Debunking 5 Referral Marketing Myths

May 2022



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65% of all new business comes from referrals. As one of the most powerful ways to acquire new customers and build a brand, many companies decide to run referral marketing program to leverage referrals and grow their business.

Despite the value of referrals and the promising ROI of a great referral program, there are many myths that get in the way of choosing to run one – particularly when it comes to to outsourcing a program or building one in-house. Let’s take a look at five of the most common referral marketing myths.  

1. A referral program can run by itself after it’s been built

 You may think that once you get started with your referral program — it will basically run itself. But to make sure your referral program continues to be successful, you will need to manage its most essential components. 

You’ll need a customer service team that is responsible for processing reward payments or reward fulfillment — thereby protecting your customer satisfaction rates by ensuring rewards are received quickly and efficiently. Your team must be consistently available to answer any inquiries customers have about your referral program. Additionally, your customer service team should keep customers in the know about any legal updates or changes to your referral marketing program.

Furthermore, you’ll need a team to help you develop and implement performance optimization strategies. You’ll need to monitor performance and track important metrics — such as the cost of customer acquisition, marketing campaign contribution, customer lifetime value, and return on investment. These all-important metrics can give you great insights into how your program is performing and where you can find ways to improve.

Moreover, you need to invest in fraud prevention and protection methodology. Fraud can quickly undermine growth and skew your metrics, impacting your ability to accurately assess your program’s performance. To protect against this, you’ll need to apply several methods — such as tracking cookies and verifying customer accounts. 

2. Referral programs are hard to set up and take a long time to integrate 

If you decide to build your own referral marketing program — you’ll quickly discover how complex they can be to set up internally. You may be waiting months or even a year before you’re ready to run your referral program. You also need to involve several departments to set up your program and bring it to market. In addition, you will need to spend much of your marketing budget on optimizing your internal program.

Contrary to what many people may believe, referral programs are easy to set up and can be integrated relatively quickly when you work with a company that specializes in referral marketing programs. When you work with Aklamio, we can help get you up and running in around 14 days with our Customer Incentives Platform.

To optimize their budgets and quickly deliver their referral programs, even big brands rely on outsourcing. At Aklamio, we work with companies like Paypal and Vodafone to help them grow their customer base and improve customer retention rates.

3. WOM referrals are hard to identify and aren’t reliable

The saying goes, “If you build a great business, customers will come.” But not in 2022. There are thousands of new businesses entering the market every year. With so much competition, you need to actively cultivate word-of-mouth (WOM) referrals with a versatile referral marketing program.

The main goal of WOM or referral marketing is to bring in new customers using your existing customers through reward-driven recommendations. Ultimately, word-of-mouth marketing is a tremendously valuable driver of repeatable, scalable growth — with people paying twice as much attention to recommendations from friends. Moreover, 92% of consumers trust recommendations from people they know. 

Aside from helping you to acquire new customers, WOM marketing also supports customer retention — as your customers feel valued because they are rewarded for staying loyal to your business.

In addition, you’ll also discover your most passionate brand advocates, what exactly they like about your products or services, and the best ways to build long-term customer loyalty. These star customers should be the main ongoing focus in your referral marketing initiatives — as 80% of your referrals will come from just 20% of your customers.

4. A referral program isn’t necessary because referrals happen organically 

You can reach far more potential customers with a referral program than you would through organic word-of-mouth alone. Prospective customers place high value on trusted referrals —  consumers say that they trust recommendations more than they trust advertising. While 74% of people say that word-of-mouth marketing significantly influenced their buying decisions.

With organic referrals, a potential customer may not be motivated enough to seek out your business and become a paying customer. A referral program gives the referred party actionable next steps — making becoming a customer as easy as possible. Furthermore, incentives establish trust with your brand and help make your customers loyal.

In addition, referrals are incredibly motivating to current customers, who will be more motivated to recommend your product or services to far more people than they would in other circumstances.

5. Building a referral program in-house is more cost-effective than outsourcing

Contrary to what some believe — outsourcing your referral program is typically more cost-effective than building your own in-house. In-house referral programs can demand much of your marketing budget and may not offer the best ROI if you’ve never set one up before. 

 By outsourcing your referral program, you not only optimize your program to be as cost efficient as possible, helping to ensure the greatest ROI — you can also focus your efforts and budget on other high-priority projects. 

Aside from the initial start-up costs, in-house referral programs also demand internal resources from various company departments. When you decide to create a program in-house, you’ll quickly acquire additional costs — including payment management, reward fulfillment, performance optimization, customer complaint resolution, and fraud prevention methodology, among others.

 Furthermore, you can scale outsourced referral programs quickly and more effectively — unlike in-house referral programs. A scaled program will help ensure your program continues to effectively acquire more customers each month. 

 The truth about referral marketing programs

 From skepticism around the value of company generated WOM referrals to the real costs involved in building and scaling a referral program, there are many myths surrounding referral marketing programs. 

With the right provider, you can quickly and easily get started with a sophisticated, customer-centric referral marketing program and begin acquiring new customers for your business. 

Curious to learn more about how we can help at Aklamio? Please reach out to us here.

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