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Offering clients a percentage of business they send me - Opinion?
Does it increase my business, cheapen my service, or scare my customers?
LABachlr




msg:787844
 9:34 am on Jan 15, 2003 (gmt 0)

I have company where I develop websites for actors, models, musicians, etc. I was wondering, if I were to offer my clients 10% of any business that they send my way, would that cheapen my service, make me look desperate, or just increase my bottom line?

For example, I have a client (an actress) who is going to the Sundance Film Festival, which everyone knows is huge. Do I offer her 10% of any business that she sends my way by mentioning my company to people, or should I just not say anything and hope that she just spreads the word on her own?

I also have a business on the side where I custom build computers for people, rebuild/upgrade/repair their present computer system, train people on computers, etc. I have offered clients 10% of business they send my way, but no one really took advantage of it. The only people that did take me up on it were my friends, but they didn't even want the money. They were just happy to send me business because I had given them such great deals.

There was even an instance where a client of mine had sent me business, so I called him up offering to send him money via paypal (as I had helped him sell stuff on ebay and new that he used the service), and he never gave me his new email address. I guess I scared him or something, but I was simply trying to show my appreciation. And I wasn't anxious or anything, just gave him a call and offered. He said that he would send me his new email address, but never did.

In any respect, what are your thoughts on the subject?

 

Woz




msg:787845
 9:48 am on Jan 15, 2003 (gmt 0)

I have done this with varying degrees of success in the past. Most of my work has/is for people who are/become friends, either before me doing work for them or as a result thereof, and they always seemed interested in helping to pass the word around as a result of that friendship. When I mentioned a possible bonus it was just that, a bonus for something they felt interested in doing anyway.

However, I did not offer a straight 10% for everything. Rather I offered 5% for a contact where I had to have meetings to "sell" the ideas, and 10% if they did most of the preperation which resulted in an order with little "selling" by myself.

Something for you to think about. These days client work is diminishing by choice for me so it is no longer an issue.

Onya
Woz

LABachlr




msg:787846
 10:01 am on Jan 15, 2003 (gmt 0)

Thanx for your thoughts. I am in the same situation in that the people that I do business with end up becoming friends of mine, and I find it difficult to charge full price to my friends.

However, they don't always become close friends. The actress who is going to Sundance, I am on a friendly basis with her, but I would not say that we are friends as such. And she is a somewhat shy girl, and may not feel comfortable mentioning my business with a monetary incentive, but may want to if it is based on her own motives. So, I am just not sure if I should get into the habit of offering a monetary incentive to any/all of my clients.

Woz




msg:787847
 10:04 am on Jan 15, 2003 (gmt 0)

>However, they don't always become close friends.

Likewise, there are friends, and then there are friends. I guess you have to go with gut instinct.

Onya
Woz

LABachlr




msg:787848
 10:17 am on Jan 15, 2003 (gmt 0)

I guess you're right...intuition is the key. I was just wondering how the majority of people would react to this offer.

Kieron




msg:787849
 11:18 am on Jan 15, 2003 (gmt 0)

I would NEVER offer clients a discount IF they send people my way. It sounds desperate on your part and is often embarrassing for the client.

People will be happy to refer others to you if your services are good and your prices reasonable.

I ask all new clients how they found me and, if they have been referred, I make a note to give the referrer a discount or something extra next time they come in as a "thank you".

(Note: GIVE the refer (no stings attached) --- not PROMISE the refer a discount IF, and only if, they do something for me.)

I also make sure I give the new client, special treatment. This makes the new client -- and the referrer -- happy.

Leave the commissions to professional sales people.
Kieron

LABachlr




msg:787850
 11:28 am on Jan 15, 2003 (gmt 0)

Your points are very valid. Especially the GIVE vs. PROMISE/IF...however...

I was just thinking of offering 10% off their next purchase with me for every client they refer to me. You say this sounds desperate, and I somewhat agreed, before I thought about it.

What about referral programs like Cingular Wireless has:

[refer.cingular.com...]

