Paying for referrals

[onetech4all]

So I picked up this new idea from listening to some sales audio books about improving sales for your business. And the speaker mentioned "paying for referrals" and I mean paying in cash, not just with a coupon or some sort of discount, but hard cash or some sort of money order that is mailed to the customer. Basically, and just a ball park, it would be like $10 for residential and like $25 for a business referral that would be payed to a customer that refers business to me, payed to the customer after I get payed from the customer he/she referred.
So, I wanted to mention this idea in the community and see what kind of responses/ideas/critiques I get.

 

[jdpetrov]

I dunno about paying out cash for a referral.

Let's say you charge $60 per hour and you get 4 referrals from one person...they each net you 1 hour of labor...so $240 total.

If you pay out $10 cash to the referee, you are now at $200.

If you give the referee a $10 CREDIT towards their next appointment, they would get a $40 credit. The next time they come back to you, you NET $20 after the $40 credit. That brings you to $260.

So because you offered CREDIT instead of paying out actual cash, you made an extra $60. The referee still received the same $40 (as a discount instead of actual cash).

I can see how a straight $10 cash payment per referral would really attract referrals especially in this economy, but between the lesser income potential and (in my opinion) a "begging for customers" public image, I think a $10 credit per customer would be a much better option.

 

[SAG]

So because you offered CREDIT instead of paying out actual cash, you made an extra $60. The referee still received the same $40 (as a discount instead of actual cash).

I can see how a straight $10 cash payment per referral would really attract referrals especially in this economy, but between the lesser income potential and (in my opinion) a "begging for customers" public image, I think a $10 credit per customer would be a much better option.

And right here is a REALLY good answer to your question OP... at least in my opinion.
Give away service, not money.

jdpetro: Where in Michigan are you?

 

[acscva]

I just ordered some of these and plan to start this for my referral program.



Here is the my referral link if you would like to order some. They start at $14.99 for 100 of them.

http://www.realisticdropcard.com/?o=YMgqYm3K

 

[onetech4all]

I think a $10 credit per customer would be a much better option

- that's still giving up some of your money. You are now, not charging the customer what you are supposed to, but less, because of the credit you have to give out. Plus it makes the whole $10 credit, sort of a "virtual money" giveaway.
If I gave the customer $10 in cash, they can buy whatever they want with something like that. Plus, let's say that the referee does not own a computer, but cares about the cash for whatever purchase, well he/she can apply the money towards a much needed shopping.
By giving money away, either virtually, through some credit or hard cash, it's still an incentive, just that cash sure beats any virtual money anyone is giving away.
Just because someone chooses to "label" it as begging, does not mean it is. I see it as paying for a service and cash is king.
I wonder how successful this would be. I will try it out and possibly get back with some results.

 

[mraikes]

- ....snipped . . .
By giving money away, either virtually, through some credit or hard cash, it's still an incentive, just that cash sure beats any virtual money anyone is giving away.
Just because someone chooses to "label" it as begging, does not mean it is. I see it as paying for a service and cash is king.
I wonder how successful this would be. I will try it out and possibly get back with some results.

I have no problem with your idea. As someone that couldn't be moved to stand up from the couch on the basis of a "credit" I might receive somewhere, the idea of actual cash would stick in my mind.

The value of a real paying customer so far exceeds the $10 cost that it's absolutely ridiculous to moan about the loss of profit on ONE job. It shouldn't be about ONE job - if you're like me - over time that one job turns into a second and a third and . . . you know what I mean. The value of that $10 investment multiplies over time.

Would you invest $10 today to get one job immediately and say two more over the next year? Or even two years? I'd do that all day long.

Heck, now that I think about it - I'd happily pay $25 for a new, paying customer.

IMO, not only are referrals the best way to grow, but referred customers have different traits. Right off the bat, most aren't shopping around - they're coming to YOU. It's my experience that they tend to be easier to deal with, less picky and more accepting of your advice and suggestions. They're less concerned about cost (because they already believe it will be worthwhile). They're simply predisposed to WANT to be your customer.

Try it out - if it doesn't work, you're out almost nothing. If it works only a few times, you'll still be ahead and your customer base will have grown. If it's quite successful, someday you can invite us all out on your yacht for a TN party.

 

[onetech4all]

@mraikes - I bursted out laughing at the end of your post about the yacht and you are absolutely right about the cash.

I will try it out. I am working on putting together a postcard size printout to pass that around to random people in the street.

I also just called up some old customers from '09 and told them I was doing a follow up and checking whether they needed some computer work (had a lady complain about a Windows 8 laptop, but she is out of cash right now or for now ), asked and received a few emails to email info to them, and made them aware of my services and that I am still in business and I got a new cash for referrals program if they are interested.

I already have several things setup to bring in additional business. I run my business part-time and I want to go full time this year with the business. It has been my dream!

 

[acscva]

I did the total of sales broken down by each customer and how the customer heard about me for 2013. 70% of my business was from referrals. That is the main reason for starting to now offer some compensation to the people who are actually referring me new customers.

 

[aweston]

I did the total of sales broken down by each customer and how the customer heard about me for 2013. 70% of my business was from referrals. That is the main reason for starting to now offer some compensation to the people who are actually referring me new customers.

That doesn't make any sense. Why pay for something you already have? That's like buying the cow even though you're getting the milk for free.

I can tell you're not a very successful person, and I'd like you to be. Here's a $50 tip. One tip to being successful: be an excellent receiver.

When someone gives you something you say thank you and that's it. Why? Because any more than that and you're detracting from the value that they're giving. They're getting personal benefit from giving you something, whether that be a compliment, a referral or a cheque. It's making THEM feel good inside. Don't take that away from them.

 

[Mokester]

That doesn't make any sense. Why pay for something you already have? That's like buying the cow even though you're getting the milk for free.

