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The 5 Factors That Make Customer-Referral Programs Fail All the referral program magic in the world won't help if your customers don't like your company enough to send their networks your way.

By Sujan Patel

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.


Nielsen data suggests that "Ninety-two percent of consumers trust referrals from people they know." Combine that fact with the way startup-world unicorns Uber, Airbnb and others have used incentivized referrals to drive their viral growth, and it's easy to see why businesses are adopting customer referral programs in larger and larger numbers.

Related: 4 Steps to Maximizing Customer Referrals

That said, referral programs are not all created equally. For every viral referral success story, there are many more companies that launch their customer-generation efforts to crickets -- meaning an embarrassing silence.

Want to increase your odds of being the former, and not the latter? Keep in mind the five factors that make customer-referral programs fail:

1. Your customers don't know about your program.

This one is kind of a no-brainer. If your customers don't know about your program, they obviously can't take advantage of it.

To make sure you're getting the word out effectively, look at every touch point you have with customers. In addition to suggesting the program to active brand advocates, add mentions of your referral scheme to any or all of the following places, as appropriate:

  • Your website (potentially across multiple pages)
  • Your social profiles
  • Your email signatures
  • Your email autoresponders
  • Your app documentation
  • Your gamification strategy

Then, follow up. Ask customers who are active referrers how they learned about the program. Not only will this show you the channels you need to bolster, it may reveal opportunities to add referral-scheme mentions to other critical areas of your web presence.

2. Your referral program is hard to use.

Customers won't jump through hoops. If they have to fill out multiple forms, use complicated referral links or expend any other effort, they aren't going to bother sending new customers your way.

Related: How Shrewd Mobile Referral Programs Accelerate Customer Acquisition

Simplifying the signup process helps, as does limiting required form fields. Trisha Winter, writing for Demand Gen Report, suggested that ease of use should extend to your brand continuity as well: "The look and feel of every referral program should be seamless and work in synergy with other brand advertising and marketing programs," Winter wrote. "If you send your advocate to a platform with different branding, they'll get confused."

To see if your own program passes the ease-of-use test, have a friend or family member who isn't a customer walk through it. Ask for this person's honest help in identifying program bottlenecks that might impede his or her desire to drive referrals.

3. Staff members don't understand your program.

RewardStream's Neil Parker suggested that insufficient staff education is one of the most common reasons referral initiatives fail:

"Your referral marketing programs experience the greatest success when your employees are aware of the program, and can explain it to customers," Parker wrote. "Everyone in your organization should understand the referral program, and your customer-facing team members should be able to explain it clearly to customers."

Take some time to assess your organization's understanding of your program. If any weak links exist, prioritize employee education above the promotion of your referral scheme.

4. Your referral bonuses isn't compelling enough to drive action.

Referral programs will never be effective if customers don't want what you're offering. Remember, most people want to do as little work as possible. A so-so referral bonus -- or, worse, one customers actively don't want -- may not be enough to get them to take action.

If you have a referral scheme in place, but engagement is lackluster, this is one of the first places to put to a test. Look to case studies like Uber and Airbnb for guidance, but pay even closer attention to what your competitors are offering. While going far above and beyond the bonuses they offer may not be reasonable (or profitable), finding that major discrepancies exist between your offering and theirs may suggest that you aren't meeting customers' expectations.

5. Your customers don't actually like your product or service.

Finally, keep in mind that all the referral program magic in the world won't help if your customers don't like your company enough to send their networks your way. A report from BlueLeaf stated this succinctly, saying, "Let's state the obvious: ALL referral plans depend heavily on the satisfaction of referred clients. If there is any doubt about the happiness of your existing clients or the quality of your services, go fix that now."

Related: The Do's and Don'ts of an Effective Referral-Marketing Program

Customers will tell you if they're happy, in the form of ratings, public reviews and direct messages. If they aren't telling you that, you've got bigger problems to face than how to repair a failing customer referral system.

Sujan Patel

Entrepreneur and Marketer, Co-founder of Web Profits

In his 14-plus years as a marketer and entrepreneur, Sujan Patel has helped hundreds of companies boost online traffic and sales and strengthen their online brand reputation. Patel is the co-founder of Web Profits and Mailshake.

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