Essay on Benefits and Drawbacks of Referral Programs

Essay on Benefits and Drawbacks of Referral Programs

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Referral programs have many different potential benefits and drawbacks for businesses. One potential benefit would be the cost of having a referral program. Word of mouth advertising costs the business virtually nothing (Small Business). Referral programs can even provide additional sales even though the company does little or no advertising (Small Business). However for employee and customer referral programs, the people get rewarded for successfully referring people to a company. Another benefit is trust. People tend to trust their family members and relatives more than they might trust businesses (Forbes). A single satisfied customer might only tell a couple people but a strong recommendation from a friend will have a higher influence then an advertisement (Forbes). However there are also drawbacks to referral programs.
A company cannot control how or when referrals will happen. This can be an enormous issue because there is no way for a company to increase its referral program and when people talk to each other it is not always positive (Forbes). Customers who have had negative experiences can discourage future potential customers from trying goods and services (Small Business). Another issue is expectations, referrals set high expectations for customers that the company cannot meet (Small Business). It has been proven that people who do not know much about a company tend to more satisfied then people who come in with high expectations (Forbes).
Customer referral programs take time and money to develop, and it is all for the customers benefit because the company hopes it will also get a benefit later down the road. The company has to take in to account the budget for implementing a referral program. It would not make sense ...

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...t referral and what rewards do they get for a referral. If a company educates their referral sources, they have a better chance of getting more customers.
Step 5: A company needs to outline their offer referral system. This is where the company comes up with a creative offer that makes people want to refer the company to people they know. Do not use money as an approach as this rarely works.
Step 6: A company needs to create a referral transformation strategy. A company needs to make sure its referral leads turn into referral customers. A company needs to create steps in which they can convert their referral leads. Do not get future customer’s expectations to high.
Step 7: A company should create a referral follow up strategy. Create several ways to reward the referrals. A company should always communicate with their clients and referral leads how much the company

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