What is Dropshipping?

Dropshipping is a type of business where the supplier directly ships goods to the customer. Unlike the traditional approach where sellers buy products from suppliers and resell them at a higher price, sellers no longer need to purchase anything in dropshipping. The model is simple to understand. The seller promotes the products of the drop shipper. When the seller gets a customer, the drop shipper delivers the item under the seller’s name. This eliminates the need for inventory, granting the seller a relatively low-risk type of business.

This model allows sellers without any capital to make money. They can start promoting products to other people once they are accepted as a reseller. But that doesn't mean that they should buy the products. They can sell even without any products on hand. This means that they can get a commission for every sale without also shipping or handling the items. The drop shipper is in charge of product development, packing, and shipping. The seller only focuses on one thing: selling. 

Dropshipping is a popular business model that has grown because of the Internet. People are now getting more interconnected, and it is far easier to find suppliers and communicate with them. The dropshipping model is ideal for new business owners who want to test their marketing skills. Since the drop shipper takes care of product research and development and logistics, the seller doesn’t need to invest anything in the business to make money from it. All he needs to do is know how to promote products and make money from it.

Why Does a Dropshipping Business Need a Referral Program?

Most drop shippers have an affiliate program. This is where they reward referrers with a commission for every seller they refer to the business. But what they don’t know is that they can also create a referral program. With this, they no longer need to reward with every seller they get. They can also funnel them into a list and reward referrers for getting new subscribers.

A referral program works similarly. You reward referrers based on the number of people that they refer to your website. You can pay them in different ways. There are different types of rewards that you can give away. There’s cash, discounts, and freebies. You can also choose who to reward. You can pay the referrer, the subscriber, or both. You can also determine when to send a reward. You can send it once referrals get a sale or when they sign up. This will depend on you and the nature of your business. 

A referral program will work well with dropshipping business because it is one of the quickest ways to get traffic to a website. Dropship businesses thrive based on the number of people that promote their products. If no one is selling their products, their business will die. So it is essential for them to get as many sellers as possible. Referral programs are a great way to get that exposure. Since referrals are made in inner circles such as families and friends, it is easier to get references. This is because the relationship is based on trust. People tend to believe promotions from family members and friends more than marketers. Use this to your advantage by implementing a referral program in your dropship business.

How a Referral Program Can Help Your Dropship Business

By now, you can see how referral programs can help a dropshipping business. It leverages the circle of trust that people have and use that for easy referral marketing. But there is more to referral programs than the mechanics. It works because it gives a dropshipping business or any business some tangible success. Here are some ways on how a referral program can help a dropshipping store. 

More Brand Exposure

A dropshipping business is just about as successful as its brand exposure. As more people know about the company, more people will be interested in selling the products. Your product has to sell before it can attract people. But you also need to show people how your products are selling. You can easily do this with a referral program. You can set up creatives or marketing materials for your referrers. They will be in charge of promoting your business to other people. You need to supply them with the content. By doing this, you have enabled them to tell the world about your brand. 

Social Proof

Another reason why referral marketing works so well is social proof. As more people talk about your brand, it also increases your social proof. You see, people tend to see brands that are talked about in a positive light. It doesn’t matter if the content is neutral. The brands that are talked about are still viewed in a positive light despite the unbiased content. 

Referral marketing works because it automates this social proof. With a referral program, you can get people to promote your brand to their family and friends in exchange for a reward. As you get more referrers, the number of referrals increases as well. Together, they give the business a compelling social proof. This then encourages more people to join the dropship program.  

More Resellers

A dropshipping business becomes successful, depending on the number of resellers that they have. The more resellers, the better. As explained earlier, dropshipping companies work by creating products and dealing with logistics. However, they don’t promote their products. They have the resellers to do that for them. When it comes to resellers, quantity is significant. While the quality of resellers may play a role as it is essential that the reseller is skilled, the volume is also as important. This is because quantity also grants the business more exposure. Even though a reseller may not be that good in selling, he is still capable of promoting the brand even to his own family and friends. This is the reason why referral marketing works. It allows resellers to tap the most accessible market - the people who are close to them. These people have a higher likelihood of taking action.

