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6 Reasons Your Customer Referral Program may be Failing

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The fact that you are reading this post probably means you have a customer referral program in place. That means you probably already know what impact referrals can make for businesses.

* 71% of companies with referral programs report higher conversion rates.

* 86% of Companies with B2B Referral Program see growth. (Influitive and Heinz Marketing).

But despite overwhelming evidence that referrals are worth their weight in gold, research suggests they remain a largely untapped opportunity.

83% of satisfied customers are more than willing to become an advocate for your brand and refer your company to friends, colleagues and industry peers. But, on average, only 29% of customers do – according to an Advisor Impact Study.

The reasons company referral programs fail to generate acceptably high volumes of customer referrals vary.

Some of these reasons include – excessive complexity leading customers not to engage, insufficient incentives for motivating participation, or lack of promotion and consequently awareness.

Here are five of the biggest reasons:

Reason #1: Lack of promotion

You‘d be surprised how many companies launch a carefully implemented referral program, only to promote it at little if at all.

Clearly, if your customers don’t know about your referral program, the odds of them taking advantage of it is rather low. So make sure your customers DO know about it.

Try to look at every customer touch point and all marketing communications to identify which provide appropriate opportunities to promote your referral program:

  •  Your website (refrain from being too in your face)
  •  Your social profiles
  •  Your email signatures
  •  Your email autoresponders
  •  Your promotional material (brochures, store posters, etc.)
  •  Landing pages are good to promote referral programs.
  •  Social media – you can place a link about your referral program in your bio section. You can also post interesting information about its rewards, like how many rewards have been given out.
  •  You can also place referral program links on newsletters, on receipts/invoices, and on thank you pages.

Also, timing is important. If you promote your referral program prematurely, for instance, the day you close the deal rather than months later when you’ve proven to be a worthy investment and a rapport is built, they may be turned off.

Reason #2: The Referral Process is Confusing or Difficult

Try not to make your customers have to jump through unnecessary hoops to provide a referral. They might get turned off if they have to fill out multiple forms, use complicated referral links or expend too much effort.

So simplify the process as much as possible for potential brand advocates.

Also, to avoid possible confusion, your referral program should follow brand guidelines so it is consistent and immediately recognizable as coming from your company, and also work in synergy with your other marketing messaging.

To see if your own program passes the ease-of-use test, have a friend or family member who isn’t a customer walk through it. Ask for this person’s honest help in identifying pain points and bottlenecks so you can eliminate them.

But don’t stop there – make sure your referral program makes it easy for you to run it!

Ideally, it should not impede your company’s workflow, it should not require extensive hours to manage, and it should not be too confusing for your own people to explain and/or manage.

Ideally, you want your referral program to integrate seamlessly into existing systems, allowing for automation/ease of use, minimal training and few noticeable changes to your daily routines once it is up and running.

Reason #3: Offering Ineffective Referral Incentives

If you want customers to give you referrals, you’ll do better if you give them reasons to do it. That’s why many successful referral programs offer cash or other incentives.

So – review the incentives you offer.

Are they as good as what your competitors are offering?

Are they substantial enough to motivate customers to make the effort to make a referral?

Do you even offer incentives?

Evaluate the incentives you are using from your customer’s point of view to assure they are motivating. Also, keep in mind, cash is not the only incentive you can offer.

In fact, according to a Universty of Chicago study, non-cash incentives increase the success of a referral program by 24% over the use of a cash reward.

The bottom line is, if your referrals aren’t coming in at the volume you’d like, you might look at beefing up your incentives.

Reason #4: Getting the Ask Wrong

We’ve heard it so many times, ‘customers need to be told what to do.’ You can ask them directly for referrals but make it easier for them by clearly defining your ideal prospect by providing details such as:

  •    Which industries or organizations you want to target
  •    The job titles or level of authority you want to connect with
  •    Significant challenges that your prospects may be facing

Timing is also crucial and can factor into how you ask. For instance, if your advocates just raved about your product or service, maybe you should capitalize on these moments of happiness and ask for referrals at that moment.

Reason #5: Quitting too Soon/Unrealistic Expectations

Sometimes business owners get frustrated and pull the plug on their referral program because they think it isn’t working. However, too often companies have unrealistic expectations – they expect to start a referral program and receive immediate ROI.

The reality is, it can take several months for a referral program to gain traction. So make sure your expectations are aligned with industry averages, your own metrics, and ultimately with reality!

Reason #6: You Haven’t Eliminated the Risks

Also, customers are sometimes turned off by these unanswered questions:

  •    How is the referral process going to work?
  •    What kind of prospects are you looking for?
  •    How should I submit my contact’s info and what details should I include?
  •    How will you approach who I refer?
  •    When and how will I find out if they sign up as a customer?

You can set-up a poll or survey to understand any doubts customers have about your referral process. Then find ways to answer their questions and address their concerns by giving them all the information they need.

Wrap up

Although companies might be cognizant of the effectiveness of customer referral programs, some aren’t efficient enough at managing them.

Just like any other marketing strategy, a referral program should be well thought out, efficiently managed, tested and continually optimized to ensure peak performance.

I hope that seeing some of the most common reasons why referral programs fail will help you to not only avoid the pitfalls but better position your referral campaigns for predictable lead flow and sustainable sales growth.