Referral programs can bring in a lot of new business, and encourage loyal customers to get more involved with your products and services.

The best referral programs aren’t just a one-off program, but part of the larger customer experience. Offering a referral deal to a happy customer is like giving them a bonus for something they’re already willing to do.

But not all referral programs work the way they’re intended.

Yep- sometimes customers aren’t into the referral program. Sometimes programs are too complex, have poorly designed incentives, or are never promoted to customers in the first place.

If you want to have a great program, you have to know what to watch out for. Here are 8 reasons why referral programs fail:

1. Not enough happy customers

In order for a referral program to be successful, you need a fair amount of customers. It’s a numbers game– the more customers you have, the more chance you have for referrals. Not only do you need customers to begin with, but they need to be happy with your services. Customers who aren’t happy with your offerings will be unlikely to refer your services to a friend.

2. Unrealistic expectations

Sometimes businesses expect that they’ll start a referral program, and all of a sudden they’ll have hordes of participants, and hundreds of new customers. Referral programs aren’t a magic fix, however. Often, a referral program is performing just fine, or still getting started, and business owners have unrealistic expectations, believing their program is failing when it’s actually doing just fine.

3. Programs are too complex

Customers want the referral experience to be as simple and straightforward as possible. If you make them jump through hoops to complete the process, they’re probably going to drop off. Your program needs to incredibly simple and straightforward.

avoid complexity in referral programs

4. Incentives are poorly designed

What do your customers actually want? Is your referral program offering them value? Some businesses offer gift cards to certain businesses for referrals, but this isn’t always a good idea. How do you know customers want that money? Is there more value you can provide?

5. A business gives up on the program too soon

It takes awhile for a referral program to gain traction, and sometimes business owners see that their referral program isn’t working, and they give up. Don’t give up too soon. It can take several months for a program to get going. You may need to tweak your incentives and your process before giving up.

don't give up too soon

6. Customers are over-exposed to the referral plan

If you’re constantly putting the referral program in front of your customers, they may get fatigued by it, and almost stop seeing it. If you promote your referral program at the wrong time– say, the day a customer signs up, rather than when they’re happily using your product months later– they may not be into your referral program.

7. Customers don’t trust the brand they’re referring

If your customers don’t trust you, they’re not going to want to participate in a referral program. They’ll be skeptical of any offer you make and won’t want to get more involved with your customer engagement team. Additionally, if customers aren’t excited about your products and services, they won’t be willing to refer you to friends and family.

8. Lack of promotion

It’s your responsibility to make sure customers know about your referral plan. Many businesses email customers at a certain time to ask for referrals or create a banner on their website. However you promote, you need to make sure that happy customers actually know about the referral program. We have a list of ways to promote a referral program if you’re looking for ideas.

Some quick promotion reminders:

  1. Use a landing page to promote the program.
  2. Place referral program links on newsletters, email signatures, store posters, your blog, on receipts/invoices, and on thank you pages.
  3. Make sure your program is discoverable – see above reminder (refrain from being too in your face, though… don’t have a pop-up every 5 seconds).
  4. Rolling invites – ask customers when they are happy (like right after a purchase or positive review).
  5. Use social media- place a link in your bio section. Post about your rewards and mention how many rewards have been given out.
  6. Make people see the benefit in joining!

Referral programs work

Referral programs are an excellent strategy for rewarding current customers and gaining new ones. The key is to make sure you have a well-developed program that’s getting customers excited about your brand.

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Posted by Joshua Ho

serial entrepreneur, technology consultant, software developer, angel investor, handball player. #bootstrap #leanstartup #startups