and then we pivoted we'd made of similar pivot. We created our own Suite of solutions as you know, we saw the need and we said, you know, there's a better way to go because as you already know full life cycle development is it can be a beast it can definitely be.
You know a lot to maintain lot to manage and then just to having to always get out there and get these customers land deals and then go through the whole life cycle. It takes a lot to manage that and you know, the shift to the product game is definitely something that's worked out for us is of course, we have our Romney Starfleet software and similar.
Like you said you have one solution. That's your bread and butter solution now, so I'm yeah, very ironic definitely similar. Similar stories there for sure. So, you know today like I said at the beginning we're very excited to bring you to have you on here because we're gonna be talking about referral marketing and referral programs specifically for e-commerce businesses.
And so why do you think referral programs are so important for e-commerce businesses these days like, you know, like no other well, you know before I get into that I probably should explain why why I'm qualified to talk about referral programs. Just being in the in the in the business that I'm in many of our customers use our software in the referral program Solutions.
So one of the things that we do as a marketing exercise and sort of lead nurturing exercise is we study our favorite e-commerce. Companies that are using our solution inside their referral programs and we produce content like case studies and teardowns and you know other types of blog posts and slide shows and things like that that helps our customers sort of visualize how they might build their referral program.
And so as a result of doing that, you know, we've we've studied a ton of them studied a lot of referral programs out there and it's it's something that you know, I'm happy to be able to share some of that knowledge with you and your audience now. and to answer your question that you know, the why do I think that referral programs are important for you Commerce is you know, I think every e-commerce business needs as many acquisition channels as it can get.
I think that's kind of common knowledge. I think a lot of e-commerce businesses are doing the usual stuff right Nancy. Oh, they're doing paid acquisition and they you know, Advertising on all the different social networks and things like that and this is just another one of those channels. It's a place where you can use your existing customers who hopefully love your products and use them and their passion for your products to get more customers like them and I think what tends to happen is.
Your customers are just like you are in a lot of ways like we are where your kind of selective about who you want to share things with like if I'm on a particular site and I see a product that I really like or I buy a product that I really know can use if there's a referral program. They're like, I'm not usually just going to send that referral link to everybody.
I know I'm going to most likely curate the list of people that I think would actually. Appreciate this product like maybe it's people that have kids for products for kids Etc. And I think that what happens there is you end up with this really low customer acquisition cost and I really high conversion rate which is kind of like the the goal the thing that everybody's kind of tracking in terms of the marketing spending in the different measuring channels against one another as you know, you're looking for those things.
You're going to give you the best bang for your buck. And referral program is I think pretty well known that it's going to be one of those things that gives you that super high conversion rate because it's it's a curated lead. It's coming from a trusted source with that will most you know, most likely they're going to trust your brand just because their friend they trust is also trusting your brand and then you know, most likely they're at a point in their life where the product that is being shared with them.
Is interesting because the person who's sending it to them as being thoughtful about who they're sharing it with right? Right? Definitely. Yeah, that's a great break down for sure. Especially like you said at the beginning these days referral marketing and referral programs now are just another tool in an e-commerce businesses kind of.
Toolbox of marketing strategies and things that they do so it's you know these days most of the marketing experts are always kind of preaching about an omni-channel marketing approach. You want to say how many Channel just you know, you've got to do a little bit of everything and so now there's been like a lot more emphasis on referral programs because you've got to get leads and you've got to get potential sale.
You know from all aspects and then because referral programs have such a high conversion because like you said it's kind of like a curated lead. It's really super targeted because you and your example you may not be quick to just sign for referral program or share referral link with like everybody in your you know in your Facebook, whatever but what you do know is if you see a product.
You're going to say oh, okay. I know my friend Joe is you know, he's a parent. This is a product for it or a child. It'll be great for him. I know you'll love it. I'm going to point it to him. And so you're doing that due diligence you're kind of doing that targeting and you're narrowing it down.
And so that's why these these types of leads have such a high value and like you said as such a high conversion rate, so that's that is really. What the power is and where the power is now for any e-commerce business that is looking to set up a referral program. Maybe just from the start that hasn't done it.
