Myth 1:
Referral Marketing Programs are less cost effective than other marketing channels.

FALSE! 92% of people trust recommendations from friends over any other form of advertising and a referred customer is 4x more likely to purchase. Referral Marketing allows you to generate high quality leads for your store that already look like your ideal customer! With your own referral marketing program you can leverage and optimize on the trust of your already loyal customers, employees, friends and family! And it not only makes for an easier sell and close, according to marketshare, Word of Mouth has been shown to improve marketing effectiveness by up to 54%.

Myth 2:
Happy Customers Will ALWAYS refer your product or services as long as you're doing a good job.

Unfortunately FALSE... a Texas Tech study found that 83% of happy customers said they would be more than happy to refer, yet only 29% actually end up referring! Why? Because they forget. We are all busy people with 3 million things to do in our own lives and a company’s referral program can slip out of mind unless frequently promoted, a motivating offer and easy to use tools! The tools to make referring a breeze are so crucial, if your customer heads to your site to refer a friend but doesn’t understand how, they will abandon ship faster than you can say SHIP!

Myth 3:
Affiliate Programs are the same as referral programs.

False, referral programs are focused on generating new leads through your customers, employees, friends and family while simultaneously growing stronger relationships with them, these people love your services, products and employees and they’re happy to share with their friends because they know their friend will be well taken care of and happy with the end product or service.

Affiliate programs on the other hand have a strong self interest factor and these affiliates are often motivated by the financial gain and are often referring and sharing with people they are not closely related to or have strong ties to.

Myth 4:
Incentivizing for referrals does not work.
TRUTH:
Incentivizing works, how do we know this? Just to look Paypal, Airbnb or uber to see how they explain their tremendous growth rates. This is not an exclusive bonus for e-commerce stores or hip trendy new services and products. Dealerships can digitize and optimize their referral programs in a similar fashion, and while the frequency of shares/referrals for a dealership may not be as high, but considering referred customers have a 51% Service Usage, Fresh-Ups have just 29% service usage. (NADA). And since the lifetime value of a new referral customer is 16% higher than your average customer (Wharton School of Business) the effort to put together a program and incentivize for a referral makes perfect sense. More than 50% of people are likely to give a referral if offered a direct incentive, social recognition or access to an exclusive loyalty program. –  Software Advice

Myth 5: Referral Programs are EXPENSIVE to develop and implement.
This is a technically a half truth…. yes, if you’re trying to create and run your own in-house referral program similar to Airbnb or Uber then you could be looking to hire 2+ engineers and spending about $20,000+ to create it! But that’s why referral platforms exist today.  A referral platform should allow you to market your referral program, track and optimize it. Discover brand advocates and track employees who are utilizing the program to the fullest. 

What do you guys think? Did you already know these truths or did something surprise you?!