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Article Teaser: From time to time, a business owner will ask me whether it's ok to give customers cash payments in exchange for qualified referrals. It seems reasonable...

Keep reading below...

Why You DON'T Pay Cash for Referrals

Copyright (c) 2006-2017

From time to time, a business owner will ask me whether it's ok to give customers cash payments in exchange for qualified referrals.

It seems reasonable: companies pay their sales people to develop new business; aren't customers and colleagues who send referrals the equivalent of sales people?

The answer is NO because what motivates a sales person is entirely different from what motivates a referral source. And the source of motivation makes all the difference in the power of the sales message.

Sales people are motivated by money. I don't mean to imply that money is the only thing sales people care about. The good ones believe in their products and services and are jazzed by the idea of building a business. Still, if the money wasn't there, they'd go sell for someone else.

People make referrals because it makes them look good to others. When you solve someone's problem by referring them to a company whose products and solutions are a perfect fit, you have passed on a bit of "secret" information (they didn't know about the business after all) and you have enhanced your credibility and reputation.

This is what gives referrals such extraordinary power: someone is so certain the referred business will do a superb job that they are willing to put their reputation on the line. Indeed, they believe that giving the referral actually will IMPROVE their reputation. That's quite a testimonial.

When you pay someone for making a referral, you taint the motivation and they lose credibility as a referral source. Think about paid celebrity endorsements. You see a well-known actress touting exercise equipment on TV. Does she use that equipment? Probably not. It's more likely that she has a personal trainer and uses state of the art fitness equipment to remain a size 4. We assume she's doing the promotion because the company is paying her to do so.

On rare occasions, a cash gift might be appropriate, perhaps when it is entirely unexpected and is truly a gift. But as a policy, cash for referrals are a bad idea.


About The Author: Shop Amazon - Top Gift Ideas
Judy Murdoch helps small business owners create low-cost, effective marketing campaigns using word-of-mouth referrals, guerrilla marketing activities, and selected strategic alliances. To download a free copy of the workbook, "Where Does it Hurt? Marketing Solutions to the problems that Drive Your Customers Crazy!" go to http://www.judymurdoch.com/workbook.htm
You can contact Judy at 303-475-2015 or judy@judymurdoch.com

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Internal ID: #3696
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Total Views: 3082

Article Rating: 1.77 of 5
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