What are some components of a good referral program and how do you make sure that you know, you have really all of the right pieces together after looking at so many of them we sort of found this. Pattern I guess so this way of thinking about them it sort of breaks the components down into into for sort of big buckets the first bucket or the first component is placements.
Like we're in your business. Are you presenting your customer with the option to participate in the referral program? The second one is which sharing channels do you use are using email as a sharing Channel or using? Messaging apps like like WhatsApp and Telegram and Facebook Messenger using social media posts like Twitter Facebook LinkedIn Etc.
The third one is the rewards you got to think about like what are the rewards? You're offering offering rewards for for both parties. Are they? Monetary rewards are they a physical product rewards? Are they digital download type rewards and then the fourth and final one is what are the different follow-up techniques you're using.
So after after the referral is made and after the refer converts, what's the follow-up that you're doing with those those referrals that didn't convert versus the ones that did. And when they did convert, what are you doing to keep that Flywheel spinning to get that person to send more of those reward or more of those referrals and to get that new person that you just acquired thanks to the referral.
How are you getting that person to sort of do the same thing as their friend? Hmm, right? Right. Yeah, and I think the main thing with that with all of that in mind is, you know finding a solution that is going to make that you know easy for you to do or at least have those components in place where.
You don't have to go through a lot of Hoops to get that done to do the follow-up to isolate the person that was referred and in the person that referred them. So all of that is is definitely some key things that you have to be mindful of for. Sure. Now, I know one of the number one question that I know at least a lot of our customers have that get our.
Affiliate referral software and most people in general once they get something up and running them. The number one question is. Okay. Now that I've got it going what are some of the top ways to increase participation in my referral program. How do I get people in? Yeah, so therefore that, you know, there's there's a few of them that I see sort of the it's tend to stand out.
The first one is. Just removing all friction points that you can possibly remove and making sure that you give you users enough choices that whatever it is that this particular person wants to do or however, they have a connection with the friend that they're thinking of is an option not everybody wants to post a link to your product on their Facebook page.
That's just the truth. It's nothing personal. That's just the truth. Not everybody uses Facebook. Not everybody uses WhatsApp, but if they do have a friend in their primary Communication channel with their friend with that particular person that they're thinking of is WhatsApp like you better provide WhatsApp for that person or they're just not going to they're not going to participate least not in that moment where you know, they're thinking about a particular person.
And so, you know email for us is most important one that obviously everybody uses Cloud sponge is using email because that's the part of their interface where we live and that's the thing that we help them the most with and so, you know for me, that's the that's the sort of lowest common denominator.
That's the thing that no matter what channels you have email is sort of the catch all that pretty much everybody has email addresses for their friends and so removing that friction point. And using using Cloud sponge or something like it to make sure that you're not forcing people to type a comma separated list of email addresses one by one on their smartphone, which nobody will ever hear you right?
You got to remove those friction points, right and make sure that it's really easy for people to just go and select. Select people from their address book and populate those fields without doing any typing these you should just be able to tab through a simple interface on their phone and go from there.
Yeah. Yeah for sure. So based on what you said. It's the eliminating the friction goes on both sides, not only eliminating the friction and the pain points on the e-commerce businesses side that is set up the referral program and you know making it. Easy for them to implement it but there's also you have to look at the fact that there's a solution that has been a mindful enough to try to eliminate the friction that the your customers your referral Partners have on their end because yeah, the bottom line is if somebody has to go through too many Hoops to just refer their friends, you know, they're not going not going to do it, you know, no matter.
Really what the incentive is, you know the main thing these days is people are so busy. You've got to always make sure that you've streamlined whatever process it is that you're asking them to go through for for sure. So I'm glad you mentioned that whenever you talk about referral programs and in e-commerce and just internet in general.
I know of course you get it all the time and then we get it on our end here as well. What is the difference between a referral program and an affiliate program because they are two different things. But I know there are some overlaps. What's your take on that? The way I think about it. First of all, I think they can coexist in the same e-commerce business can have both and the way that I think about it is an affiliate program.
