First off, let me say this. I delight in sending business my friends' and colleagues' way.
When I find brilliant, passionate people who love what they do—and do it so well—I can't wait to share the news with my clients.
And because I want to help those clients solve their peskiest problems, I'll even refer them to a—gasp!—"competitor" if I am convinced that they can fill a void I cannot.
But in the last six months, I've felt a new wind blowing in Referral Land. Well, maybe not new. Just different for me.
At Cat's Eye, people have been coming to us lately with "proposals."
"I'll send business your way for a 10 percent referral fee."
I want more business. We all want more business. But this whole referral thing can get complicated. Who gets what out of it? And whose needs should come first?
The 'Referral Triangle' (no, it's nowhere near Bermuda)
Okay all you visual learners out there, picture a triangle—one point at top, a point at each side.
AT THE TOP: The Client
Wants the highest quality product or service at the best price—from someone she can trust. Is concerned about whether the business making the referral has her best interests in mind.
ON ONE SIDE: The Referrer
In the best of worlds, just wants to help the client get what she needs. Also may be motivated by the referral fee he gets.
ON THE OTHER SIDE: The Person Getting the New Business
Wants the new business, of course. May or may not feel obligated to send new business the referrer's way. Might be concerned that he is paying for the referral—or not.
These three people, in some cases, have conflicting needs and priorities.
And the questions.
Does the money have anything to do with the decision to refer or not?
Does the referrer keep the 10 percent "finder's fee" or should she offer it to her client as a discount on the product or service? (Some people actually do this.)
Should you disclose to your client that you are getting a referral fee?
And if you do tell her, will she wonder if the other vendor/service provider inflated their price to cover the fee?
Does the business receiving the referral fee feel obligated to send a reciprocal referral along?
I have seen smart business people with amazing ethical standards on both sides of this issue—fee-based referrals and not.
What about you? Do you see any gray areas?
As the client, would you be bothered by the fact that your vendor or service provider made money in a referral transaction?
Would love to hear your thoughts below, in the comment box.
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