4 minutes to read

This article is part of the “Do I need a referral program” section of the referral program resource guide that has over 38 resources dedicated to everything you need to know about referral programs.

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 explode. They’re just part of an overall plan.

Here are the 5 most common myths we hear about referral marketing:

Myth #1 – “I’ll be just like Dropbox and AirBNB!”

Dropbox, AirBNB, and Uber are all famous for their referral programs. When Uber started out, they encouraged customers to tell their friends and gave them $20 off their next ride if they got a friend to sign up. Even though it seems like everyone uses Uber, this referral program is still alive and well, helping Uber acquire new customers all the time. In fact, if you signed up for Uber using my referral code today, we’d both get $15 towards our next ride. 

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

Myth #2 – “Referral programs result in viral growth.”

Forget the idea of the viral loop.  We’re not saying it isn’t achievable, but a referral program alone isn’t going to put you on the highway to viral growth.

Just because there is a “Refer a friend widget” or you ask your customer to “Refer a friend” it doesn’t mean they will and it doesn’t mean their friend will join.   

How good is your product market fit?  How good is your customer service?  Are your customers blown away?  Does it make sense for them to tell their friends?  All questions you should ask yourself to make a better product and/or service.

A referral program isn’t a replacement for all other marketing.  It’s not a silver bullet and isn’t for every business.  A referral program is a piece of the marketing strategy.  How big of a piece is it? Well, that depends on a lot of factors.  It could be a great channel for growth or it can be valuable and complementary to your other marketing strategies.

Myth #3 – “Referral programs are hard to set up.”

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.

Myth #4 – “Referrals happen naturally so I don’t need a formal program.”

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.

Myth #5 – “Referrals via word of mouth marketing are way too hard to track.”

Maybe this was once true, but it isn’t anymore. When someone signs up for your product or service, make sure you ask them how they heard about you. You can ask manually, but you can also set up tracking through referral program software, or through an analytics program like Google Analytics or KISSmetrics. Software really is your best friend when it comes to tracking, a lot of software options like Referral Rock offer in-depth statistics. Plus, customers can also track their referral stats. 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. A referral program can encourage customers to spread the word.

This article is part of the “Do I need a referral program” section of the referral program resource guide that has over 38 resources dedicated to everything you need to know about referral programs.

Related Articles

Avatar

Posted by Emma Siemasko

Emma Siemasko is a writer for Referral Rock and the Founder of Stories by Emma, a content marketing consultancy. She specializes in writing about startups, marketing, and customer engagement.