EEC finds refer-a-friend programs still on fringe

Only three percent of online retailers use refer-a-friend programs in their e-mails, much lower than the 44 percent that use send-to-a-friend programs, according to a new study by the Email Experience Council.

The EEC conducted the Refer-A-Friend Benchmark Study in conjunction with its newly integrated partner, RetailEmail.Blogspot. It reviewed several e-mail newsletters from online retailers and found of those interviewed only three retailers: Blue Nile, Drs. Foster and Smith, and TigerDirect, included refer-a-friend links in e-mail.

"This finding is not totally surprising, as many of the top online retailers have extensive store networks, which makes it much easier for consumers to become familiar with a retailer," said Chad White, director of retail insights and editor-at-large at EEC, New York. "Refer-a-friend programs, which typically introduce the friend to the retailer's offerings, are better suited to retailers that are nearly or entirely virtual, which is what we saw with the three major retailers that we identified as using these programs."

The other key finding of the study was variance in how refer-a-friend programs are implemented, unlike send-to-a-friend programs, which are fairly uniform regardless of the retailer. For example, while two of the retailers used refer-a-friend programs to entice people to shop at their online stores, the other, electronics supplier TigerDirect, aimed to entice people to sign up for the e-mail newsletter.

Mr. White said that he was surprised that only jewelry retailer Blue Nile offered any kind of incentive to help drive their referral program, giving both the referrer and friend a discount based on how much the friend spends on a first purchase. He said that retailers are promotional by nature and often give new e-mail subscribers a discount offer, and suggested they offer these benefits to referral recipients.

As 2007 draws on, Mr. White does not expect any big shift in refer-a-friend adoption among the largest online retailers, but he does anticipate that a few more will start programs over the next year or two, saying that these programs have a stronger place among smaller online retailers.

"That said, I would expect some of the major online retailers that don't have send-to-a-friend programs to implement refer-a-friend programs instead, since much of the functionality of send-to-a-friend can be replicated by hitting the forward button on your e-mail client," he said. "I think that TigerDirect's flavor of refer-a-friend implementation, in particular, will find some converts as a list-building tool. Also, currently no major online retailer has both a send-to-a-friend and a refer-a-friend program, and I expect that to change because each program has its strengths and some retailers will want to have both tools at their disposal."