From Bribing to Delighting: How a Referral Program Nearly Damaged Our Brand
Two years ago, my team at Worldwide101 was brainstorming about how to reach more customers for our premium virtual assistants, when I blurted out, “Let’s launch a referral program!”
It seemed like such an easy win. After all, our customers loved us, and they were already referring their friends. Why not incentivize anyone to refer us by giving them a cut of each sale?
So we invested in affiliate software and launched a web page to advertise our referral rewards. To maximize the return, we made it easy for anyone to become an affiliate. Then we waited for the leads to pour in.
Of course, it wasn’t that simple. Over the following year, we would try three different iterations on our referral program. All of them would fail, undermining our customer relationships and our brand. Only after offending a happy, loyal customer did we figure out how referral bonuses should really work for a premium brand like ours.
Fail #1: More leads. But not good ones.
Immediately upon launching the referral program, we saw that the quality of new leads it generated was extremely poor. Though it’s obvious in hindsight, it didn’t occur to me that most people who would sign up as affiliates would be in it solely for the cash.
All of those new, unqualified leads took lots of time to screen, and few actually signed up. Even worse, those that did become clients were far less committed to a long-term relationship with us. We pride ourselves in offering a money-back guarantee to unsatisfied customers, but in the past virtually no one had ever asked us to make good on it. These new customers saw our guarantee as an invitation to be non-committal, and they treated us as if we were a no-risk free trial.
For a team whose mission is partnering with clients to be successful for years with meticulously matched virtual assistants, our first attempt at a referral program turned out to be a huge energy suck that threatened to tarnish our reputation.
Fail #2: Turning affiliates into angry adversaries
The problem, we decided, was that we were paying referral bonuses too quickly — as soon as the referred client signed up. Affiliates felt they could send us just anyone, without vetting qualified, serious prospects for whom our premium VAs were a good fit.
What if instead, as many businesses do, we waited until the referred client had stayed with us for a while?
So we tried a new approach, altering the terms of the program so that affiliate partners received the referral bonus only after their referrals had been Worldwide101 customers for at least three months. That felt fair, since on average 90% of our customers stay longer than a year.
Almost immediately, some of our affiliate partners went completely silent. That was a positive, since these people were only interested in the quick reward. We were better off without the leads they were sending us.
Then something else happened that, again, I probably should have expected. Many affiliates continued to make referrals, but (naturally) not everyone they referred would make it past the three-month mark. Instead of chalking up the forfeited bonus to a poor referral, affiliates got angry with us for not doing enough to keep the new client happy and subscribed!
For example, one affiliate referred a woman who was a successful executive coach, but who had cycled through many virtual assistants without success. From our first interaction with her, we suspected that the problem was not the assistants but her own communication style. However, because she came to us as a referral, we bent over backwards to keep her subscribed, only to confirm our suspicions: Her habitual lack of communication made it impossible for our team to be of any help.
I had launched our referral program intending to build an enthusiastic army of affiliate champions. Instead, I found myself with an adversarial mob of back-seat drivers, sending my team down roads we didn’t want to travel.
Fail #3 (Or, the One that Turned It All Around): Insulting happy, longtime customers
Taking stock of our rewards program after a full year, I declared it an utter failure. The quality of leads was horrible and the number of refunds we had to issue to unsatisfied customers increased. Worst of all, I had been complicit in betraying our company philosophy, our values, and the premium nature of our brand.
Of course, as our paid affiliate program was crashing and burning, we continued receiving unpaid, unsolicited referrals from happy clients. Since the quality of those referrals was top-notch, we began inviting clients to become affiliates. What better way to show our appreciation for spreading the word?
To my surprise, none of our clients accepted the invitation. In fact, one long-term customer emailed to say it had offended him:
Absolutely not. I am not interested in referring clients for a reward. I am happy with your service, and if ever I have friends who can benefit from it, I will let them know because I like to help my friends.
His frank, jarring feedback convinced me that our entire approach to rewards was wrongheaded. We had designed our affiliate program to attract people who were detached from our company and who were in it for nothing more than the monetary reward. That might work for businesses selling an impersonal, commoditized product, but it was destructive for a premium, personalized service like ours.
I immediately shut down the affiliate program.
From Bribing to Delighting: Our new approach to promoting referrals
A few weeks later, a long-time client named Hubert referred his friend John to us, and John signed up for our service. I sent Hubert the following email:
Thank you so much for referring John — I really appreciate it! He just signed up and got 20% off his first invoice just for being your friend, and we have also taken $100 off your next invoice as a small token of our appreciation.
Thank you again!
Now, instead of bribing strangers to send us unqualified leads, we’re simply reinforcing referral behavior that our happy clients do on their own accord. We make it easy for new signups to tell us who referred them, so they get the 20% discount and we can surprise and delight the referrer with a $100 thank-you. We also make it easy for clients to share the 20% discount, strengthening the idea that referrals are really about giving a gift to a friend. But we don’t make a big deal about it, and we certainly don’t tell clients what’s in it for them.
For me, the failure of our rewards program — and its successful turnaround — offers three big lessons:
#1. One size does not fit all when it comes to referral programs.
Third-party affiliate networks may work well for product businesses or Saas companies whose on-boarding process is standardized and low-touch. But if your business personalizes premium experiences for each customer, think long and hard about whether a disconnected third party can really offer the lead quality that you need.
#2. The best referral partners aren’t motivated by monetary rewards.
They recommend your products and services because they genuinely like them, they genuinely like you, and they genuinely want to help someone they know. Because it’s all genuine, they have a stake in the success of the new client’s relationship with you — they want it to work out because they’ve put their own name on the line.
#3. The best referral partners know when NOT to make referrals.
The other day one of our clients said to me,
You know, Sandra, I was going to refer someone I know to Worldwide101, but then I really thought about it, and I realized this person will be trouble for your team. I don’t want that — our good working relationship means too much to me.
I have never felt so good about not getting a new lead.