Business Payola - Keeping Your Referral Partners Motivated Can Be Tricky Business

When you get a referral, you may wonder what you can do to inspire the referral source to refer even more people to you. You'd think it would help if you rewarded them. And to a point that's true.  However, getting this one right can be trickier than it seems.

There are a number of factors that can make a big difference in terms of what will be appropriate and what will have the desired effect.  Get it wrong, and the reward can actually backfire, or it will just cost you and won't do you much good.

Here are some points to consider.

1) Consider your niche

The niche you and your referral partners are in will make a big difference.  If you are in the internet marketing niche, for example, it is not only acceptable but expected to pay commissions for referrals.  The difference lies in the percentage or amount of commissions, how soon it is paid, and whether to give any bonuses.

In fact, there are numerous internet marketers who have build their business on the concept of recommending products and services and collecting commissions.  This can be a win-win all around since their help with marketing can help boost the profits of products or services that otherwise would have found only a much smaller audience.

In some other niches, however, referring someone in exchange for money is frowned upon. And if you were provide a monetary reward, you'd likely cause offense rather than appreciation and increased efforts.

Remember this tip...  if you can't reward recognize!  Find ways to show your appreciation by recognizing someone for their referral. It could be as simple as a public mention in your ezine, newsletter or company bulletin board.

2) What kinds of rewards work well

Once again, you should be familiar with what is acceptable and appreciated in your niche.  Within these parameters, you could give the following:

Universal fit: Cash, cash equivalents such as Visa gift cards, and possibly store gift cards.

More personal:  store or restaurants gift cards or gift certificates, gift baskets, culinary gifts, magazine subscriptions, movie tickets, specialty food gifts, donation to their charity of choice,  and rebates for your own services (only if appropriate, and if it's something that the person would otherwise purchase anyway).

Even more personal: A dinner or lunch with you, tickets to a special event or sporting event, perhaps a round of golf - but only if they golf :o).

3) How much is enough (and not too much)

Most of the options above are very flexible when it comes to the question, "How much?"  Obviously, a commission based on a percentage could range from 10% and up. And a flat fee commission could be any amount.  Gift cards and gift certificates come in a wide price range.  Actual gifts can be small or huge.

So how much is enough, and how much would be too much?  This can be tricky, and several things need to be considered: like whether you commit to giving a specific gift or commission every time, and if not, what you will do for follow-up referrals to avoid disappointment. The Las Vegas style of random reward can easily backfire - if you provide a reward once but then not the next time that could be off putting to some.

As you can see, rewarding your referral partners or referral sources can be tricky.  Business owners in industries where they simply pay referrals are actually lucky since all they have to do is pay a commission. Imagine having to juggle gift baskets and tickets to baseball games and such.  And what's worse is that one person's treasure could be another person's disappointment.  And disappointing a referral partner or source is something you should definitely try to avoid.

An easy suggestion for people you're building an ongoing referral relationship with is to have an open and frank discussion so there's no room for confusion or disappointment. If a monetary reward is your choice finalize it in writing so there's misunderstanding or hard feelings.

But finally, the most important MUST do is make sure to thank your referral partners. Nothing is more special than a well thought out sincere, hand written note of thanks and appreciation.