Cross Promotion: Why Referral Websites Are Bad for SMB

Aggregator sites are all over the web. As a small business owner, you may see these Referral websites as a way to improve your revenue generation. After all, these platforms give you a way to tap into a new audience you may not have had access to in the past. 

However, even the most common platforms in the data Referral industry have a few fatal flaws — the types of flaws that could result in far less business coming through your doors rather than the other way around. 

Before you sign up for one of these services in hopes of increasing your sales, it’s important that you understand exactly what you’re signing up for. The fact is that data Referral isn’t typically a wise move for small business owners. 

A Brief Glance Into the Aggregator Business Model

Data aggregators follow a relatively simple business model. Here are the key aspects of aggregators:

• Customer data. Aggregators start by curating customer data. They typically do this through buy now pay later (BNPL) services that require merchants to give up their customer data when new customers make BNPL payments. 

• New sales. Next, the data aggregator starts to send marketing materials to the customers they’ve received data from, generating revenue by selling them on different brands. Think of it this way: You buy a pair of shoes. Three days later, you get an email or a mobile message from your BNPL provider about shoes from a different brand. If you buy the new shoes, chances are your BNPL gets a percentage of the sale. 

• Constant contact. The BNPL stays in constant contact with the customer in an attempt to sell more and more products from varying brands and earn a commission with each purchase. 

Why Small-Medium Businesses Should Stop Seeking Referral Services

At first glance, working with an aggregator firm may seem like a great way to expand your revenue. After all, you could be one of the brands in the emails the data aggregators send. However, it’s rarely wise to act on first-glance emotions in business. 

The truth is that when you work with a data Referral firm, there’s a strong chance that your revenue will actually fall because you’ll miss out on chances to upsell your own customers. Here are four reasons most small businesses should steer clear of data Referral firms:

When SMBs Sell Using an Aggregator, They're Giving up Their Customer

The biggest problem with data aggregators for small businesses is that when you work with one of these firms, you have to be willing to share customer data. As a small business, it’s important that when new customers buy your products or services, you’re able to stay in contact with them and keep them engaged with your brand. 

However, sales are done on a one-and-done basis when you sell through aggregator models. The key for these services is that you provide the aggregator with customers. Sure, you may be able to grab a sale or two in emails that you pay for, but once that sale is done, the data aggregator is off to sell products from other brands. 

SMBs Work Hard for Their Customers

You’ve worked hard as a business owner. You’ve learned your target market and built your operations around bringing customers through the door. Through market research and trial and error, you’ve brought your customer acquisition costs down and learned how to continue selling them products. 

After all that work, it doesn’t make sense for you to give the data you’ve accumulated to a sales aggregator. 

When you give the data to the aggregator, your customers will begin to receive emails from them on top of the emails and messages they receive from you. That only serves to fill up inboxes while reducing your chances of making follow-up sales. 

Aggregators Sell Clicks to the Highest Bidder

Data aggregators don’t care how much effort you’ve put into building a solid customer base. They also don’t care how hard you’ve worked to provide a quality product and produce solid customer reviews. Their core focus is on the optimization of their revenues. 

So, how does a Referral agent optimize its revenues?

They do so by selling ads to the highest bidders. For example, a data aggregator may send out messages about shoes. Massive retailers like Nike with huge profit margins have plenty of money to bid up the cost of advertising through the aggregator. 

SMBs Can’t Afford to Outbid Large Retailers

If you don’t have the economic benefit of being a massive company with strong margins, chances are you’re not going to be able to compete with the large retailers that use data aggregators regularly. 

Keep in mind, these Referral firms don’t care about your business’s success — they care about their own success. In an effort to drive up their own revenues, they focus on the market participants with the biggest budgets, companies that can afford to spend millions of dollars each year on customer acquisition. 

As a small business owner, you may have a few bucks for advertising, but you simply don’t have the economic means to play on the same field as billion-dollar market leaders. And you don’t have to. 

The simple fact is that if you don’t work with data aggregators, you won’t have to compete to stay in touch with your own customers. 

The Solution: Use a Provider That Doesn’t Share Customer Data

The biggest problem here is BNPL services. It’s important that you offer your customers a way to buy now and pay later, but the vast majority of BNPL options follow the data Referral model. That means that when you take advantage of their applications, you also risk losing your relationships with your customers each time you make a sale. 

The good news is that there’s one BNPL provider that isn’t interested in selling your customer data to the highest bidder. 

Gratify Pay knows that when your business succeeds, they succeed. So, they focus on helping your customers pay for items while they help you retain your customer data. Take advantage of a free consultation with the team at Gratify Pay to learn more about how reliable, non-data Referral BNPL services can help you grow your bottom line.