Are Referral Apps a “Silver-Bullet”? Here’s the Data
Why Email and Social Media are More Effective
As Farmers look to sell direct-to-market, it is important to consider how to attract and grow your customer base. Farms with a large, diverse set of customers enjoy more consistent sales, ongoing demand and better resilience. There are a variety of options for Farmers to reach potential customers, including word of mouth, email, and social media.
Word of Mouth
Word of mouth is a natural and organic way that many businesses have historically grown their customer base. When Buyers have a great experience with your Farm, those Buyers then tell their friends and family who in turn become customers. Pretty simple, right?
Historically, word of mouth was organic and offline. While ‘offline’ word of mouth (e.g. someone talking about your Farm to a local friend or neighbor) is ideal, it is slow, unpredictable and hard to track.
Today it is possible to track online “word-of-mouth” with referral applications. These businesses provide solutions to track Buyers who ‘refer’ other Buyers (incentivized by a discount or store credit). It sounds like a great idea, but the data is not convincing.
Statistically, online referral applications translate to a +2% increase in new Buyers. The cost of these apps start at $50 - $150 a month on average, with some also taking a percentage commission on your products sold. In other words, the cost is not worth the reward.
Referral programs were brilliant about 10 years ago when they were novel; now they are largely ignored by Buyers --- and stale when it comes to outcomes. Industries that still run successful ‘customer referral programs’ are typically large consumer product goods companies like Netflix or Uber who have millions of customers. Referral programs are often established once a company reaches massive saturation across other marketing channels.
Let’s break down the numbers for ‘Referral Apps’. If your Farm has 500 customers, then you can expect about 10 new referral customers (~ 2%). If those customers spend an average of $50 with your Farm, that is a $500 in gross revenues for your Farm. If you’re earning 20% net margin, then perhaps you’ve made $100 in net income (one-time). Given the ongoing cost structure of Referral Apps, the returns are most likely a wash (or a loss) for the average Farmer.
Most importantly, Referral Apps do not result in ongoing referrals. Most businesses will only see a benefit at the launch of a referral program, then experience a steep decline in interest from their customers over the lifetime of the program.
There are many low to no cost, profitable options to gain new customers that are much more effective and productive than referral programs.
Email Marketing
For Farmers who are interested in getting the most out of their existing customer base, email marketing is the easiest way for you to increase engagement with your Buyers and boost sales.
Would you spend 20 minutes per week to increase sales? We find that Farmers who send weekly newsletters earn 28% more on average per month compared to Farms who don’t. Your marketing plan should start with an email campaign strategy— simply because it’s free to get started and it works!
The data we’ve aggregated across 1000’s of Farms tells us that 35% of all orders online originate from an email or newsletter. Here are some suggestions for your Farm’s regular, ongoing email marketing:
Send weekly ‘Order reminders’ to prompt regular purchases
Send a newsletter from the Farm 1-2x per month
Send offhand personal emails --- maybe 1-2 a week --- to individual customers to personalize conversations (especially with new or loyal buyers)
Offer a promo to delight and thank your customers for their support
Check out our blog covering Newsletter Tactics 1-2-3 for Successful Farms.
Social Media Marketing
Americans are online 6 hours a day on average. Whether your current or future customers are scrolling through Facebook, watching Instagram stories or checking their inbox, each has their own routine(s). This means that if you want to access all possible customers and sales, you must be on all channels.
Analyzing millions of pageviews monthly, we see 65%+ of online sales come through social media on mobile phones. There are many benefits of social media marketing:
Social media posts and ads are easy ways to drive traffic to your website.
Authentic Farm life content (e.g. daily chores) connects Buyers on a personal level, boosting customer loyalty.
Potential customers can readily engage with your Farm, providing an efficient way to capture new leads.
Seasonal and promotional offers in your Social Feed, and targeted Social Ads, is an easy way to reach new local Buyers.
Takeaways
Word of mouth is great for your Farm (free), but we don’t recommend spending money on a referral app program. Farms would be wise to put more effort into email and social media marketing. Email marketing enables Farmers to keep their Buyers engaged while increasing the average order volume, including timely promotion of latest products and seasonal offers. Social media enables you to reach potential Buyers in your local area, with the opportunity to target ads in a specific territory.
Barn2Door provides Farmers with an ecommerce experience designed with the needs of Farmers in mind. Our integration with Mailchimp enables Farmers to easily manage and build email marketing campaigns that automatically sync with contacts and products from their shop. An upgrade into Mailchimp Essentials, enables Farms to make “Smart Recommendations” to Buyers, which automatically suggests products based on prior purchase history. Data indicates your Barn2Door Store + Mailchimp Smart Recommendations can drive a +30% increase in Sales conversion rates and +35% average increase in click-through rates.
At Barn2Door we speak with Farmers to learn the challenges they face day-to-day. We appreciate their feedback to help guide our product and engineering investments. We love to build new capabilities that help Farmers better manage their business.
Barn2Door powers Farmers who sell direct, helping them increase sales, access customers and save time. If you’re curious how Barn2Door could help your Farm build a thriving direct-to-market business, watch this 5 minute video.