Customer Referral Programs

Customer referral programs have gained massive popularity over the past few decades and more so in recent times. These programs cut across all industries and are being utilized by firms in advertising, the automobile industry, hotels and financial services just to mention a few. These programs take full advantage of word of mouth marketing and as such they are highly effective when implemented correctly. The profitability of these programs is however being questioned as firms are concerned about possible abuse from customers who merely bring in prospects of low value just to earn a commission. To address all these fears, we have prepared the following fact sheet.

Customer Referral Programs: The Facts

• Nielsen - a global information and market research company found that people are more inclined to buy products when referred by friends. 92% of their respondents also said that they trusted referrals especially when they came from people they know.
• Wharton School of Business also found that a customer referral is more likely to be of a higher value than normal clients and the person that referred them by 16%.
• According to New York Times, referral programs for clients increase new business by 65%.
• As you can see from the statistics above, a client referral program could actually work to your advantage. So why do we see far too many referral programs that fail? Let’s find out below.

3 Reasons Why Referral Programs for Clients Fail

It goes without saying that every business knows that referrals are important. However, not many of these businesses are willing to put the effort into making sure that these programs succeed. You cannot create a half-hearted referral program that does not invest in rewards, training or marketing and expect it to succeed. The referral program needs to well staffed and integrated with the company’s overall marketing strategy. Sufficient resources are required to kick off the program and keep it going. Below are some of the mistakes made with referral programs.

1. Insufficient support from management

   For customer referral programs to be successful, the company needs to have a good rollout and this means setting aside enough resources. The program requires hand-on support from the company’s executive for it works in cooperation with the various departments and divisions of the business.

2. Poor Imagination

   For customer referral programs to be successful, the company needs to have a good rollout and this means setting aside enough resources. The program requires hand-on support from the company’s executive for it works in cooperation with the various departments and divisions of the business.

3. Weak Incentives

   The incentive to give your company a customer referral needs to make sense. Gifts, awards and discounts are all good but are they really enough? The incentive must be valuable and not insulting. Get creative with incentives and rewards.Besides the rewards, people will naturally not want to refer poor products and services. The backbone to a good client referral program begins with an excellent product.