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The Soft White Underbelly of Referral Marketing

This post is a special Make a Referral Week guest post featuring education on the subject of referrals and word of mouth marketing and making 1000 referrals to 1000 small businesses – check it out at Make a Referral Week 2010

Not that I want to be a wet blanket during referral week, but sometimes there’s room for reminders when things are not necessarily all that rosy. I love referrals and referral marketing, and I believe in the cause of referral week. Still, it’s good to keep the full spectrum in the picture. There are some dangers there.

1. Don’t recommend without knowing who you’re recommending

Back in the early days of Palo Alto Software we included a list of business planning consultants on bplans.com, our free business planning resource. The listing was free for users and consultants, and we certainly had no resources to check and validate the information included. So we offered it as a useful resource to some with some obvious buyer beware and check references advisories.

One day eight years ago I got a call from somebody saying a consultant on that list had taken $3,000 from him and never completed a business plan. He was blaming us for listing the consultant. I knew nothing about him and next to nothing about the consultant. Although we had put everything we could on the site to make it clear we were listing, rather than recommending, how do you think I felt? How satisfied do you think our customer was to be told that using somebody on our list was his fault, not ours? Technically, we were right. Commercially, we lost a customer. And we didn’t know the people on the list. Bad move. Business mistake.

Another time I got a similar call from a different customer making almost the same complaint about a different consultant. That second time, unlike the first, I knew that consultant. He had done business planning for an old college friend of mine, and my friend was very happy with the results. He was involved with getting several of our bplans.com sample companies financed. He was a good professional consultant.

So this second time, I called the accused consultant. And he said he’d been trying to give the client back the initial money because he couldn’t stand working with him. The client, my friend said, had been exaggerating the truth in the plan, had “sketchy ethics,” and, in a nutshell, wasn’t somebody he wanted to work with. But the client wouldn’t take the money back, because he wanted the consultant to get him financed, not to give him the money back.

The second story was better than the first, but neither is much fun. We pulled the consultant listings off of bplans.com as a result.

2. Don’t risk dollars for nickels and dimes

The saving grace for us in both of the two stories above was that we weren’t taking any money. That makes a huge difference. When things go bad (and sometimes they do) your situation is way worse if you’ve been taking money for referrals. In that case, maybe you have legal language like disclaimers and all, so you might not be legally liable (I’m not an attorney, I don’t know).

I’m always amazed when I see experts whose time is worth hundreds of dollars per hour getting involved with small shares of add-on products worth a few extra dollars. Does it make sense to stake your professional reputation on what amounts to as much as a free lunch every so often? I don’t think so. I say recommend cleanly, without financial interest, to preserve your credibility as an expert.

3. Don’t call revenue sharing or comarketing referral business

I think this is basic ethics, and doesn’t need saying. Still, especially during referral week, let’s agree that when you get a cut or a commission that’s not a referral. That’s a revenue share or a sale. And it’s not fair to pretend you’re just recommending somebody out of good will or generosity.

Tim is the president and founder of Palo Alto Software, founder of bplans.com, and a co-founder of Borland International.

4 OpenForum Moves and Expands

One of the partnerships I’m most proud of is my long standing relationship with OPEN from American Express. I’ve said for so long that I believe OPEN is the entrepreneur of credit cards. I’ve been contributing content on the OPENForum content hub since it’s inception and this past week OPEN made a bold move to make the site even better by adding a networking feature that allows business owners to connect.

You’ll still find great content, in fact along with my regular contributions, I’ve been able to secure contributions for the marketing section from well-known experts such as Rohit Bhargava, author of Personality Not Included, Ann Handley, Chief Content Officer for Marketing Profs, Tim Berry, founder of Palo Alto Software, Susan Wilson Solovic, founder of SBTV.com, and Scott Ginsberg of Hello My Name is Scott fame. This line-up of pros will provide you with a one stop information shop to help you build your business.

Just this past week the site featured article on How to Use Social Media to Promote an Event, Pushing Information Out to Your Team, and Driving Your Business with a Higher Purpose.

The video below walks you through some of the highlights of the new site. Please come have look.

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14 Thinking of Starting a Business?

On Wednesday, May 20th at 9am PDT/Noon EDT I will be joined for a live webinar panel discussion by Ken Yancey, Jr, CEO of SCORE, Tim Berry, founder of Palo Alto Software, and Rich Sloan author of StartUpNation to talk about starting a business. Collectively, this group has poured over thousands of business plans, seen great successes and great failures and advises many a fledgling start-up on the strategies, resources and regulations involved in going out there on your own.

ken yancey jrtim berryrich sloan

Register for this session here

I believe that this might actually be one of the best times in history to start a business. If you need that little nudge or have decided to jump in with both feet, come learn from the pros how to do it right.

This is the fifth in a series of five webinars brought to you by HP, creators of MarketSplash and the Creative Studio – online tools to make your marketing simple, professional and affordable

Our discussion will center on the following, but we want to hear from you too. Come join us.

  • Why right now is a great time to start-up
  • Thrills and pitfalls of business ownership
  • Resources and regulations
  • How to find a big idea/innovation
  • Businesses to start right now
  • How to pitch for money
  • Marketing a start-up
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2 Back to Fundamentals Webinar

I’ve teamed up with my partners at Palo Alto Software to present a webinar for businesses interested in taking small action steps today that will pay off big tomorrow.

Simple Marketing Tactics That Pay Off Big in a Slumping Market is a free webinar scheduled for Wednesday, February 11th at 12 noon Central Standard Time.

I will touch on topics such as attracting all the clients your small business can handle, how to work with clients who value what you have to offer, and how to significantly increase what you charge for your services.

For more information and to register for this event

2 Social Media Systems Continued

Last week I wrote about my way to manage the social media beast and then asked other active social media folks to do that same. Today’s system overview comes by way of Tim Berry, founder of Palo Alto Software blogging at the Huffington Post. Tim’s take is affably title Down the Social Media Rabbit Hole

Tim’s take is so perfect – and one of the reasons I wanted to pursue this – take heart, Tim asks as many questions are proposes solutions and that’s the way most of us, even self or otherwise professed experts of this stuff feel.

For me, though, it’s not so systematic. In fact, my 18-month journey into the soft white underbelly of social media is more like delightful, alluring, distracting, disorderly chaos. I’m 61. If this post had a sound track, it would be White Rabbit, by Jefferson Airplane. In fact, I just put that onto iTunes, while I write this. ~ Tim Berry

Let’s keep this up – who else to we need to harass into sharing their system – have you shared your system?