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Referrals in the Real World

The best way to get on in the world is to make people believe it's to their advantage to help you.
--Jean de La Bruyere (17th century French writer)

Every IP loves referrals. What's not to love? When you sell by referral, you can cool it on cold calls and beef up your business by rousing your friends and neighbors, clients and colleagues to sing your praises and toss out your business cards like flower girls on speed. One recommendation propels you to another, and then another; maybe you'll even sweeten the deal by throwing in a thank-you gift or cash reward for each referral that comes your way. As long as every link in this marketing chain is solid, everybody wins -- or so goes the theory.

I agree with the experts when they say that getting other people to chinwag on your behalf is a first-class sales tool. What gets lost in this good old Rolodex shuffle, however, is the plain fact that business relationships link people together, not just their PalmPilots, and people have a way of messing up perfect plans with their imperfect perceptions. Don't look now, but when human foibles come into play, nothing goes by the book.

Take the popular suggestion that a can't-miss way to get people to talk you up is to pay a commission for leads that turn into actual business. If a hot referral turns into a chunk of business that's worth, say, $2,500, you'd pay your bounty hunter $250. The 10-percent finder's fee is meant to be a nice gesture that impresses people and builds tons of goodwill (not to mention your business), but incentives, even generous ones, can boomerang, big time. Holy mackerel, can they ever.

Recently I referred a colleague (whose work I enthusiastically admire) to a client who ended up hiring him. Well, good for him, I thought. End of chapter. But it turned out my colleague had a fee-for-referral thing going -- about which I was clueless -- which explains the $150 check he sent to me (10 percent of his fee for the gig) along with an effusive letter thanking me for my confidence in him. So now here's the weird-human-foible part. Getting that check was hugely unnerving; for a week I kept pushing it around on my desk. Every time I laid eyes on it I got this slimy greasy-palm feeling, which really started to creep me out. I mean, all I did was recommend this man for a job I knew he'd be good at -- something a friend would certainly do with no expectation of reward (except maybe a thank you). But perhaps he didn't see me as a friend? More of a contact? Or a carny barker? Well, that didn't feel real good, as if I'd just snagged an enormous tip, a prize you might bestow upon a waitress who got your eggs Benedict exactly right. And if I did cash his check, would that signify my tacit agreement to keep the referrals coming? Would he expect to be cut into the action if our roles were reversed, and he was the one recommending me? And what would it say if I never cashed the check? After a few weeks, I was up to here -- hand held at forehead level -- with this sort of obsessive overload: I took the infernal thing to the bank and swore (unsuccessfully) to forget about it.

The gesture that was supposed to do for our relationship what calcium does for bones ended up sapping it instead. Maybe this makes me a small, small person, but now I hesitate to recommend my colleague, good as he is, just to duck that whole dreaded dilemma. Sure, I could simply tell him to keep his 10 percent, but then we'd probably get stuck in one of those "No, you keep it," "No, you keep it" circles, which isn't a great way to do business. Mine isn't the sort of reaction that fans of the fee-for-referral fox-trot like to talk about, but guess what: it happens. My advice? Keep the cash and write a sincere thank-you note instead. Or send flowers, as my matchless picture framer did when I sent a customer to him. Nothing over-the-top, please. Just basic human decency, expressed by a modest gift that says, I appreciate you thinking of me.

Oh, don't get me wrong. I promise you that referrals can be a godsend, as long as you know when to challenge the conventional marketing wisdom and follow your own good sense. Here are some of the most blunderheaded bits of advice about referral marketing I've come across.

1. Unusual gestures generate a lot of goodwill and get customers talking about you.

Oh, yeah? To suggest, as one marketing maven did, that the best way to earn clients' referrals is to mail them lottery tickets or personalized T-shirts is abysmally silly. Plenty of clients won't accept any sort of gift, even a small one, lest it be construed as a bribe or a kickback. (Anyway, you don't really buy the idea that sending lottery tickets is the smartest way to win new business, do you?) There's an extravagant variation on this theme, one in which ambitious self-promoters are advised to put on a so-called "referral drive." The customer who brings you the most referrals during a certain period wins a serious cash award ($1,000). You're an IP, not PBS; skip the refer-a-thons.

2. Create special stationery for your referral sources and have them send a personal note.

A successful insurance agent floated this idea as a way to warm up a referral, and apparently it worked for him, but if you ask me, it verges on unethical. At the very least, it's ham-fisted, inappropriate, and presumptuous, even if you're well-acquainted with your referral source. Think about it for half a sec: you're being advised to hijack Joe Colleague's letterhead under the convenient guise of making it easy for Joe to refer you to his clients. Letterhead has clout -- it bears its owner's special imprimatur -- and the person whose name is engraved on it gets to make the rules about when to use it, nobody else. You can ask Joe C. if he'd be willing to write a personal note on your behalf, and you can even offer to write a draft to save Joe the trouble, but keep your paws off his letterhead. No exceptions.

3. Carry your colleagues' business cards, and when you meet someone who could use their products or services, hand out a card.

This is the cornerstone tenet of Business Network International, an organization devoted to furthering its members' businesses through word-of-mouth referrals. Founded in 1985 by Ivan R. Misner, BNI claims its members in 300 chapters nationwide conducted over a million referrals last year, which "generated millions of dollars' worth of business for each other! Some participants have added as many as 50 new clients in the first two years!" True, this system can work, as long as your card handouts are accompanied by a sincere personal comment about the good work of the person whose card you're passing along. It goes without saying that you'd better not be making that up -- a real referral requires you to know something about the person you're vouching for. But if you're dropping cards around town like confetti out a tenth-floor window, you're a royal pest, and will be dismissed as such.

4. When you send a thank-you gift to clients, follow up to make sure they've received them. That's the best time to ask for referrals.

Gifting is a tricky business anyway, infinitely worse when it looks as if the gift was presented mainly as a way to influence the recipient's conduct. That's practically the dictionary definition of "bribe." So if you're really only checking up on FedEx's on-time record, leave it at that. Never, ever, kid yourself into thinking that a gift can camouflage your real agenda. It'll blow up in your face.

Your best move in the long run is to learn how and when to ask for referrals from existing clients -- a task you should warm up to, unless you get a particular kick out of cold calling. Otherwise, there's only one overarching rule: ask for referrals after you've delivered real value and you know your clients are happy. If instead of asking, you get the feeling that the timing's wrong, it's because (a) you're right, it is a bad time, or (b) the timing's okay, but you wimped out. Let's face it, some clients never will give you referrals, and the right time never comes. You'll have to figure out who they are so as not to waste your time or annoy the clients. With everybody else, you've got some room to maneuver. Maybe your interpersonal skills need a brushup, or maybe your clients are truly happy but not very talkative. Either way, you have some work to do.

Remember that what counts, first and always, is that you respect your relationships. This is one of those rare instances where there's absolutely no middle ground. There's no such thing as half-respect: it's absurd. As with the whole of business, whenever and wherever it's conducted, referrals included -- relationships always rule. Ask permission before you drop a name, treat people with care, have a good time. You'll be fine.

We'd love to hear your feedback about this column, or put you in touch with Nancy K. Austin if you like. You may also like to see her biography.

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