Jacky Sherman

The Consultant's Consultant

07970 638857


3 Reasons Not To Offer Financial Incentives For Referrals

Success and business should flow between you ...



When I'm out networking, I often hear people make their pitch and ask for referrals by offering a financial incentive. Here are three very good reasons to avoid falling into this trap ...

Avoid offering financial incentives in return for referrals!

Avoid offering financial incentives in return for referrals!

copyright: konstantynov / 123rf stock photo

We've all heard them: "I'm offering £XXX for any referrals you make to me". This immediately shows a lack of understanding of what referral marketing is all about.

Here's why:

  1. It can damage your relationship with your client

    Let's take an example: If I say to you, "I know someone who is perfect for helping you with that. What I like about him is (add a testimonial). Would you like to meet him?"

    What if I was to say to you, "I know someone who is perfect for helping you with that. What I like about him is (add a testimonial). By the way he is paying me £XXX to introduce you. Would you like to meet him?"

    Now the client is unclear whether you want to help them or just want to help yourself. If you're thinking that you wouldn't tell your client that you have this financial arrangement, imagine what they will think if and when they find out, especially if there are problems down the line.

    I'll leave the lawyers to fill in the details.

  2. It can damage your relationship with your introducer

    I've written about this before. If the incentive was to receive money as a result for introducing you, then your introducer may look carefully at how much you are earning as a result of his referral. Suddenly, you're in a tit-for-tat arrangement with all sort of ramifications and opportunities for mistrust to emerge.

    Alternatively, what happens if you offer 5% commission and your competitor comes along and offers 10%?

  3. It costs you money you would not have to spend if you just reciprocated

    For many people, it means they don't have to spend time investing in the relationship and looking for ways to reciprocate. In particular, it lets you off the hook in finding introductions for them in return. Surely referring them to their ideal client is a much better incentive?

    Firstly, from a financial viewpoint, the lifetime value of that client is likely to be higher than the commission you pay them. Secondly, it costs you nothing other than a few phone calls and maybe a joint meeting. Thirdly, you get a burst of the feel good factor as your relationship with your referral partner deepens as you demonstrate an interest in each other's businesses; success and business flow regularly between you.

    After all, the more successful your partner is the more likely they are going to be to be able to refer you and vice versa.

This doesn't mean you shouldn't reward people for introducing you, but there are so many more ways of doing this that are more meaningful than just handing over some cash!

"More on reward strategies another time!"

Do you want to know more about building reciprocal relationships that lead to both of you growing through referrals? Call me on 07970 638857 or click here to send me an email enquiry and let's see how I can help you.

Until next time ...


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07970 638857