They give a $10 gift cert. for every person that you refer to them. That's pretty much the same thing. Does it seem different in the eyes of the client if the company that is offering it is a major company vs. a small business?

Kieron




msg:787851
 12:56 pm on Jan 15, 2003 (gmt 0)

Hi LABachir
The best thing to do when you still have doubts is to try it. You may get the odd person being referred to you for a discount… you simply have to decide whether its worth asking everyone and if its a good way to drum up serious business? You really have very little to lose.

The benefits of a big business doing this is
a) they usually focus on a product or service a large number of people buy or change regularly.

b) Referral schemes run by big companies are only small part of their total marketing strategy. They have little to loose by asking people (they have never met) f they want to earn a buck.

c) the big companies spend huge amounts of money and time pushing these referral schemes to millions of potential “partners”. With these numbers alone, its little wonder thousands of people (who where going to change anyway) took up the offer.

Anyway, whatever you decide, best of luck.
Kieron

yokelrobin




msg:787852
 1:04 pm on Jan 15, 2003 (gmt 0)

I would suggest something like sending them a bottle of wine. I know a SEO who gives a bottle of champagne to anyone who 'tells a friend' who then becomes a customer. Don't know how successful it is though...

Undead Hunter




msg:787853
 3:46 pm on Jan 15, 2003 (gmt 0)

Hey Yokelrobin, that was my first instinct, too. But that can be a really big faux pas with people who are recovering from alcoholism! And you never really know who has or hasn't...alcoholics are very very good at hiding it, which is part of the problem. Plus there are others who won't drink for religious reasons, or just general health reasons.

I've done some research on customer loyalty, Loyalty programs, and "generating buzz" - and the consensus is that many people feel "cheapened" when you offer them money to promote your services. It only works in some cases, in some industries.

But potential customers will believe the opinions of their friends and family far beyond any other method - albeit critical reports, media coverage, etc. If you're good, they'll *want* to talk your service up.

Again, salespeople are a different story. They want to make a living via comissions, and might not have a problem with it.

When our clients passed us on to others, we always called and thanked them personally. I'd recommend high-quality thank you cards over gifts. There is a kind of community feeling you can generate this way - like each of them are a member of a secret club where you get great value for your money.

Now I have a question for you, LABachlr - how'd you get such cooool clientele? And can you sticky me about what kind of costs these people would afford? No offense, but I always thought the vast majority of actors were too cash poor for web sites? Although I know what a great promotional tool it could be...

Travoli




msg:787854
 3:53 pm on Jan 15, 2003 (gmt 0)

I like the idea of sending them a "thank you" gift. At the end of a successful contract, you send over a couple of stainless steel coffee mugs (nice ones) or a cheese basket with a nice thank you card.

Not many companies go for that personal touch these days. Most clients would be delighted to receive a gift, and they will recommend you for free forever :)

jackofalltrades




msg:787855
 4:02 pm on Jan 15, 2003 (gmt 0)

Would you have the opportunity to have an informal chat with your client at any point?

Perhaps a phone call just asking how they like the site or if there is anything more you could do? I would take an opporunity such as this to casually mention that you would be grateful if they passed your details on to their colleagues.

If think anyone will appreciate that you are running a business and from my little experience in the industry it seems that the majority of actors/actoresses socialise in the same circles.

I wouldnt offer a %age tho.

Like others have mentioned, a personal gift is more appropriate for your client type.

JOAT

4eyes




msg:787856
 5:15 pm on Jan 15, 2003 (gmt 0)

My 2 cents

A percentage commission payment is fine.

Finding potential clients costs money - cold calling, advertising, whatever you do there is a cost.

A commission payment should reflect the saving you make in acquiring the business and your client will understand that.
You are not 'cheapening' your business, just being efficient.

Like Woz said, make the percentage fit the amount of time/money saved.

[added]
Will obviously vary depending on the market - don't know much about actors and the like, but a Local Radio DJ has had a few commission payments of us and brought us some nice clients:)

Undead Hunter




msg:787857
 7:07 pm on Jan 15, 2003 (gmt 0)

One more thought - here's some points & advice from Emmaneul Rosen's "The Anatomy of Buzz", pg 202, "Should I Give Incentives for Referrals?"