Creating a referral program for your dropshipping business is easy. It is all about designing the right plan that will fit your target market. Here are some steps that you can follow so that you can create and launch your referral program.

STEP 1: Think About Outcomes

It all starts with the outcome. Think about the result that you like to get from your affiliate program. It all starts there. You cannot just create something without thinking of the end goal. You need to know where you’re headed before you can go there. With this, it is essential to determine the outcomes that you like to get out of your referral program. Think about these questions: "Do you want to get more traffic? Do you need more resellers? Do you need better brand exposure? Do you need to build more trust with your resellers?" You need to answer these questions and consider these things as you create your referral program. By doing this, you’ll know the action that you need to see to determine your referral program’s success. 

For example, you like to see more traffic. When this happens, you need to look at your analytics and reward referrers as they give you the contact information of their family and friends. However, if your goal is more resellers, you can reward referrers when their referral successfully signs up as a reseller. You only give the reward when they sign up. You need to know your desired outcome so that you can structure your referral program the right way. Once you know your result, you can now determine your desired action. Is it a website click or visit? Is it a new subscriber? Is it a new seller sign up? Is it a sale that the reseller made? You have to choose one from these and take note of the action that you’ll like to see in your referral program. Only when you have decided on this can you proceed to the next step. 

STEP 2: Think About Your Rewards

Next, you should think about your reward. You cannot launch a referral program without compensation. If you do that, then that’s not a referral program. It’s a request for promotion with nothing in return. That’s not an excellent way to convince people. You’ll need to give them something in return for the effort.

Rewards don’t need to be complicated. You can give away a simple exclusive discount code to the referrer. In a dropshipping business, you can give the referrer more substantial commissions in exchange for their referrals. Another model is the network model, where the referrer gets a percentage of their referrals’ sales. This means that if the references have multiple referrals, and each of them managed to generate some transactions, the referrer earns more. This is the model that works for multilevel marketing businesses, and it can work for dropshipping companies as well. 

It is important to remember that there are different types of rewards. The standard eCommerce referral rewards are cash, discount codes, and freebies. However, these rewards may not work that well with dropshipping businesses. It is better to give the resellers higher commissions or give them exclusive freebies for their promotions. 

STEP 3: Think About Who To Reward

Every referral program has two actors: the referrer and the referral. The referrer is the person who promotes the brand to his family and friends. The reference, on the other hand, is the person who takes action as a result of the promotion. The person can sign up as a reseller, subscriber, or buy an item. It all depends on your desired action, as you have defined in step 1. 

From there, you should determine who you’ll reward. Will you reward the referrer or the referral? It is an excellent rule to eliminate friction as much as possible. This means that if an actor is on the fence to take action, you reward them for giving push them to do it. For example, the referrer may be hesitant to promote your program if you don’t pay him. So you should do that.

Similarly, the referral may also be hesitant to sign up. So you should reward him as well. Because of this, it is ideal for paying both. This eliminates any friction from both parties and pushes them to take action. The only downside of this approach is that it is expensive. This means that you spend more on each referral. You can cut your costs by providing discount codes or a percentage of sales to your leads. It may not be good in terms of profit. But it will pay you in the long run in terms of brand exposure. 

STEP 4: Create Your Referral Program

Now that you have your outcome, reward, and actor to reward, it is time to create your referral program. Doing this is easy if you have a referral marketing software. The software will help you create and launch a program in a single click. It has helped Shopify websites like Best Hunting Bow Labs, and it can improve your dropshipping webpage as well. 

STEP 5: Promote Your Referral Program

You cannot just create a referral program and wait for it to work. You need to promote it. First, your customers and subscribers should know that it exists. You can let them know by sending an email or putting your referral program link in the announcement bar of your website. Or you can launch an influencer marketing campaign to let other people in your niche know about the existence of your referral program.

As you can see, launching a referral program for your eCommerce dropshipping website is not that difficult. You need to know the outcomes that you like to see and understand the mechanics of your referral program. Once you have that down, you can easily create a referral program with software and launch it through primary website promotion.