Why Referral Programs Suck

I don’t recommend ‘buying’ your customers. I’m a proud Detractor of referral programs that incentivize customers to refer their friends and family. There’s little difference between this approach and pyramid schemes… and everyone hates pyramid schemes.  Your brand is better than that.

Why referral programs suck:

  1. It’s fake. Using incentives to ‘buy’ referrals is equivalent to admitting that your brand is not worth recommending based on its merits. “We know our product isn’t good enough to tell your friends about, so here’s $10 to tell them it’s good anyways.” If this is true, fix your product or you will fail in the long run no matter how much cash you pump into buying referrals.
  2. It conditions undesirable behavior.  By paying for referrals, you train your customers that they should only recommend your brand when there’s something in it for them. Advocates recommend brands because they’re altruistic, don’t ruin that.
  3. It’s an insult.  Your customers are not mercenaries for hire. And their friends and family aren’t chumps. Besides that, when someone gets referred by a person that’s being compensated, credibility and trust gets flushed down the toilet. Just don’t do it, OK!

The beauty of Advocacy:

  1. You’ve earned it.  As a result of the hard work your brand has put into establishing an excellent product, great customer service and exceptional value, you’ve earned the business of your customer.
  2. They want to advocate your brand. Often, more than 50% of your customers will say they’re highly likely to recommend your brand, when asked. You just need to ask them to do so. Without bait.
  3. Advocacy = Altruism. The number one reason people put their reputation on the line to recommend products and services that they believe in, is to “help” and make it easier for others to find products and services that meet their needs.

Now, there comes the little matter of demonstrating to your Brand Advocates that you appreciate their recommendation. This can be as simple as a thank you note, or an actual reward (coupon, giveaway, etc.) for their Advocate actions. This may seem like a subtle difference, but I assure you it is not. Consider the difference between the two following calls-to-action, and the motivation for why an Advocate takes action:

  • Referral approach: “Tell a friend to sign up, and we’ll give you 50 dumb reward points, and this T-shirt you’ll never wear.”
  • Advocacy approach: “You’ve experienced the benefits of our product, please share your experiences and spread the word. Love you, mean it.”

Take the Advocacy approach, and then demonstrate your appreciation to your customers when they recommend your brand. This will drive immediate purchases, and some may take a while. Either way, if you encourage and show love for these Advocate behaviors then positive Word of Mouth will drive your business to new levels.