"The incentive should not be the main motivation...
people need to maintain their self-respect and their creditiability among their friends"

"Ask your customers what THEY think -
Scott Cook, the founder and chairman of Intuit, describes his experience: "We've tried various artifical stimulants to word of mouth, like financial incentives to recommenders. None have worked. Some produced isolated, but surprising, negative reaction - 'I don't sell my friends for a bit of cash...'"

it goes on to suggest that a "menu of items such as credit in the service dept, cookies, cash, movie tickets and so on might be better than offering just one type of incentive."

Advice to use at your own risk. It's a book well worth reading - I'm seeing the tactics in here being used now by record companies and the like.

4Eyes, I totally agree it doesn't cheapen your company, but it's possible it could make some customers feel cheapened, as in the example above.

4eyes




msg:787858
 9:38 pm on Jan 15, 2003 (gmt 0)

Undead Hunter,

That makes sense - I guess the best advice is 'know your customers' and work with what fits their profile - offer the incentive that best suits the client.

AmericanBulldog




msg:787859
 10:03 pm on Jan 15, 2003 (gmt 0)

I tend to agree with undead.

Having sold on straight commission for 17years, I can speak from direct experience. Very few will offer up their friends or associates for a bounty.

The best thing you can do is ask directly for referrals...
Dear _____ , Who else do you know who could use a site like yours? Do you mind if I give them a call?
Who at your acting class? Who at the rehearsal? etc...

When you do receive referrals follow up with a nice thank you card and an inexpensive gift as well as a personal call to thank them, and ask again for another referral.

Train your customers to look out for referrals in this way. Always ask at the end of every conversation, soon they will let you know before you ask.

LABachlr




msg:787860
 1:16 am on Jan 16, 2003 (gmt 0)

Kieron,

I agree. With larger companies, it is different. Cingular, for example, is selling an entirely different product...one that people can switch to at the click of a button...much like long distance companies. Doesn't really work well with websites.

One can offer a better deal to bring in business as a website developer, but offering to give a discount IF they get their friends, family, and whoever else they might meet, in on it is a whole different ballgame.

And Undead, I agree, as stated above...it only works on some individuals in some industries. With regards to my "Coool clientele", I just happen to be in a location (I'll give you one guess ;) ) where there are a lot of working actors. I'm not sure where you are located, but if it is not LA or NY, I can see why you would only associate actors with a less than substantial financial situation. Where I am located, it is quite the opposite. And with regards to what they can afford...the level of actors out here runs the gamut...from dirt poor...to filthy rich.

A thank you gift, like yokelrobin and Travoli suggested, may be an option. Maybe something entertainment related...movie tickets, concert tickets, etc. But I would not give them for every referral. Maybe just to those people who have referred more than a certain number of clients to my company. However, I would thank them after each new client.

And there is also the option, like Kieron said, if someone sends me a referral, to offer a discount on their next purchase with my company. That kills two birds with one stone. It gives them a form of compensation, and it gives me more business. However, I would only give it to them when they referred me new clients, and not "promise" it to them "only if" they get me new clients as Kieron pointed out. There is definitely a subtantial difference in perception based the the delivery of that offer.

And yes, JOAT, actors, actresses, and musicians definitely hang out together. That is why word of mouth is so important, and I do not want to cheapen it with an offer.

And I love the quotes that you mentioned, Undead:

"The incentive should not be the main motivation...
people need to maintain their self-respect and their creditiability among their friends"

"Ask your customers what THEY think" -
Scott Cook, the founder and chairman of Intuit, describes his experience: "We've tried various artifical stimulants to word of mouth, like financial incentives to recommenders. None have worked. Some produced isolated, but surprising, negative reaction - 'I don't sell my friends for a bit of cash...'"

And this one from AmericanBulldog:

Very few will offer up their friends or associates for a bounty.

Very true. I agree 100%. That is why I posted my question first before I did anything, and I am glad I did! It has helped me see my options in a very short period of time, and I thank you all.

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