Is something that anybody can sign up for it's not necessarily just your customers who are Advocates of your brand Affiliates can come, you know can come from anywhere and you know often ill an affiliate will have their own portal where they can log in and sign up and get their codes and and then they can go use those codes in whatever their affiliate like wherever their audiences right?
Maybe there. Are they have a blog or maybe they do advertising. Paid advertising to those unique links and so, you know, I think Affiliates are. More like partners of your business and I think of a referral of referral program is something that your customers are doing and they're doing it. They're not doing it necessarily just to earn a monetary reward like cash the way an affiliate would they're often times referral program is a way for your customers to give a reward to their friend to give their friend a discount or to earn access to a digital download or to earn a discount on their next purchase all of those.
Would not be interesting to an affiliate, right? And so I think the differences are partly in the rewards and partly and who who actually would be interested and I think there is like you said like a fair amount of overlap between the two and some some parts of a referral program sort of look like like they're similar to what you would do as an affiliate program like you giving somebody a unique link that they can go post onto a social media feed.
You know, the rewards are attached to that are you know, you got to really think about you know, what your customers actually want and probably do a bunch of testing and research on what your customers are going to find Value in whether it's discount on their next purchase or. Free shipping or whatever it is that you think you can offer them to get them to participate in that referral program.
Yeah be up for sure. That's that's definitely good point there to mention though. The incentives are definitely different. That's one kind of make key thing because with the Affiliates primarily they're looking at it commissioned a monetary Commission in most cases but these days there's actually even another level.
Which I think is similar to what we would consider an affiliate program we and that would be an influencer program influencer marketing program and I guess influencer really is almost an affiliate. I think it's just a fancy way of a fancy name for affiliate these days that we keep hearing that more and more all over the media and everything influences.
Would you would you agree that influencers are really just kind of today's Affiliates or is there a. I haven't really thought about that but I guess off the cuff. I would say that after an influencer starts like sending you like actually once you have a relationship with an influencer, they basically become an affiliate right but the way that you enter into that relationship is different right the way you enter into an affiliate relationship is you advertise that you have an affiliate program.
They're out there seeking affiliate programs that they can. So that they can sign up for whereas from what I understand. I haven't done this myself, but my understanding is with an influencer. It's more of a the tables are turned you as an e-commerce site you seek out the influencer and you say hey, like if I give you this product for free will you do a review on YouTube or whatever it is you're getting your influence or to do and then after that's done.
Then they become an affiliate of viewers. Then they're putting you their affiliate Link in in their links and things like that so that they can sort of make money from sending referrals to you. But I just think the way that that relationship is is sort of forged at the very beginning is probably different different between the two.
Yeah. Yeah. That's that's true. Yeah, that's really good breakdown because it's kind of flipped it's the business. That's really kind of going out there doing the seeking for these influencers. They're looking at all of these people that have large followings whether it's on YouTube, you know, Facebook Twitter Instagram and they're doing their pitch.
They're saying okay, we've got this product. We got the service. If you pitch it for us, you know will give you such and such and then yeah, so the cording. Process is really the other way around. So yeah, that's it. That's really a good way to look at it for sure. Now, you know with the standard referral program that we first started talking about.
Of course, there's a lot of options when it comes to incentives because. You know, you're dealing with your customers and of course if it's a happy customer, maybe they want more product. Maybe they want discounts to Future purchases. But what are some other unique incentives that you know any Commerce company can come up with to really just encourage participation in a referral program.
Is there something that can you know stand out? Yeah, I think we've seen we've seen a variety, you know, I think the first way, you know, I would encourage your audience to sort of think about it is to sort of separate the incentives for the referrer versus the referred party. I think depends on your audience.
It depends on your customer base. There's no single answer that is true for everyone but it's often true that you'll get better results out of. The altruistic reward where your customer person that's already your customer is going to be more and more likely to participate in your referral program.
If it's if it's a way for them to give the reward to their friend rather than for them to earn the reward for themselves sometimes both is better, you know, like I think airbnb's famous referral program and drop boxes referral program have rewards for both sides of that. But I think every business needs to sort of consciously think about those two separate things and test them separately and then for both of those you want to test a monetary versus non monetary rewards, I think right some people like it for example, like in a B2B environment the person that's buying from you is typically spending the company's money.
