5 Referral Program MYTHS - BUSTED!
A myth by definition is "a widely held but false belief or idea. /miTH/ - noun." And with referral programs slowly making their way into the digital era, complete with the ability to track and optimize unlike ever before, there are a LOT of myths still surrounding referral programs today, their efficiency and effectiveness. I'm here to help clear some of that confusion up. Here are 5 referral program myths - BUSTED!
Myth 1: Referral Marketing is less cost effective than other marketing channels.
FALSE! 92% of people trust recommendations from friends over any other form of advertising and a referred customer is 4x more likely to purchase. Referral Marketing allows you to generate high quality leads for your store that already look like your ideal customer! With your own referral marketing program you can leverage and optimize on the trust of your already loyal customers, employees, friends and family! And it not only makes for an easier sell and close, according to marketshare, Word of Mouth has been shown to improve overall marketing effectiveness by up to 54%.
Myth 2: Happy Customers Will ALWAYS refer your product or services as long as you're doing a good job.
Unfortunately FALSE... a Texas Tech study found that 83% of happy customers said they would be more than happy to refer, yet only 29% actually end up referring! Why? Because they forget and their salespeople aren't asking, only 15% of salespeople currently ask for referrals (Texas Tech). We are all busy people with 3 million things to do in our own lives. Unfortunately your company’s referral program will slip out of your customer's mind... unless it's frequently promoted. An enticing offer and easy to use tools can streamline and improve your referral efforts ten-fold. The tools to make referring a breeze are crucial, if your customer heads to your site to refer a friend but doesn’t understand how, they will abandon ship faster than you can say SHIP!
Myth 3: Affiliate Programs are the same as referral programs.
False, referral programs are focused on generating new leads through your customers, employees, friends and family while simultaneously growing stronger relationships with them, these people love your services, products and employees and they’re happy to share with their friends because they know their friend will be well taken care of and happy with the end product or service. The reward they receive strengthens their loyalty and keeps your referral program at the top of their mind.
Affiliate programs on the other hand have a strong self interest factor and these affiliates are often motivated by the financial gain and are often referring and sharing with people they are not closely related to or have strong ties to.
Myth 4: Incentivizing for referrals does not work.
False. Why? Because incentivizing works, how do we know this? Because according to Software Advice, "More than 50% of people are likely to give a referral if offered a direct incentive, social recognition or access to an exclusive loyalty program." Just to look Paypal, Airbnb or uber to see how they explain their tremendous growth rates. This is not exclusive to e-commerce or hip trendy new services and products. Dealerships can digitize and optimize their referral programs as well, they just need to understand the benefit and utilize the right tools. While the amount of shares/referrals for a dealership may not be as frequent as an e-commerce store, your ROI from a referral is invaluable to your retention strategies. Referred customers have a 51% Service Usage, Fresh-Ups have just 29% service usage. (NADA). The lifetime value of a new referral customer is 16% higher than your average customer (Wharton School of Business). In just their service spending alone, the effort to put together a program and incentivize for a referral makes perfect sense.
Myth 5: Referral Programs are EXPENSIVE to develop and implement.
HALF TRUTH ALERT: Yes, if you’re trying to develop and manage your own end-to-end in-house referral program (similar to Airbnb or Uber) then you're looking to hire 2+ engineers and ready to drop about $20,000+ to develop an this in-house program! But ain't nobody got time for that.
That’s why automated referral platforms exist. A referral platform should allow you to promote, track leads, discover brand advocates, streamline your referral processing through automation, optimize your brand advocates and top sales team members, and delivery verifiable results and reporting. Ultimately you should be increasing referrals, customer retention, employee engagement, and revenue through one easy-to-use digital incentive marketing platform.
Don't let those myths fool you. Referral programs are one of the most effective ways to drive more business to your store and increase customer loyalty without breaking your bank. Ready to start increasing referrals and retention with your own referral program? Request a demo today.