Referral marketing is a great way to get your company on the map. Your happy customers tell their friends and colleagues, and things start to spiral. Suddenly, you’ve got a $1B valuation and everyone’s saying you’re a unicorn… Well, not exactly.

Referral marketing is a great way to encourage happy customers to spread the word, but there are many myths about referral marketing. Most of them have to do with a famous company who got crazy growth.

But remember: any company worth their salt has brilliant people working hard to get their company on the map. Sure, a referral strategy may be a slice of the overall marketing pie, but it isn’t the whole pizza.

Referral programs aren’t a magic elixir that cause businesses to explode. They’re just part of an overall plan.

Here are the most common myths we hear about referral marketing:

Myth 1: “I’ll go viral just like Dropbox and Uber!”

Reality: While referrals are a great source of new leads and customers, not all programs will see viral level success.

Dropbox and Uber are famous for their referral programs.

  • Thanks in part to an easy-to-use referral program and compelling free storage space reward, Dropbox grew their customer base by 3900% in just 15 months.
  • And Uber encouraged customers to tell their friends by giving them $20 off their next ride if they got a friend to sign up. Uber’s referral program also led to impressive results, with an estimated 12x ROI.

Oftentimes, when people talk about how these large companies got their start, they cite the referral program as the magic reason things took off. But the real reason Uber and Dropbox took off as companies is because they offer an extreme value, not because of a referral program. The referral program acted as a complement to a great product and a marketing strategy that was already winning.

A continuous viral loop (where referrals keep rolling in) is achievable for some businesses, but a referral program alone isn’t going to put you on the highway to viral growth. Nail your product and customer service first, and make sure you’ve got a USP that sets you apart so people quickly understand why they should choose you over competitors.

A referral program isn’t a replacement for all other marketing strategies, either. It’s not a silver bullet and isn’t for every business. How much of the marketing “load” a referral program can carry depends on nailing down your essentials, referral rewards, promotional messaging, and more.

Myth 2: “My referral program will be an overnight success.”

Reality: Be patient; referral program success takes time.

Referral programs don’t take off right away. It takes time for program promotion to translate into shares, and shares to turn into new customers.  People may not be ready to share right away, especially if they can’t think of relevant people to share your brand with.

And even after they do share, referrals might not be ready to buy right away. Referral program success is all about building up momentum consistently so that over time you can achieve solid results.

But it takes a while: it takes awareness and reminders and repetition. (We’ll cover more on increasing this awareness under #5 and #6.)

Myth 3: “I don’t need rewards for referrers.”

Reality: Priority one for most people is what’s in it for them.

Don’t expect people to share without offering a reward. Although your product and customer service needs to be top-notch for people to share, customers usually won’t share without the prospect of an incentive. And make sure that reward is something people can use and actually want to earn. If your business isn’t one that lends itself to frequent purchases, for instance, pick a cash or gift card reward instead of credits towards someone’s next purchase.

Myth 4: “I have a sharer reward, so I don’t need a friend reward.”

Reality: Your customers don’t want to “sell out” their friends. They want to give their friends a gift.

Don’t neglect the friend reward, either. If you only offer a reward to sharers, then people might still be reluctant to share. Why, even when there’s an incentive on offer? Well, people don’t want to feel like they’re selling out their friends.

But give them the opportunity to send something exciting to their friends and earn something for themselves? They’ll be all-in and much more likely to share, as the reward feels a lot more altruistic.

And on the friend’s end, your business offer looks way more compelling. Since there’s a reward involved, the friend will be much more likely to click and become your customer.

Myth 5: “I can just set up a referral program and forget it.”

Reality: People need to know about your program for it to be a success, so promotion is key.

You’ve put all the work into your program, but you need to let people know about it for it to be a success. It won’t run on its own. So, be sure you’ve got a promotional strategy in place. Here’s what we recommend:

  • Direct promotions: Monthly to quarterly emails dedicated to promoting the program
  • Indirect promotions: Lots of promotional touchpoints, based on where you already interact with customers (think newsletters, transactional emails, social posts, checklut pages, website menus, portal experiences, team member conversations, and even physical flyers with QR codes)

Myth 6: “After launch, my program will just sustain momentum on its own.”

Reality: You’ll need to stay consistent with your program promotion.

Many marketers excitedly share the program with customers and fans right as it launches, but then just leave it be and think it will promote itself. Big mistake!

Sure, people might have been enthusiastic about your program when it first launched. But people are busy and may  forget about your rewards program if you don’t remind them. It’s not necessarily because they meant to forget, but things do come up and people have a million other things they have to think about.

Which is exactly why you should remember: You will still need to promote your program regularly and keep existing sharers engaged. A lack of consistent promotion is an injustice to all of the hard work you put into setting it up in the first place.

In addition to the regular promotional emails sent to all your customers, re-engage existing sharers with more targeted outreach.

  • Monthly Summaries, or personalized overviews of existing sharers’ activity, will keep the program top of mind for fairly active sharers.
  • Quarterly reminder campaigns will help re-energize people who have joined the program, but who haven’t shared within the quarter.
  • Event-based invites reach sharers at their happiest times – the times they’re most primed to share with friends (say, after they make a purchase or complete onboarding).
  • Seasonal campaigns use a holiday, event, or limited-time reward to reignite engagement in existing sharers.

Myth 7: “I’m already getting organic word of mouth. Why should I pay for referrals?”

Reality: Word of mouth is unpredictable, but a referral program can create more motivation and consistent sharing.

Many startup founders and small business owners believe that if they have an awesome product, the word will spread naturally. While this is true to an extent, a small push from a referral program can encourage happy customers to go the extra mile to make a referral.

Referral program incentives work: they grab attention and they motivate sharing. It’s all about the psychology of referrals (remember, they want to know what’s in it for them, and for their friends). You might get some word of mouth organically, without rewards. But you’re going to get a whole lot more by putting a system in place that not only has a compelling incentive, but offers all of these easy methods for sharing and tracking and reminders.

Myth 8: “Referral programs are hard to set up.”

Reality: Software makes setting up and running a program much easier.

Referral programs may seem like something for big businesses. When you go through a referral process from another company, it seems quite technical, and you doubt you can implement it on your own.

Referral programs are actually quite easy to set up, thanks to simple referral marketing software solutions that give you a comprehensive way to manage your referral program. These solutions integrate social sharing, refer a friend widgets, and conversion tracking.

And with Referral Rock, setting up a program is even easier, thanks to:

  • A dedicated program advisor
  • Reward recommendations based-on your audience
  • Tailored program & campaign messaging written for you
  • Technical integration assistance

Myth 9: “Referrals via word of mouth are too hard to track.”

Reality: Maybe this was once true, but it isn’t anymore thanks to tracking software and other methods.

When someone signs up for your product or service via a referral, you need a way to know exactly who sent them. Sure, you can set up tracking on your own, such as with our manual referral tracker.

But this can be time-consuming and frustrating once you have a high volume of referrals. There’s a better way, though — you can set up automatic tracking through referral program software.

Software really is your best friend when it comes to tracking, as it creates unique referral links that track the source of every referral in real time.

Software options like Referral Rock offer in-depth statistics. Instantly see who your best sharers are, brand awareness your program is generating, and the number of new customers and leads coming from referrals. Plus, customers can also track their own referral stats via a personal dashboard. Keeping track of word of mouth marketing has never been easier!

Bust the myths

Don’t let these myths get in the way of setting up a referral program or optimizing one for the most success. A referral program can encourage customers to spread the word, as long as you avoid the misconceptions and common pitfalls.