I’m often asked during the Q & A portion of my live events if one should offer incentives (read: bribes) for their customers to provide them with referrals. Should they be offered cash? Perhaps, a gift?
I strongly suggest not doing that.
There are generally two challenges with offering incentives for referrals:
- If the referrals are not based on loyalty and “know, like and trust” but rather on reward alone, it tends not to be sustainable.
- (Most importantly) Those to whom you are referred will most likely feel resentful upon discovering they were referred because you bought and paid for the referral. How will they find out? When you tell them that they will receive an incentive for referring you to others.
This could result in their being not too pleased with the person who referred them. I know I’d feel that way, as would many with whom I’ve spoken.
Recently, I received an email from a firm that sells a high-ticket service to speakers. In the email, it said I would receive a referral fee for any speakers I referred. I wrote back (politely, of course) to let the salesperson know that not only could I not refer them without first knowing more about them through references, but that there were now two challenges:
- If the references are being bribed to refer, that tells me nothing about the quality of their work.
- There’s no way I would ever want another speaker to think I referred them because I was being paid to do so!
I suggested that — instead — they provide speaking professionals with amazing service and, as a result, they would do terrific via both proactive referral and reactive word-of-mouth. And, that’s what I would share with you.
So, my suggestion is to not offer inducements of any kind for referrals.
However, there is something you can do, which is actually much more effective.
And, we’ll discuss that in the next post.
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That isn’t just your opinion Bob, statistics prove it – so clearly that the major pharma company that paid large coin for my co-author to do a large parallel study with 8 billion data points in each set rejected the findings. Paying and creating obligation/bias was (and is) a major component of their corporate “values”.
Speak up loud and strong on this point, I think it makes the world a better place (and will get more valuable referrals shared, that prospers everyone).
Hi Bob. Great post! My clothing business is 100% referral based so I truly appreciate and agree with your thoughts. Every once in awhile I have been asked for “clothing credit” in exchange for referrals….OR I have been asked “what do I get in exchange for the referrals I give you?”. I say no to the clothing credit. In reponse to the second “what do I get….”, I SAY “I will give you super excpetional service like I do with all my clients”! Moving forward, I should give them a copy of one or all of your books (as a gift, of course… NOT in exchcange for referrals!). Warm regards…. Make it a great day!
This is a great viewpoint, Bob, and I always appreciate reading your take on issues like these.
But one question I would love to get your thoughts on – formal Affiliate Programs. We have one for our 12 Minute Marketing product, and we have aimed to be as “buttoned up” as we possibly can with it.
It has actually helped with the “weeding out” process, as well…since, to join the Affiliate Program, you have to buy the product (which helps you become a better marketer), you’re less likely to recommend it to people if you don’t believe in it. And we can’t believe that you believe in it if you haven’t taken a look at it and started using it first.
(And we would of course take referrals from those who don’t want or need to join the Affiliate Program.)
The question is whether a formal program like this is one that you think is a good idea, or if these sorts of things don’t jive with your philosophy.
(NO, I’m not trying to recruit you to join the Affiliate Program. But I would love to hear what you think.)
Cheers,
Dave
Hi Dave, you bring up a great point, and in today’s world of online, affiliate marketing I should have mentioned it. To not have mentioned it is obviously confusing. The context of the article was not formal affiliate marketing . I think that people who buy from affiliates know that they are affiliates…basically resellers of that particular product or service. Please forgive my not thinking to acknowledge that.
No worries, Bob. But you did get me thinking, which is the whole point, right?
In the context you’re talking about, though, I think you are spot on: If you tell someone “listen to Dave speak, he’s awesome” that’s one thing…if you do that with the hopes that I come back to you with a $50 bill, then the process is cheapened considerably.
I sat down for coffee once with a highly networked friend; the friend fielded a phone call and I heard him say “I don’t want anything for this referral – I just want you to do the best possible job for these people and make them happy that they work with you.” That’s the sort of thing you’re talking about, I’m sure…
Thank you, Kathryn. Coming from you, that’s indeed great to know!
{Note: Kathryn is coauthor with Scott Degraffenreld http://www.superchargedreferrals.com/}
Bob, this post was VERY helpful and timely. I’ve been thinking about this topic lately as I get a lot of referrals in my business and wondered if I should be offering something in return other than a heartfelt thank you. I’m hoping your next blog topic is how to properly thank those who are sending you good referrals. Thanks as always, Bob!
Thank you, Kim. And, yes, we’ll be discussing that next.
Bob,
Great post. Daniel Pink explains intrinsic vs extrinsic motivation in his book ‘Drive’ and it provided awesome insight into why intrinsic motivation sustains great referral relationships far longer than referral fees. Also avoids the inherent conflict of interest in paying referral fees.
Keep up the great work!
Bteandan
Thank you, Breandan; very appreciated. Thank you for sharing!
LOL. That’s awesome, Mary. And I guarantee they respect you more for not allowing yourself to be manipulated like that! Excellent response!
