Promoting your business is hard work. For many businesses, then, it makes sense to use third parties to drive people to their companies. After all, claiming your Yelp page is free. Companies like Yelp also offer marketing services (for a fee) that give you benefits like enhanced listings and pay per click advertising.
Restaurants in particular may find themselves paying fees for customers who find and use their information through sites like Yelp and GrubHub. GrubHub, for example, charges referral fees and commissions of up to 30 percent of the value of an order if a customer's order can be attributed to their marketing services.
Third party fees may not deliver results.
It is reasonable that third parties that help you earn business should be rewarded for their services. The reality, however, is that these services may fail to deliver results that are in keeping with the fees they charge.
For example, Yelp's marketing services have received some negative reviews about the results they deliver. For example, customers find that leads are not targeted to their business or that they receive inquiries about services they do not offer.
One customer who wrote about his three-month trial with the company reported garnering one high value lead in three months: A lead that only might pay back the fees that he paid over the long term.
Third party fees can be expensive.
Often, third party referral fees can be sky high. Take, for example, the business owner who reported on his three-month trial of Yelp. His reported cost per lead? More than $485.
Similarly, referral fees like those you might pay through GrubHub can be expensive. Consider the reality of paying up to 32 percent per order (plus a 10 percent delivery fee) for orders placed through GrubHub. For a $20 food order, that means $4 is going straight to a third party instead of in your pocket.
That can be an expensive way to earn orders for your restaurant, especially if you are a small business trying to grow. Is cutting into your already tight profits really worth the results that third party referrals provide?
Third party fees might not be accurate.
High fees aren't the only problem with third party referrals and services. You may find that these fees aren't even accurate.
For example, Yelp and GrubHub have come under fire recently after an article in Vice revealed that they sometimes route takeout and delivery phone numbers through GrubHub.
By doing so, they allow GrubHub to collect higher referral fees. Some restaurant owners have even reported being unaware of this practice and/or being confused to find that their monthly numbers are not accurate thanks to paying more in referral fees than they had realized.
In addition, GrubHub doesn't even take their commission from the actual order placed. Instead, they base it off the average of a certain number of orders not placed over the phone. This means that an order smaller than the average could result in a fee above the amount you already agreed to pay.
With potential inaccuracies in fees, combined with high fees, it may be better for you to pursue other options for attracting customers to your business.
Beyond Referral Fees: Digital Marketing
Luckily, businesses do have another option when it comes to promoting themselves: Digital marketing. Digital marketing is a group of low-cost strategies that allows you to improve your online visibility and earn referrals without paying referral fees.
For example, consider social media marketing. By cultivating an active social media presence, you can get people talking with their networks about your business. Those conversations spread awareness of your brand.
You may even find that happy customers begin telling people in their networks to use your business. All of a sudden, you are enjoying the benefits of a referral without paying referral fees.
This type of success is common among businesses that implement digital marketing. The key is to choose the right strategies and use them effectively.
Next time, we will look at digital marketing more closely and examine how it can be used to earn you referrals and brand awareness, without the fees.
