Is Offering Incentives for Referrals A Good Practice?

 

Offering incentives for referrals can be tricky, and the practice has a fair share of critics. One of those is Paul McCord, sales manager and author. In a recent post on his blog, he notes that firms with an effective referral generation process shouldn’t need to offer incentives. But, if done correctly, incentives can be successful. The issue, according to McCord, is that crafting an ethical and effective referral process is difficult and very time consuming.

When offering referrals, McCord writes that salespeople most commonly make the following mistakes:

•    The incentive is not an incentive, it’s a bribe—a sizable chunk of money, at least in relation to the cost/value of their product or service, in the hopes of getting referrals.
•    The incentive is not an incentive, it’s a come-on—it is nothing more than a discount for their own products or services, which many clients see as nothing more than another way for the salesperson to get more business from the client.
•    The incentive has limited appeal.  For instance, they’ll give a $10 gift card to Starbucks or coupon for a car wash.  That is, an incentive given to everyone but with limited appeal.

Have you found yourself or company falling into these familiar pitfalls? If so, click here to read McCord’s entire take on incentives and what he believes is the “key” to an effective program.