Mistakes Businesses Make When Creating Referral Programs

Managing partner at Moving Traffic Media, a New York digital agency offering SEO, PPC and Amazon marketing services.

Referral programs can be an effective marketing strategy for businesses looking to grow their customer base. By incentivizing existing customers to refer new customers, businesses can tap into their network and expand their reach. 

However, creating a successful referral program is not always easy, and many businesses make common mistakes that can undermine its effectiveness. 

With that in mind, let’s explore some of the most common mistakes that businesses make when creating referral programs.

Autopiloting

Autopiloting, or simply "setting it and forgetting it," is a common mistake that businesses make when creating referral programs. 

Autopiloting refers to the act of launching a referral program and assuming that it will run itself, without any further input or monitoring. While it may seem like an efficient way to manage a referral program, autopiloting can actually be detrimental to its effectiveness.

Autopiloting can lead to a lack of engagement with the referral program, both from the business and its customers. Customers may lose interest in the program if they feel like their referrals are not being recognized or rewarded appropriately, while the business may miss opportunities to optimize the program for maximum effectiveness.

Referral programs can be an excellent source of new business, but they require ongoing monitoring and adjustments to ensure that they are delivering the desired results. By autopiloting the program, businesses may miss opportunities to improve the program, optimize rewards, or address any issues that arise.

Furthermore, referral programs rely on consistent messaging and clear communication between the business and its customers. By autopiloting the program, businesses may miss opportunities to reinforce the program's messaging or fail to communicate changes to the program effectively.

Launching before you’re truly ready

Launching a referral program before you're truly ready is another common mistake that businesses make in referral marketing. While it can be tempting to launch a referral program as quickly as possible to start generating leads and sales, launching prematurely can actually do more harm than good.

A referral program requires clear messaging and guidelines to be effective. If the program is launched prematurely, it may lack clarity and leave customers confused about how to participate and what rewards they can earn.

Referral programs need to be thoroughly tested before they are launched to ensure that they are functioning properly and that the rewards and incentives are appropriate. Launching before adequate testing can lead to technical issues, inaccurate tracking, or unbalanced rewards.

A poorly executed referral program can have a negative impact on a business's brand image. Launching before you're truly ready can result in a program that appears unprofessional or unreliable, potentially damaging the trust and loyalty of customers.

Substandard UX

Substandard UX, or user experience, is another common mistake that businesses make in referral marketing. A referral program with a poor UX can lead to frustration and confusion among customers, resulting in a lower participation rate and fewer referrals.

A referral program that is difficult to navigate can discourage customers from participating. Complicated navigation can make it hard for customers to find the information they need to participate, leading to frustration and lower participation rates.

Referral programs that require customers to fill out lengthy forms or provide excessive information can discourage participation. Customers may be hesitant to provide sensitive personal information, and may abandon the process altogether if it takes too much time.

No timeline

Not having a timeline or deadline for a referral program is another common mistake that businesses make in referral marketing. While it may seem like a good idea to keep a referral program open-ended to encourage more referrals, not having a timeline can actually lead to lower participation rates and less urgency among customers.

Customers may be less likely to participate in a referral program if there is no sense of urgency or deadline. Without a timeline, there is no incentive for customers to refer their friends or family members immediately, which can result in lower participation rates.

Not having a timeline can lead to missed opportunities for businesses to capitalize on peak referral periods, such as during holidays or special events. By setting a deadline, businesses can encourage more referrals during these high-traffic times.

Referral programs that don't have a timeline can make it harder for businesses to budget their rewards and incentives. Without a clear end date, businesses may have a harder time predicting how many referrals they will receive and how much they will need to spend on rewards.

Making it too complex

When a referral program is too complicated, it can be difficult for customers to understand, participate in, and refer others to the program. This can lead to lower participation rates, lower referral rates, and a negative customer experience.

If the rules of the referral program are too complex or difficult to understand, customers may be less likely to participate. Confusing rules can lead to frustration and misunderstandings, which can result in fewer referrals.

A referral program with too many steps can be daunting and time-consuming for customers. This can lead to lower participation rates, as customers may not want to take the time to complete all the necessary steps.

If the threshold for rewards is too high, customers may be less motivated to participate. Customers may feel that the effort required to reach the threshold is not worth the reward, which can result in fewer referrals.

A poor choice of incentive

Incentives play a crucial role in motivating customers to refer their friends and family members to a business, but if the incentive is not appealing or valuable enough, it may not be effective in generating referrals.

If the incentive is not valuable enough, customers may not be motivated to participate in the referral program. This can result in lower participation rates and fewer referrals.

If the incentive is unrelated to the business or the products/services it offers, customers may not see the value in participating. For example, offering a free movie ticket as an incentive for a car dealership referral program may not be effective.