Referral based marketing is becoming more popular each day. As the buyer’s journey depends more on word of mouth than salespeople companies want to use this to their advantage by providing rewards for referrals, social shares, reviews and more. This concept worked like a charm for many companies such as Uber, Lyft, Ipsy and many others who offered enticing win-win rewards for referrals that benefit both the referrer and referral. But there are more examples of failure than successes in referral programs as the Advisor Impact Study states, 83% of customers who had a positive experience with a brand are willing to make referrals but only 29% actually do. Here we will discuss all the various factors for this and how you can avoid them!


1. You are over selling

Don’t force your consumers to sell your product to their network. If you are requiring referrals to make a purchase to get a reward then it will naturally deter many users from making those referrals. Instead, encourage users to refer friends and family who must sign up to the loyalty program and enter all their data to earn rewards. That way you have their contact information to send them relevant communications and marketing materials to convert them without forcing a sale and turning consumers against you.

You should always try to position your brand as a good fit that takes care of its consumers, not a pushy company that doesn’t reward for anything other than a transaction. According to Cap Gemini, transactional loyalty programs make up 97% of all loyalty programs out there, but 77% of these programs are failing within 2 years. Companies are finally realizing that following the crowd isn’t always the best idea.


2. Your referral program isn’t enjoyable

The key to any referral program is to create an experience users already want to share then incentivize them to give the push they need to take action and actually make the referrals. Start first with reviewing your customer experience and fix any existing problems that could create a negative experience with the brand such as POS issues, poor salespeople, unorganized return process, etc. The next step comes after the purchase when you present consumers with a loyalty program that rewards referrals.

Avoid a “Buy 10 get 1 free” type program that creates deal loyalty, not brand loyalty. Instead, provide them with a program that is enjoyable and fun to engage with. Give them branding games, social media actions, levels, challenges and an interactive design. Once you give them a good customer experience during the purchase and an enjoyable loyalty program experience you’ve got those referrals in the bag!


3. It feels like a scam

Another crucial element of any referral program is the need to provide users with value before you starting to ask for something. Simple ways to do this are to give users free points just for signing up that can be used in a fun scratch & win, contest or giveaway. By giving value right away, people already gain trust in the program and are more willing to give it a shot. If you start off the relationship with your customer asking for things and promising something in return then you’re already starting off on the wrong foot. You’ll get one of those eye squinting looks as they consider if this could be spam or a legitimate program that’s worth their time. Avoid the eye squints all together and make the value obvious right from the start!


4. It’s too complicated or time consuming

You need to understand the day-to-day life of your consumers. They are working full time jobs, taking their dog for walks, feeding their children, preparing dinners, meeting friends, having dinner with family, cleaning the house, the list goes on in on. In summary… consumers are BUSY. They make the “is this worth my time” decision in a matter of milliseconds without the blink of an eye. Make your referral program simple and easy to use to maintain consumer’s attention and not add any more complication to their lives. This simplicity increases not only acquisition during initial signups but also engagement as they’ve had a positive experience and are more likely to return for more. People hate not knowing things, if they feel like they don’t know how to use your loyalty platform then will walk away and never return. Make your users feel smart and capable by making it easy to use!


5. Prizes are too easy to get

If you are offering consumers cash, discounts, prizes or gifts then get ready for a lot of low quality leads flowing in. Now we aren’t saying your consumers are going to take advantage of you but if you set it up where it’s all too easy to earn rewards then that’s exactly what users will do. They will be referring everyone from their networks when only 20% of them are actually relevant for your brand. This might sound like a good thing to you but in the end you waste time and money and on all those rewards and you position your brand as one that consumers can take advantage of.

The key here is to set up different levels, actions and restrictions. Social&Loyal’s gamified loyalty platform allows clients to set up different levels where some prizes can only be redeemed once users engage enough to move up, which requires them to perform actions beyond the referral. This encourages users to refer relevant contacts instead of begging everyone to sign up for rewards. Our loyalty program also allows you to set up a plethora of engaging actions in addition to the referrals such as social media actions, quizzes, branding games, surveys and more. Mix it up to create an experience beyond the referral! Lastly, restrictions are a basic part of any referral program that must be set, with our loyalty program you can set a maximum number of referrals per user to avoid any issues.


6. You don’t track or analyze data


This point is pretty straight forward, you need to track data to be able to analyze results and make appropriate changes and improvements. Choose a platform that does this for you automatically to avoid all the headaches of number crunching. Make sure you review this data on a continual basis to discover the best types of rewards, actions and even messaging to get users to sign up and invite their network to become your brand’s advocates!


If you want to learn more about referral programs and loyalty platforms set up a call with one of our experts!

In the meantime, check out this interview with gamification expert Yu-Kai Chou to learn how to drive behaviors and avoid gamification mistakes!

Marcos Martínez
Software Engineer & Head of IT

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