Referrals - To Pay or Not to Pay
When I initially immigrated to New Zealand I was shocked to learn that over 80% of people found jobs through word of mouth. This incredible reliance on referrals and personal recommendation permeates Kiwi Society. For me, it has become my favourite form of marketing and of generating repeat sales. When people make a genuine recommendation we very rarely second guess or question what they've said as there is incredible power in someone's testimony of an experience. It is for this reason that referrals are so incredibly effective. We are the beneficiary of somebody else's ‘trusted relationship’.
The incredible effectiveness of testimonials and referrals create a temptation to offer to pay people to give you referrals and testimonials. It makes good business sense - a highly qualified lead requires less time and is more likely to convert to a sale because people come to you interested and believing you are a great option. Passion, belief and confidence are the 3 keys to selling anything and when your customer has had a great experience they can exude the 3 qualities resulting in their friends being almost sold on your product and or service due to this enthusiastically wrapped recommendation of a friend.
I have come across two recurring challenges when thinking about paying for referrals. 1) How much should you pay & 2) How do you overcome the feeling that people are just referring because they want the payment?
As a general rule, I have found that most Kiwis are happy to give a genuine referral without needing any form of compensation. In fact it feels wrong to get paid to refer and can put people off referring because they worry that if they were found referring for personal gain their friends might think less of them and think they were just doing it for personal benefit and gain. This does not mean one should not do it. It requires careful thought. Paying for referrals can work, especially when you're able to offer a substantial and/or meaningful reward - for example some housing companies pay $1,000 - $5000 for a successful referral. Obviously, this approach would be more challenging with high volume, low profit items e.g. A bakery or coffee shop. This does not exempt one from showing gratitude in practical ways - Some companies offer to fund a charity for referrals received, others “pay it forward”, some look for low cost & high perceived value (Motels offering free breakfast for the person referred and for the referrer on their next stay).
As a country we are blessed with incredible abundance and therefore much of the population are very happy with a simple thank you, an acknowledgement that they have taken the time and made the effort. Whether you're a business who likes to pay for leads in one way or another, or whether your approach will be one of a simple thank you, or maybe a handwritten note, the secret is to 1) ask for referrals 2) follow them up diligently & professionally and 3) thank people sincerely. These 3 elements will allow high quality leads to keep flowing into your business.
