Rewarding Referrals: Industry Pros Weigh In
A DISTRIBUTOR ASKS: Someone referred to me a possible client and asked if I pay a referral fee. Nobody has ever asked me for a referral fee before and when I refer business to people, I never ask anyone to pay me. Do other distributors pay referral fees? If so, how do you calculate what that should be?
We have several referral partners including graphic designers, event planners and a large-format sign company. We give a 10-percent referral fee on the first three orders if we are to handle the client directly, and 10 percent of every sale if they will be dealing with the client themselves, even if we do the invoicing. The referral fee excludes setups and shipping. I have outlined the terms in writing, and when someone asks I send them our referral fee policy. This has worked really well for me.
Action Marketing Co.
In my promotional career I worked on the distributor side for over 11 years before joining the supplier side of the business. I have honestly never seen a money-based referral opportunity work in the long term in any capacity. We are in the relationship business and relationships that are based on squeezing every angle for profit and financial reward seem to cause resentment, take time to track, foster zero loyalty and limit the capacity of anyone bringing real value to the overall end goal.
Corporate Promotional Sales Manager
I actually run a program encouraging my clients to refer me for a gift. It’s a very ‘If I’ve done a good job for you’ type of thing, but it works. It’s called an incentive—to do something more than normal. The fee is a little different in that it’s cash. But I would draw the comparison to an ad agency bringing you their client and asking for a remittance. It’s appropriate in that case, and therefore can be appropriate in private cases. How much? I wouldn’t do a percentage. I would do what you think it’s worth. Move from the “fee” idea, to appreciation; from cash to gift. How much is that intro worth? A $100 gift card? A $500 gift card? In this case it’s a show of appreciation, not a pay for play. Both sides win.
WAYNE GREENBERG, MAS
JB of Florida, Inc./ A Division of Geiger
My Realtor clients often get and give referral fees; however, in the 30-plus years I’ve been in our industry, I’ve never been involved with referrals from or to other distributors. With that said, as I understand referral fees in real estate, it is a one-time fee, but in our industry giving someone a referral is actually giving them a client. That client could be with the distributor for months or years. So, with regard to referrals in this instance, would the referral fee be based on the first order only, or a fee for the entire time of service?
RICHARD A. DEBIASO
Richard’s Promotional Products
I have paid referral fees over the years as a general method to gain business. I have never paid more than $25 unless there was an implied agreement beforehand. Obviously, you don’t pay it until the deal is done and paid, and only pay based on your margin, not the gross.
GLEN D. ELEY
Eley Imprinted Products
Absolutely not! If someone referred you and your expertise to someone—that’s why we’re in business! Referrals are the golden fleece of our sales industry.
GARY M. MURPHY, CAS
If a friend asked for a referral fee, tell him you are going to take him and his wife out to a fine dinner as soon as the account pays their $500 bill. But, a true friend would not ask or expect a fee for helping a friend.
Mike Gordon Promotionals
Do You Have An Answer?
A Distributor Asks: I’m considering sending out a customer satisfaction survey to get some metrics for my business, to make sure I know about any issues or problems clients have experienced, and to gather positive feedback for testimonials on my website. For distributors who do these types of surveys, what kinds of questions do you ask and what service do you use for the survey?
What’s Your Answer? Email answers along with your name, title and company name by June 23 to Question@ppai.org for possible inclusion in an upcoming issue of PPB magazine.
Julie Richie is an Austin, Texas-based writer and former associate editor for PPB.