I can tell you're not a very successful person, and I'd like you to be. Here's a $50 tip. One tip to being successful: be an excellent receiver.

When someone gives you something you say thank you and that's it. Why? Because any more than that and you're detracting from the value that they're giving. They're getting personal benefit from giving you something, whether that be a compliment, a referral or a cheque. It's making THEM feel good inside. Don't take that away from them.

Its called appreciation. Referals are the best sort of client...the FACT that 70% of his gross income is from referrals is outstanding...this proves to me that he is professional, effective, and above all...SUCCESSFUL. So I'd have to disagree with your off-the-cuff statement that you 'can tell' he isnt successful.

I WOULD caution that you need to watch the bottom line as this promotion will increase the cost of first time clients by $10 or whatever you choose to give. Make sure you are leaving yourself adequate margin, especially since you are now considering going full-time.

Whether you offer a referral program or not, you can be successful...different strokes for different folks.

 

[acscva]

That doesn't make any sense. Why pay for something you already have? That's like buying the cow even though you're getting the milk for free.

I can tell you're not a very successful person, and I'd like you to be. Here's a $50 tip. One tip to being successful: be an excellent receiver.

When someone gives you something you say thank you and that's it. Why? Because any more than that and you're detracting from the value that they're giving. They're getting personal benefit from giving you something, whether that be a compliment, a referral or a cheque. It's making THEM feel good inside. Don't take that away from them.

aweston,

I would beg to differ from your statement! I have been in the computer business for 27 years and have done sales of over 1.2 million in the past business location before selling that company book of business.

I have had several years of 6 figure income with having times with up to 10 employees! This new business the first year I am working solo and am on my way to 6 figure income already.

This new referral program is geared towards new customers to help them give referrals. I know this works as I learned this from someone that is doing over 2.5 million in sales but pays even a much higher referral but he is in a bigger city.

 

[aweston]

aweston,

I would beg to differ from your statement! I have been in the computer business for 27 years and have done sales of over 1.2 million in the past business location before selling that company book of business.

I have had several years of 6 figure income with having times with up to 10 employees! This new business the first year I am working solo and am on my way to 6 figure income already.

This new referral program is geared towards new customers to help them give referrals. I know this works as I learned this from someone that is doing over 2.5 million in sales but pays even a much higher referral but he is in a bigger city.

That's ok, but what if you could be doing a million a year or more? I'm thinking in much bigger terms.

Let me give you one more tip and if you still don't agree, that's fine, I'll bow out.

One tip for being successful: You NEVER pay for quality referrals. You earn them.

How? Part of that equation is ensuring that your clients leave with the same high they came in with the very first time you made contact with them.

The reason that I made the comment of being successful is that you can tell. Unsuccessful people think and speak differently than successful people. Unsuccessful people defend themselves while successful people listen.

I'll also ask you this. If you walk up to someone and say "I'm going to give you $50 for saying something nice about me" what do you think will happen? You'll probably get some half-arsed response like "Man, you're awesome. Gimme my $50". It's not going to do a whole lot for you, like any quick fix.

Now, walk up to another person and say "Give me $50 and I'm going to fix that computer like brand new". When they come to get it hand them a brand new computer with all their stuff on it and then say nothing. What do you think they're going to say? You're probably going to hear so many nice things you won't be able to squeeze your head through the door. New clients will be lined up down the street.

The difference is in the INTENT and MOTIVATION and as a result your EXPERIENCE will be vastly different.

 

[Mokester]

Man...tact my friend...no one is really arguing the validity of your point...just how you are saying it. Calling everyone 'unsuccessful' just because they do something that you don't believe has value is narrow minded, elitest and downright disrespectful.

Yes I understand and agree that you earn referrals...which this forum member does. The discussion regarding referral programs is as old as business itself. Works for some, for others it doesn't. Carbonite, bit defender, webroot, etc....almost all programs we use have a referral/affiliate program...I guess all those multi-million dollar companies are all unsuccessful as well?

To the OP...please post results...I hope this promotion works out for you! Goodluck on taking your business to the next level now that you are going to go full-time!

 

[acscva]

Everyone has different views of business.

I earn business from my customers but also like to reward them for referring me.

 

[cmonova]

@Shawn....I see absolutely nothing wrong with the certificates or giving $10 or whatever for a referral.....

@Aweston…"what if you could be doing a million a year or more"…What if? Sort of like your "One tip for being successful" comment….You said "You NEVER pay for quality referrals"…Well the same could be said for: You NEVER work for free…yet on your website you state "We Fix it or it's Free"….

Just because one biz owner does something that others may or may not do does not always mean it's right or wrong. Can't even count the number of times others have said to me "oh..that won't work"…or "we tried that and it did not work"…Well guess what….it worked….

Shawn and some other owners on this site i've known for quite sometime now and have come to find them not only tech savy but business proven..What I mean by that is there are many that talk the talk (even on this forum) but few have been as successful as these guys over time...

 

[onetech4all]

To the OP...please post results...I hope this promotion works out for you! Good luck on taking your business to the next level now that you are going to go full-time!

- I will give this at least a month. I will post results after one month. I just finished a little postcard sized printout, that I will give out to people in the street or high traffic places.

 

[aweston]

- I will give this at least a month. I will post results after one month. I just finished a little postcard sized printout, that I will give out to people in the street or high traffic places.

Keep us updated. Remember, I'm not saying it won't work. I'm saying there's more efficient and effective ways to spend your hard earned money.

 

[SVIT Ryan]

- I will give this at least a month. I will post results after one month. I just finished a little postcard sized printout, that I will give out to people in the street or high traffic places.

I'm curious how this has worked out for you so far as I am considering doing the same thing.