Bob, another great post! The key is doing amazing work and delivering legendary service- that way people WANT to refer you and are excited about what you did for them. The “want to” referrals will always carry more emotion and commitment than referrals that were paid for.
Excellent, as always, Bob. I will take this to heart (and wait patiently for your next post) as I definitely struggle with how to say Thank you for referrals. One person, in particular who has indirectly (friends/referrals from his referrals) sent me many thousands of dollars worth of business through the years.
PS. I love Mary’s idea, yet I’ve already given him 3 of your books, so other ideas are greatly appreciated. 🙂
Thank you, Susan. I certainly agree!
Linda, thank you. You’ll find tomorrow’s post to be quite simple and easy to apply. I’m sure you do much of it, already and – knowing you as I do – a lot better than you think you do! 🙂 BTW, I loved your blog post again today. WOW! bit.ly/nxZXhE
Your posts always make great points and often stir great memories.
For instance, I got my start in marketing and sales when I *proclaimed myself* Admissions Director for my former instructor’s martial arts academy to help it grow. Referrals became a pretty big deal in that academy – after getting serious about marketing I worked to position ours as a very exclusive academy and that you had to be referred to in order to get in.
Prior to that time, we did what a lot of other schools would do – offer incentives like a uniform, equipment, private lessons. We even ran contests. Such methods resulted in very few referrals actually generated.
I realized later that the best way to motivate our member-families on referring was to illustrate the benefit to both the referring party and the referred party. For example, that enrolling with a friend would calm any anxieties a new student might have about starting a new activity as well as make it easier – even more fun – to stick with. Further, the referring party was in actuality doing something nice for someone else by introducing them to a really healthy activity (physically, mentally, emotionally, and socially). A fact I was sure to remind them of.
After all that, however, in keeping with just plain old human decency and kindness, no referral went without at least a thank you card sent to the member-family’s home in the mail.
Marc, your entire comment was wonderful teaching covering all the best aspects of marketing and referral-based marketing. Thank you for sharing that with us!!
Thank you, Dave. I agree with you. And, I LOVE the story about your friend who fielded the call during coffee. He’s creating a bigger pie (perhaps, even coffee and pie) 🙂 for everyone; the person he referred, the customer, and I have no doubt for himself. Thank you for sharing that.
Excellent points, Bob… both in your article in the comments. 🙂
I’d love to know your opinion of something similar but different — offering a small gift (perhaps a $5 Starbucks card) as a thank-you for posting an online review/rating (regardless of whether that review is negative or positive).
Spot on, Bob. I was offered a $100 referral fee from a window company I had referred to my cousin. Instead I asked them to give the cousin a $100 discount on their purchase. My cousin thought that was great, I felt good for not taking a “bribe”, and they got more business from me and my cousin! And yes, thank you cards are always, always, always the right thing to do. Include 2 business cards, one for them and one to give to someone else! Remember to say that, so they pass it on!!
Looking forward to tomorrow’s message!!
Thanks for another great post…. and it made me think of that wonderful online publishing phenomenon. “Buy my info product, normally selling for $5,000 for only $9…. AND get $750,000 worth of bonuses. ‘Cause you’re special.” It destroys credibility and is insulting to the customer. 🙁
Hi Bonnie, long time since we’ve seen you here. Welcome back. Regarding your thought, if it’s offering it to them “in order for them to post” then I would advise against it.
Great idea Beth, regarding what you did with the referral suggestion. You created a win for all. Regarding the thank you cards, absolutely yes on sending a thank you note. However, I might not be totally in agreement with the entire suggestion (which certainly doesn’t mean I’m right, of course). In my opinion, a thank you note should simply be a thank you note; not a *direct* request for another referral. More to come in next post. 🙂
Andrea: Don’t forget the free Ginzu Knife. 😉
I’ve been back and forth debating on the virtues of referral fees. When you are selling a service globally online the admin of it gets even more complex. Buying referrals just seems to not fit our values, even though some companies “seem” to have a lot of success.
My conclusion, the effort to setup the referral pay out system would be better spent creating additional remarkable value for customers.
Thanks for closing this off for me.
Thank you, Doug. I hadn’t even thought of it in that context. Thank you for bringing that up.
Great job Bob. This makes perfect sense. What I normally do, is after I get a referral is send a thank you and maybe a small gift. But I never announce it or ask for the bribe like you say. Thanks for putting into words what I have felt all these years.
Awesome, Michael. And thank YOU.
Great Post Bob……
Thank you, Gaurav. Great to see you!
I so very much agree with you. I am in a program that pays $1,000 for a referral, after the referral buys into the program. Since I have a few people who I want to refer to the program, I was forced to take a look at the situation. I have decided that when I do refer a person, I will tell them about me being paid $1,000 and will give the money to them. So in the end, I will be referring them to a great program (and did I say great? It’s awesome) and next I will be giving them a $1,000 gift after they join. Bob, if you can think of a kinder way to handle this, will you let me know?