So giving them a discount. It's probably not going to perform as well as giving them an Amazon gift. Right because I don't care so much about saving their company 5% but they love to have a $25 gift card. Right? And so, you know, I think some of those things are worth looking at we have and then on the digital downloads is the sort of other thing that I think people should consider where you know, we have one one customer that after you've made I think it's three referrals you get access to like a VIP newsletter.
Which is kind of counterintuitive that why would anybody want to do that? But you know, they're really good at selling the value of this newsletter. And then once you get to a certain level maybe it's 10 referrals or five referrals you get access to like a community we could actually like log into this like private Forum or private place slack Channel where you know you and people like you are going to collaborate or network, right?
So I think thinking about those things that you can offer that aren't necessarily based in cash value is worth it. And then the last one the fourth one is really. Like physical products, right? You know free t-shirts mugs stickers, you know that kind of thing you'd be surprised. If you do some tests with those things you may be surprised at how much people want want those things.
Yeah. Yeah, that is true. And I appreciate those. Those are some good options and I think the main thing the main Takeaway on that is we really before. Doing anything really kind of trying to understand who the customer is and what really is going to excite them or interest them and it is going to vary for sure depending on on you know, who they are.
What type of business you're in because like you said with a B2B type of business going to be different because you know, they don't care about saving the company money per se they you know, if they're going to be some incentive they want us to put something in their pocket or something that they actually received themselves so that that makes a whole lot of sense.
Well Jay, I can talk about referral and referral programs in affiliate marketing programs all day because you know, as you know, it's something that's course theater are our company here. That's our bread and butter. I was really excited that to have you on you showed a whole lot of wealth of imphal to our listeners and I really appreciate you having you on but I was like to close things out with my final kind of closing fun fact and what and that is what is one thing that our audience would be surprised to know about.
That's a good question. I don't feel like I'm that interesting of a guy but you know, one of the one of the things that people typically will be surprised that if I tell them is my my first job out of college. I was firmware operating system programmer for a company that was selling smart card.
Devices so, you know the machine that nowadays everybody's got a smart card chip on their credit cards. But this was more than 20 years ago. And so it's kind of unusual at the time. And so, you know, the you know that that card acceptor that you see on the counter of convenience store or in a gas pump those acceptors have a little computer inside my first job out of at a community college back in 1997 was was writing device drivers and operating systems for those little computers that are able to communicate with your smart card.
So. Is pretty pretty esoteric career path that I chose for myself but since then obviously things have changed quite a bit. Yeah. Yeah. Definitely we had a that's interesting. But yeah, like you said smart cards these days. I mean, I don't know if I see hardly any credit cards these days they don't have a smart card.
So I know that whole technology is has has changed quite a bit and I guess they the ones both today there. I guess there is a still a fair amount of of firmware on those actual accepting devices. I guess it's just, you know, kind of I'll get a hold back in cloud system that it's tied to these days.
That's probably the main. Yeah, I guess so. Yeah, I haven't been in that game for a long time. But I'm guessing that all those devices are connected somewhere. Yep. Yep, for sure. Well great. We appreciate you sharing that Jay and that like I said, I think you've brought a wealth of information on about referral programs.
And we appreciate having you on now if any of our listeners would like to pick your brain even more on that or get in touch with you directly. What is the best way for them to do? My social network of choice nowadays is LinkedIn and don't just send me a message there because I get a lot of spam there.
If you do send a message just make sure you let me know that you listen to this podcast and then I'll you'll that will help you cut through the noise. Don't just put me on a list and use linked helper too spammy because I just still probably oh probably ignore you if you do that. And then anybody wants to find out about Cloud sponge can just go to www.skybanditz.com.
Okay, great. Blisters will definitely take advantage of that and check out your website as well. Well, thanks again for joining us today Jay on the e-commerce marketing. Cool. Thanks for having me Harland. Thank you for listening to the e-commerce marketing podcast. Do you need to get more feedback and reviews from your customers and improve your customer retention?
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CEO and Founder of CloudSponge