Paying For Referrals?

cbtexas

What do you guys think of paying your customer say 25.00 for each referral that generates a job for you? I know you should ask your customers for referrals, but I am thinking some benefit for them would cause them to provide more and higher quality referrals. Not just giving some name to get you out the door. They might be inclined to dig deeper into their network of friends, relatives, and co-workers and really recommend your work if they get additional compensation down the road. What say you? Ask them when you leave the job or call you with a name. If you get the job and only if you get the job, then immediatly cut them a check for the name they gave.

CB

ron schenker

Put yourself in their shoes for a minute. How would you feel if a contractor cut you a $25 cheque for a referral. What if the referral was for a $120,000 addition, or a $300 bedroom paint job. I think a referral comes from a satisfied client that is happy to spread your good name around. If you do pay something maybe offer them a discount on the next job you do for them or send them a real nice gift basket or potted plant or something along those lines. I think $25 is a waste of money.

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ModernStyle

I give out gift certificates for restraunts for referrals once the job is complete and i have been paid. The size of the gift certificate and the type of restraunt depend on how big the job was. Sometimes I am refered to customers by my paint supplier, when that happens i buy lunch for all of the employees there.
Its pretty much some of the cheapest advertising you will find. It amazes me that alot of contractors dont seem to apperciate the people who are giving them referrals, it would never cross their mind to give someone something for doing them a favor. The guy I used to work for would have never considered buying an employee of a paint store lunch, that would be considered throwing money away. He would expect the referral and say that they owed him for all the money he spends at the store, as though he was the only painter who ever purchased things there.
Alot of people are not allowed to accept cash for referrals so the food thing works out alot better for me, but I would do cash if I needed to.

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cbtexas

I thought about the different job levels that you may get from each previous customer. I would feel funny giving a previous guy different amounts for two different referrals because it would seem like one is appreciated more than the other. I don't like the discount idea as much because I want him to be a silent salesman for me. Aka cheap advertising. I want him to sell as refer as many people as he can so he probably doesn't need 10 discounts or 10 potted plants, or even 10 gift baskets. He probably could use 25.00 each time or 10 different gift certificates to take his family out to eat. I agree that this is some of the cheapest advertising you can do because it only cost you when you land a job from it. I don't know why more people don't use this method.

dirt diggler

i've thought about it - and talked with people about this - and I've decided never to do it

I'm totally with Ron Shenker on this ---

i'd be pretty insulted getting $25 for a 120K addition ... imagine what someone would feel that CAN afford a 120K addition

kinda tacky as well

I think a simple "thank you" is more professional

TNGHomes

I made the mistake two months ago to give a guy a stipend for a sucsessfull lead on a medium sized job. Now he is trying to whore me out to everyone he knows that needs any kind of repairs....(I dont need calls for door knob replacements or bathroom mirror hanging) and he's telling people "he does great work and cheap" I'll never pay on a lead again as said above a simple thank you would have been better.

dougchips

Hey do you still have the pennies in your loafers?

You can give more than $25. Lets say that you did a 50k pool for Bob and he tells his friend Joe about you. Joe wants a 60k pool, really the $ does not matter. Lets say that Joe and Bob play golf (thats what men do). How about a nice gift card for a round of golf for two with a cart and a gift card for lunch and a few beers? If Sally and Sue play golf pay for a foursome.

End results;

=They might think that you really appreciate their business.

=They might tell their friends and co-workers about the pool guy that bought them a nice round of golf.

= Whatever you do will be cheaper than the cost of an ad. Being honest with people also works--"My company loves repeat clients and clients that refer their friends, family and co-workers. When we run ads it cost us about $300 for each new customer. I could give ***media the $300 or as my way of saying thanks, here is a gift card for you and Joe so you folks can enjoy a round of golf on me.

If the job is small consider mini-golf and a gift card to Bruger King.

Or you could do your polite thank you thing and invest the $300 on a new set of wally-mart clubs for yourself.

my 2 pescos

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dirt diggler

oh i'd do something nice - im good about favors

but givin straight up cash/writing a check

tacky

POOLMANinCT

I have a customer that has brought
me about 100k in referrals in 2 seasons.
all good $$$$$ renovation work. I sent her passes to local amusement park for her family 4 kids her & hub, and a 100$ concession aka food certificate. when I closed her pool she said ty, and it wasn't necessary (they are loaded$$$$$$.)
she said she was just telling the truth, and helping her friends find
an outfit that will do a quality job. but said she had a great time at the park.

ray

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cbtexas

The straight up money may not be a good answer as people may feel insulted. A nice dinner for two may be better. Even better than a round of golf as everyone eats. A nice steakhouse dinner would be nice. It could even be a dinner for 4 so both couples could enjoy the benefit and possibly discuss who else they could promote you to.

Nice ideas Dougchips

POOLMANinCT

its not about money, its about the jesture...

and no I don't feel obligated to grease anybody, for telling the truth.

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......Less with the jaw & More with the paw.....

dirt diggler

EXACTLY

you can spend the money for the gesture

but to just straight up hand out money ... eh

dougchips

Here's a question, if someone keeps giving you more clients and you give them money or gifts to compensate them at what point do they need a 1099 or a W-2? I would assume that the IRS might show an interest if you paid one person $5000 and wrote if off as advertising. The person is really getting paid for providing a service. It would suck to have to call someone and tell them that you accountant wants you to 1099 them.

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Danahy

ditto.

I've even talked to a couple of customers, who said... I think people would rather you keep the $25, just make sure you give my friend the same level of service you gave me.

I won't do it, ever... maybe if something better came along, maybe, but not the money thing...

john elliott

I would never offer money or gifts for referrals. Here is the reason-

If I offer customer A an incentive for a referral, and he takes it, and I get customer B as a result, when I offer the same incentive to customer B he knows that customer A didn't refer me because he thought I would do a good job, but because of the incentive.
Customer A knows this, of course, and realises (unless he's stupid) that customer B will eventually find out about the incentive scheme
In my experience people are happy to refer good contractors to their friends without expectation of any kind of reward other than continuing good service

John

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RTRCon

Never sent out any $$ or gift cirts. for referals.. We have been invited to all kinds of "Oh were having a big party for all the subs when were done" parties.. Never been to one of those either, maybe they forgot .. Let your work get referals..