The stormy challenges of an in-house referral program

Developing software in-house is always a risky business, and this is as true for referral programs as it is for other types of software systems. Marketing lead-gen teams must fight through stormy weather when having to design requirements from scratch while simultaneously navigating the turbulent waters of IT concerns and project priorities.

At Amplifinity, we’re proud to say that some of our most successful referral programs are for customers that had endured the storm of their home-grown systems before turning to us. These are both B2B and B2C brands that were unable to scale their programs sufficiently to meet their referral goals.

With their in-house programs, these brands had high operational costs and frustrated their advocates with poor communication. While these programs achieved some level of referral success, they did not achieve the level of solid lead generation and closed sales that was anticipated.

Here is a typical example from our most successful telecom customer::

This customer had a home-grown reward fulfillment process that took 30 to 45 days to issue a bill credit to their customers. In addition, their referral program did not generate any status communications to the advocates, so advocates had no clue whether or not their referrals were even processed. This resulted in large volumes of calls to the call centers to inquire about the status of referrals and referral credits. And, because there were no automated status updates to inform advocates about referral progress, the advocates lost interest and made few additional referrals. With these program weaknesses, this customer was more than ready to graduate to an automated referral platform when we reached out to them.

In this post, I’ll focus on three challenges of in-house programs: scale, advocate experience, and operational costs. Implicit in the text is the understanding that a solid SaaS referral platform addresses the challenges with the right mix of enterprise hardening and rich feature sets. In future posts, I’ll focus more on the best referral practices and program features that make for the most successful referral experience.

Scale

By “scale”, I mean the ability to support millions of referral events without depending upon IT to keep the software running, without requiring manual intervention to complete any of the referral processes, and with sufficient tooling to support program changes without involving IT.

We’ve seen in-house referral systems that successfully empower advocates to make referrals, but then require manual intervention to complete the referral process. They don’t effectively close the referral loop so that advocates get rewarded in a timely manner, they may calculate rewards with a spreadsheet, or they may require manual steps to fulfill the rewards.These manual steps are manageable at the outset of the program, but when referral volume climbs to hundreds or thousands of successful referrals per month, manual processes cannot keep up. Operational costs go up and advocate experience goes down, as in the telecom example above.

Advocate Experience

The number one factor driving successful referral programs is a fully-engaged advocate base. Once a customer, employee, or partner accepts your invite to become an advocate, your referral program has to do everything in its power to deliver a positive advocate experience.  Happy advocates make more referrals. Unhappy advocates abandon the program.

In-house programs often struggle to keep their advocates happy. We hear stories like:

“My friend told me he bought your product, but I never got rewarded.”

This happens when the referral loop doesn’t close, either because of inadequate system design or because of dependence upon a manual process. That hurts!  It drives calls to your call center and discourages the advocate from making more referrals.

With in-house referral programs that successfully close the loop, which is great news, there remains a missed opportunity to stimulate the advocate to make more referrals, which is an active, and automated, nurturing program. Every time a prospect takes action, whether responding to an advocate’s email or completing a purchase, the brand has an opportunity to reach out to the advocate, thank her for her referral activity, and ask for more referrals. In-house programs generally don’t have this capability and lose out on a key method for amplifying the success of the program.

A closed-loop assures a positive advocate experience. An effective nurturing program turns that experience, and the referral results, to great!

Operational Costs

Above, I mentioned how manual processes and an unclosed referral loop increase operational costs. Interestingly, these are not IT costs, but the cost of extra work on the business side to keep things moving.

On the IT side, the largest operational cost for in-house systems comes from the management of the referral program content. This includes the web pages that advocates and prospects use, the referral tools, and the emails that go to prospects and advocates. What we’ve seen in home-grown systems is that it is expensive to maintain this content, and that maintenance generally depends upon IT involvement.

Successful referral programs are built on platforms that remove IT dependency from the equation once the initial integration to the back-end systems are completed. This require tools that allow marketing teams to manage their own content and to configure their reward rules. We have found this self-management capability to be very popular with our customer base.

Summary

It takes time and money to build and maintain an effective referral program. Organizations that choose to go it alone find that they are putting Referral Program Calm Watersmoney and time into an unproven, incomplete referral platform, which more times than not results in lackluster referral results. This blog has focused on the turbulence of in-house referral programs as compared to using referral software. In subsequent blogs, I will address specific capabilities that the most successful enterprise referral platforms use to calm those stormy in-house waters.

 

Questions? Email me at lbloom@amplifinity.com

 

Referral programs & affiliate programs – 4 big differences

I am a referral program consultant with Amplifinity, and a frequent question asked by prospective customers with whom I work, is: What is the difference between a referral program and an affiliate program, and which one is better for my company?

The differences are more pronounced than they expect. The simplest answer is, referral programs leverage the trust and enthusiasm of people who know your brand, and turn those trusted individuals into a new and high quality customer acquisition channel.  On the other hand, affiliate programs place a brand link on a brand or blogger website with the intent of motivating site visitors to click the link.

Let’s look at four major differences between these two programs:

Referral programs more successful than affiliate programs

1) Referrals are personal.  The advocate (the person who makes the referral) and the prospect know and trust one another.  Prospects are more likely to trust a recommendation from a friend than any other source, Nielsen has found. In contrast, affiliate programs generally don’t leverage relationships and transparency. When I read a blog post recommending a brand, it’s not nearly as influential on me as if a friend recommended the brand.

2) Referred leads are higher-quality.  As opposed to affiliate programs with their low personal connection, in referral programs brand advocates know both the brand and the prospects they refer, so there is a high probability that they are referring friends and associates that are a good fit for the brand.  The advocate has effectively pre-qualified the prospect and provided the prospect with an endorsement of the brand.

3) Referral programs drive high lead-close rates.  With referrals, the marriage of high advocacy participation rates and trust that originates from the personal connection ensures higher conversion rates and a shorter sales cycle.  Our data shows that personal referrals close 42% of the time, double the industry average of 21%.  That translates to two new customers for every five referrals made.

4) Referral programs drive high advocate participation. They enable brands to directly reach out to their customers, employees, and partners to uncover loyal brand advocates.  Affiliate programs typically do not reach the level of engagement and penetration that referral programs do, mostly because of less program structure and, again, an absence of the personal relationship that naturally drives trust and brand loyalty.

 

All-in-all, the proactive approach of referral programs trumps the generally more passive nature of affiliate programs. This is not to discount the value of affiliate programs – just to show that you can do better.  In fact, affiliate programs can work well in parallel with referral programs.  But, on their own, our data proves time and time again that affiliate programs will not contribute to the bottom line to the same extent as a well-managed referral program.