The Referral is Dead, Long Live the Referral!

Are School Referrals Dead?

I think they could be...

Back in my Arbor days, I setup and ran the referral programme. We managed to get 21% of our accounts to make a referral and it was incredibly lucrative BUT, it took a massive concerted effort across multiple departments and months or pre-launch.

We ended the referral programme, evolving into a MAT strategy instead.

Most Founders I speak with have a <3% referral rate. That means that for every 100 customers you have, you're only getting 3 referrals per year.

There are 3 structural reasons within the EdTech sector why referrals aren't happening.

1. Academisation has fragmented local networks

Schools aren't connected like they once were. Today, 50% are Academies, sitting outside the Local Authority.

Just because schools are geographical close doesn’t mean they work well together. You need shared interests or challenges in order to drive collaboration, and only when that collaboration is happening does it lead to rapport.

Without rapport, you’re not going to generate referrals...

Back ‘in the day,’ every school in the Local Authority had things in common - for one they could all complain about their LA, many of whom were pretty authoritarian in their approach to managing schools.

Nothing bonds a Brit more than having a good old moan, and schools felt they were all in the same boat together. Conversations flow, and out of that opportunities to recommend solutions and share best practice happen.

2. The Decline of Local Events

The chart above shows Academisation is affecting the make-up of education within an education authority. Remember that when a school Academises, the local education authority loses funding for that school.

Academisation is (broadly) much stronger in rural areas. Take North Somerset for example - 64 out of 85 schools have Academised.

Education authorities are under a double hit - central Government funding hasn’t kept pace with inflation and at the same time, schools are ‘opting out’ and taking their funding with them. Typically authorities would hold back 4-6% of each school’s annual budget so this quickly runs into hundreds of thousands less.

Less money = service cuts, the first of which is usually events.

Schools just can’t meet each other as frequently as they could.

3. The First Mover Advantage Problem…

Many of the companies who excelled in referrals were able to do so because they were the first (or at least very early) to market.

The problem of diminishing returns comes into play here.

Take Uber - before Uber ordering a taxi was a pain. You had to ring, arrival times weren’t accurate, pricing could be a bit iffy, and every new place you went you had to find a new provider.

The benefits of switching were massive. Easier, faster, better, (used to be) cheaper. However, the benefits of switching from Uber to something new are minimal - diminishing returns.

The same holds true for food delivery services, online marketplaces, and all kinds in the B2C space, but it’s also true in schools.

Many of the most successful school referral programmes were from companies operating 20 years ago.

Today, schools are packed full of technology and there aren’t many areas were you can be a first mover. Simply put, your solution isn’t as unique as you think it is.

It’s not that you’ll never get a referral, but when it comes to stacking your time, energy and money on a strategy, for referrals to work (10%> referral rate), only a handful of EdTech companies are unique enough to be able to do it.

For referrals to work, you have to go all in. Offering a 10% discount or an Amazon gift card is pretty pointless and you’ll see it in your data. Count how many referrals you received last year and divide it by your customer number. After 5 years working with dozens of EdTech companies, I’m yet to meet any who have a 3%> referral rate.

Instead, everyone remembers that 1 school who came in via a referral and thinks it must be working, but they ignore that they’ve got 400+ customers, meaning 399 didn’t referral anyone.

As always, thanks for reading and see you next time.

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Best, Jay