Should You Pay for Referrals?

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Friday is “Question of the Week” day here at Duct Tape Marketing. Each Friday I’ll tackle a specific question I received via readers or in places where I’m speaking. Submit your question here and if we use it we’ll highlight you and send you a signed copy of Duct Tape Marketing.

referral gift
photo credit: Chris JL via photopin cc

This week I received what amounts to a two-part question about ways to motivate, incentivize and reward someone for sending your a referral.

Here’s the question: Should I reward my referrals sources with some sort of monetary incentive and if so should it only be for referrals that turn into customers?

So, here’s my two-part answer: I believe that the best referrals are made for social reasons and not financial reasons. Certainly if you’re selling a $19 item someone might tell their friends in order to get $5 referral fee, but beyond that, money changes the dynamic in a way that isn’t the healthiest.

I’ve always contended that the best reward for a referral is enormous appreciation. The way you pull that off is two-fold. First shower the person referred to you with a special experience. Then make your referral sources feel special by creating opportunities for them – build a referral club, give them surprises, give them access, give them community.

Now, for the second part of the question – a referral that doesn’t turn into a customer right away is still valuable. I’ve always advised people to come up with some way to show appreciation or reward for the referrals that don’t pan out. Send them a gift card, flowers, movie tickets or chocolate. As long as you keep that referral source motivated the next one and the next one will turn into your next great customer.


Question of the Week, Referral Marketing

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