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3 Common Reasons Most Referral Programs Fail

Good intentions...

All business owners and entrepreneurs have the best intentions when starting a referral program.  They might see a big brand name offering some type of program that seems to generate crazy amounts of leads.  They think "If I offer something, they will come". It’s a feel good effort. They put together an offer, post it here and there, send their customers an email, and they might even have some kind of “launch” for the program.  The problem is... it wasn't thought through. The offer wasn't compelling enough (the "what's-in-it-for-me" fell flat), there was no personal feel or appreciation attached to the offer, it was confusing, it was utterly forgettable, etc..

Common Reasons for Failure...

 

Reason#1 - Unwillingness to create a compelling offer

Why does so much of small business revenue come from referrals, despite any real effort going into their referral programs?  This is a major disconnect. The vast majority of small business owners don’t understand the magic behind referrals, or why putting resources into a referral program makes sense.  Most simply think “I’m getting referrals, so something must be working”. This may be true when it comes to advertising. For example, if you put $1,000 into advertising and $5,000 worth of business comes back from it, you might think “WOW!, something happened! Let’s see what $10,000 worth of ad spend delivers!”.  With this logic, why would you not spend money on something that has been PROVEN to work?

Reason #2 - It's not customized

Your referral sources won't take your referral program seriously if it’s not customized.  More importantly, they won’t feel that YOU are taking it seriously. Your referral program should feel like it’s invitation only, and it needs to be specific.  You need to spell out very clearly what the offer is, how the referral should be made and how the referral source will be paid. All these should come after you have made the referral source feel special and appreciated, and they have opted into YOUR customized program, not some “click here” out of the box program to herd the masses.

Reason #3 - No proven formula

Many referral programs are started because the business owner thought “I need to have a referral program” which is ABSOLUTELY TRUE.  However, you should create a referral program because it can revolutionize your business, not because it’s “something you need to do”.

This is how YOUR business will be different, how it can stand out and grow to enormous heights before your eyes.

The formula is SIG...

Simple

Interesting

Goal-oriented

Simple: 

Make your referral program easy to understand.  You need it to be customized for your business, but you also need it to be very easy to deploy, manage, and most importantly… be headache free for your referral sources.

Interesting: 

Confirm that the incentive you are offering is going to motivate your referral sources. This is imperative and the detail that is tragically lost on most small business owners.  Many people think they can offer any kind of discount and it will WOW people into referring them business. Nobody cares about 10% off their next visit if they refer a friend. NOBODY.  Make your incentive robust and in line with your business model (in our online course we take you through the math to establish a range of what you should offer depending on your margins, industry, etc.).

Goal-oriented:

Establish what your referral sources want to accomplish and give them updates along the way.  This is crucial. And remember, you can tell your referral sources how many leads they’re bringing to YOU, or you can focus on how much money is being made for THEM. 

You want your referral sources to be as close to 1099 workers as possible.  Would you rather have 100 referral sources working for straight commission and positioned to be advocates for your business whenever opportunities arise, or 1 salary sales person that needs to be trained, managed and compensated with a big commission?  Here’s a trick - have goals for both. 

If you’re taking your referral program seriously, your referral sources know that they’ve signed up to make money or benefit in a significant way.  You need to establish goals with them and keep them updated on their leads and payouts. This fundamental element is very important and is your roadmap to creating an army of advocates for free.

  

Tom Ryan, Founder | Referral Program Pros

Helping entrepreneurs and small business owners motivate referral sources to achieve 10x growth.



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