Referral madness

August 9, 2016
August 9, 2016 smz-blog

Referral madness

In today’s mail and email, I received offers for miles, rewards, points, a billing credit and a free ride. All I had to do was refer a friend or family member. Oh, and enter a code and have them enter a tracking code.

Of course I recognize that referral programs are incredibly efficient (thanks Dropbox) and have a low cost per acquisition.

A study was conducted by the Goethe University Frankfurt and the University of Pennsylvania on referral programs and customer value which followed the customer referral program of a German bank. That bank paid customers 25 euros for bringing in a new customer. The study found that referred customers were both more profitable and loyal than other customers. Referred customers had a higher contribution margin, a higher retention rate and were more valuable in both the short and long run.

So are customer referral programs worth the cost? The study says that it records “a positive value differential, both in the short term and long term, between customers acquired through a referral program and other customers. Importantly, this value differential is larger than the referral fee. Hence, referral programs can indeed pay off.”

Tom Sawyer getting someone else to whitewash the fence was smart. But when every crazy fence owner is doing it, a little luster has been lost. I’m calling it “referral madness” and hoping that in cases where I’m a true brand ambassador, I’m asked to make a referral. And in cases where I have little experience with a product or service (or anything less than a raving experience), I’m hoping to not be asked. Or at least asked less often.

These blogs are an attempt to boost word-of-mouth (word of blog) for our agency. So if you know a business that could benefit from SMZ’s services, join our low-tech referral program and you’ll get rewarded. (Ahem, SMZ chocolates!) That’s a pretty sweet deal for all, right?

Jamie Michelson, President/CEO

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