Should You Pay People For Referrals?

how about offering gift vouchers to referral partners instead of a referral fee

I was talking to a friend about an article I read recently, debating whether or not it’s ethical to pay people who refer clients and customers to you.
Here’s the article, by Corinna Gordon-Barnes: http://youinspireme.co.uk/2011/icky-to-pay-referrals/

The verdict was left to Corinna’s subscribers, many of whom were of the opinion that it’s unwise to pay people for referrals, because it encourages them to refer you even if you’re not the best person for the job – just because they’re getting paid.

My views on the matter are slightly different.

On the one hand, I agree that a whole Affiliate Marketing industry has exploded as a result of people promoting products and services that they haven’t used themselves, simply for the purpose of earning money. And to me, that’s unethical.

However, as an Affiliate Marketer myself, I believe that affiliate marketing can be done ethically. Personally, I only promote people I know personally and/or whose products and services I have used myself in the past or would like to use in the future.

I would recommend these people even if I didn’t get paid for the referral – and sometimes do anyway.

As a receiver of referrals, I think it’s simply a nice thing to do, to show your appreciation when someone refers a client or customer to you. Especially if that person (or people) is one of their own tribe – one of their friends, a family member, or a client.

They are putting their own reputation on the line, by putting their trust in you to deliver the goods. Because they know you can.

If you feel uncomfortable giving referral partners a cash fee, how about sending them a gift voucher for the same amount – usually around 10% of the sale.

A friend of mine, who referred her friend to me for career coaching, was delighted when I sent her a gift voucher as a referral gift. “I’m going to spend it on something special for myself”, she said.

How great is that? I enjoyed giving her the gift, and she enjoyed receiving it.

You see, the fact is: if you refer someone to me, it means that I don’t have to spend money marketing myself to attract that client. You’ve saved me some money. So why wouldn’t I want to thank you for that?

What goes around comes around. As long as you’re being authentic – as long as you choose your referral partners carefully, so you know they have the best intentions in referring you – then I believe it’s perfectly acceptable for people to pay for referrals.

Do you agree or disagree? Please feel free to leave comments below!


About the author Julia Barnickle - The Quiet EntrepreneurJulia Barnickle is a film maker, photographer, artist and writer, and the founder of The Quiet Entrepreneur community for introverts in business. She offers visibility coaching to raise your online profile, and helps you create videos to promote and deliver your services.

Follow Julia on Instagram | Youtube | Twitter | or on her website.

4 comments… add one
  • Val Nelson

    Well said. I agree completely! I’m a connector type person so I love making custom referrals to the right match, and when people pay me a finders fee, it allows me to continue to spend time on this valuable service. Think of all the headaches people can avoid when they don’t have to make or receive a zillion calls to the wrong people. I cut out the blindness factor by connecting resources I have already assessed and built trust in. It’s a valuable service that deserves payment, and my referral network members are happy to pay for it. I only refer to the services I trust. Thank you.

    • Julia Barnickle

      Absolutely! That’s what I love about building a network of people I like and trust, Val. Thanks for commenting.

  • Julia, I think you’re right – on the whole, referrals are a positive force.

    Like you, I’m a Hostgator affiliate – in truth, I only just noticed your banner for them as I started writing. It’s a great example of a referral/affiliate program. I refer my clients to them because I know Hostgator won’t let my clients down; they’ve not let me down, ever.

    I also tell my clients that I get a referral fee and that, once they’ve enjoyed the benefits of this supplier’s services, they too can become an affiliate. HG has a generous and hugely popular affiliate system and it works because they offer a great service.

    Referral/affiliate systems encourage suppliers to do a great job. They also, as you’ve pointed out, ‘give back’ to customers who market their services.

    I encourage my own clients to reward referrers; I tell them that expecting customers to share/forward marketing collateral (emails/likes/follows) to friends without thanking them is icky, personally. A favour is a favour, but when it’s a business favour, a material ‘thank you’ is both fair and polite.

    Thanks for this article – you’ve raised some interesting, useful and very topical points.

    Simon

    • Julia Barnickle

      Thanks for your comments, Simon. It’s good to hear from a fellow Hostgator affiliate! I was so glad to have a reliable service, when I changed over to Hostgator after a couple of my websites got hacked on another hosting provider’s server.

      You make a good point about people sharing marketing colateral with friends – I suppose, in this age of “free”, it’s to be expected (sadly).

      Your website is fascinating, by the way – and I love the reasoning behind the name!

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