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    7 Common Referral Marketing Myths Debunked

    Referral Marketing Programs: 7 Common Myths

    5 minute read

    Referral Programs: 7 Common Myths

    The internet is a vast and highly unregulated source of information. Consequently, it’s no surprise that much of the data found online is inaccurate. This is particularly true when it comes to the topic of referral programs.

    We’d like to set the record straight, once and for all. Below are seven common myths and misconceptions about referral programs and the real truth behind each of them.


    Myth #1 - A referral program is the same thing as an affiliate program.


    myth_1

    This is the most common misconception we hear during initial consultations. It's true that referral programs and affiliate programs are remarkably similar, and you can build an affiliate program using referral software. However, there are a few key distinctions between the two.

    In a referral program, your brand ambassadors are typically your customers. They are already fans of your product, they are educated about the features, happy with the support, and they have first-hand experience with your brand. Affiliates on the other hand tend to be financiallymotivated, and lack that first-hand brand experience. Affiliates are primarily self-interested. Ambassadors may be self-interested, but tend to have more of a variety of motivations than affiliates.


    Myth #2 – Referral programs are just as effective as other types of marketing.


    myth_2

    Word-of-mouth marketing is king when it comes to consumer trust. In fact, 82% of Americans seek recommendations when considering a purchase. According to another survey, 84% of people are more comfortable taking advice from another satisfied customer or colleague than an ad or other marketing tactic.

    Compare this to only 62% of consumers that trust TV ads or the only 50% that trust paid search results. Referral marketing programs that leverage this trust provide a much greater ROI than other channels and convert higher quality customers.


    Myth #3 – Exceptional service is all it takes to get customers to refer business.


    myth_3

    Unfortunately, it’s not always this simple. Yes – customer service is a critical part of recruiting passionate brand ambassadors, but it’s not the be all and end all. Not by a long shot. To build a solid referral program, you must deliver products or services that meet or exceed customer expeftations, and then provide extraordinary service. 

    For your referral program to take root and be exponentially scalable and successful, offering people something of value in return for their referrals – and that something doesn’t necessarily have to be money - is proven to drive more of them. Research conducted at the University of Chicago revealed that non-cash incentives actually produced more referrals than cash. It simply has to be something that will effectively “scratch the itch” of your loyal followers. It's important to test various offers to determine which drive the most high-quality, converting referrals for your business. 


    Myth #4 – Customers that are pleased with your product or service will automatically produce referrals.


    myth_4

    If this were true, there wouldn’t be any need for formal referral programs, now would there? To the contrary, a marketing study conducted by Texas Tech indicated that 83% of respondents would be willing to refer new business to a brand they love, but only 29% of them actually do.

    The fact is in order to obtain a steady stream of quality referrals, you have to ask your advocates for referrals, and then make it easy for them to do so.


    Myth #5 – Referral programs should focus only on those consumers who are most influential.


    myth_5

    Sure, having powerful brand ambassadors is going to help you to achieve great results, but that doesn’t mean you should exclude less influential advocates. In many cases, it’s not how many connections your ambassadors have, but the quality of those connections. All it takes is one referral to someone that happens to have a need, budget, and trusts the recommendation of the referring friend to help take your sales to the next level.


    Myth #6 – Once referral programs are in place, they can basically run themselves.


    myth_6

    The most important component of quality, successful referral programs is the relationship between the ambassador and the brand. Without this, the program will fall short. Relationships with your brand ambassadors must be nurtured over time. Leveraging referral software will allow you to focus on this important human factor of your referral program, while the nitty gritty details are managed within the platform.


    Myth #7 - If I am a SaaS provider, I should just build my own solution.


    myth_7

    The truth is, if you are in the software business, you probably could create your own referral program. You could also probably create your own CMS for your blog, or adserver for your ads, or CRM for your sales data. You could easily do all your own hosting, too. So why shouldn't you?

    Simple; opportunity cost.

     

    It's our responsibility to make your referral programs as seamless and easy to build, integrate, and optimize as possible. We make sure your data is secure. We do all of this so that you can spend more time in other areas that can also help to grow your business. 

    Now that you know the truth about customer referral programs and how incredibly powerful they can be, the question is no longer should you implement such a program, but why haven’t you already? Get started with a free demo or consultation today.

    Posted in Affiliate Marketing, Social Commerce, Referral Marketing

    Fadi George

    Written by Fadi George

    Fadi George is the website director at Ambassador, with a special interest in SEO, digital marketing and growth hacking. He's a lover of all things NZ and tech.

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