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Offering a discount/payment for referrals

Offering a discount/payment for referrals

I have had a number of referrals from existing cients in the last few weeks. o date I have grown my business from Sales letters with follow up calls, a telemarketing campaign and a little networking.

This year I have joined a lunchtime BNI group and am going back to the sales letters and will have someone follow up with a call.

However, given my referrals from existing clients are growing, I was cnonsidering writting to all clients stating that if they referred me I would offer x amount per new client - do you think this is a good idea?

How else can I use my existing client base to help grow?

Thanks in advance for any advice

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19th Feb 2012 17:35

Do the best you can for them

Given the current fashion for getting everything (or anything) as quickly as possible my views might now be a bit out of date but in over 30 years I'd guess 98% of my new clients have come from referral and without any financial incentive, in fact I think it would cheapen me in their eyes if I started offering them £X,% or a Boots voucher.

If you have a sound client base with the sort of clients you would like more of then your best and most efficient marketing is to provide them with the best service you can, and drop a hint every now and then that you are on the look out for more business.

Think of it the other way around, if you found a great solicitor, builder or IT support company wouldn't you want to recommend them to friends & colleagues to help both of them out rather than because you were offered 5% off you bill the next time you used them?

Referred clients are the best because they are already 90% sold on you when they walk through the door and are more likely to be of the sort of quality as the person who pushed them your way.

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19th Feb 2012 20:56

Agreed

I agree with the last post.  When I first set up 2 years ago I offered a 10% discount off the next bill up to £50 for a referall.  I got 10 clients this way but mostly not terrific ones.  I stopped offering the discount when I'd built up more clients and since then referred client quality has gone up!

 

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21st Feb 2012 11:29

Says It All

Paul and @mr.mischief both hit the nail on the head.

Do you want clients who believe in you, who believe in what you believe?

Or do you want those who are out to make quick (small numbers of) bucks?

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21st Feb 2012 11:34

Who doesn't like to be thanked?

I have a different approach to the above comments.

Since beginning my practice, I have offered a 'commission' or thank you payment to existing clients who refer me new work.  I try to make it fairly generous as well.  I work on the basis that, if I receive a pre-sold new client from an existing client, and say that new fee is £1,000 a year, over five years it's £5,000.

 

If I then send a thank you cheque to my client for £100 they are normally really chuffed.  They may have just spent an hour telling their friend that we give a good service and for that effort they get a decent reward.  I have had some really good clients from this approach. 

Compare that to the £180 I spent on an advert ( I learnt my lesson!)  I didn't get one telephone call from the advert, what a waste.

By actually paying the money, rather than just giving a discount off their next bill, they 'feel' the benefit.

I believe it's a win win situation, my existing clients hopefully feel motivated to tell their friends, plus they get a nice cheque and I get a new client and only pay the money out on a definte new client, rather than spending out on say advertising which may never get any new work.

Anyway, I'm glad we have different opinions about this, otherwise we would all do the same things and that would be boring!

 

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By nickygl
25th Feb 2012 18:19

Gift

I also get the majority of new clients from client referrals. When I receive a referral I thank my client and usually send them either flowers or champagne, which usually goes down very well.

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07th Mar 2012 16:09

Hi Lorraine

Did you decide to offer discounts/incentives or are you still deciding?

I am tasked with coming up with some new marketing ideas for my firm to try and bring new business in.  One of my ideas is to offer a discount to our clients if they refer us and we take on a new client on the back of them referring us to them.  Most of our clients come from referrals anyway but I just thought maybe if we actually tried to encourage our present clients to recommend us and for that we would apply a '%' discount to their fee it might reap some reward.  At the moment we dont even ask clients to refer us, it just happens! so even if we just asked if clients could refer us it might be something it would certainly be more pro-active than at present.

I wasnt sure about the legal side of doing this but having visited the ICAEW site it appears there is nothing wrong with us doing this but we must be upfront about it.

I am still deliberating on this and whether to push forward with the idea or not so am also simply looking for peoples thoughts/opinions on it.

Thanks for your time.

 

Jon

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07th Mar 2012 16:33

Don't Give Away Money!

@Sloane Walker, Jon, Lorraine et al

Don't give away money!  It's the most costly thing you could give away.  Even the Chancellor can't get bulk discount from the Bank of England for money!

Instead, give away what costs you the least - Your services!  They are valued (or should be) at far more than it costs you to deliver them.

Keep your prices where they are and offer extra 'value' for free as a reward/incentive for providing referrals.

David Winch

Make Sales Without Selling and Get Paid What You're Worth

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07th Mar 2012 16:39

Hi David

I appreciate your feedback and what you are trying to say and I dare say my directors will say exactly the same thing. I was purely thinking (on basic and admittedly very simplistic terms!) if a client gives you a fee income of £250 say, he refers a new client and the fees are £1,000 say then even if you were to literally offer a 1 yr only discount of 25% of (say the lower fee), you've made money in the 1st year and then hopefully you've got the repeat business going forward.

Thanks

 

Jon

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09th Mar 2012 09:17

Or You Could Try ...

... offering the referrer an extra service, priced at approx 25% of their fee, that have said they want, for free!

Might you give this a go, Jon?

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By murphy1
09th Mar 2012 09:37

@David.....I like that idea as opposed to money, however, some of my clients would not need another service.

I have decided not to offer a discount in a formal manner, but do pass back a thank you for good referrals and I am now mentioning to clients that we are looking to grow the business and we would pass a comission back to the client. Without exception, any client I have spoken to has said they would not want/expect anythign back because they are so pleased with what we do that they are happy to refer.

I think there will always be a group of clients that are happy to refer and others who simply do not think to mention us, and it is that group that I will work on going forward.

 

Lorraine

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09th Mar 2012 10:58

Hi David

Sounds like a good idea but as Lorraine said the majority of our clients would not need an additional service over and above what we already provide.

Lorraine - good idea, hope you get lots of referrals from it!

 

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By JAADAMS
09th Mar 2012 11:20

A word of warning...

I would add a word of warning here. One of my clients is an IFA. He recommended me to a client of his and indeed the client has now become my client.

However, the IFA has not paid his last two invoices (yes, I know... I should have stopped doing any work for him some time ago - but that is another matter!).. when I asked him about my outstanding invoice his comment was along the lines of ‘I’ve given you clients - I’m entitled to an introductory commission deductible from my outstanding fee’.

 

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12th Mar 2012 12:07

He just sounds like a 'XXXXXXX' - fill in the blanks at your own discretion. I think someone like an IFA would realise that it works both ways, he can send clients your way and presumably you 'did' send clients his way? After all I cant offer financial services advice and always refer my clients to someone else for this but I dont expect a commission for it, I just trust that they will reciprocate and send relevant clients our way as well, and thats what happens. As its mutually beneficial a commission/discount isnt required in my opinion.

But to demand a 'introductory commission' on that basis is out of order in my book and unprofessional.

 

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12th Mar 2012 12:39

Just another thought ...

Jon, Lorraine

Is there not some other service which your clients need, even if you can't provide it right now?

Be creative!  You need a range of 'products' and I don't just mean different 'flavours of ice cream'. Bookkeeping, Accounts, Auditing are three obvious services you could offer, but is there nothing else?  Tax planning, personal wealth management, share portfolio advice ... You could expand this list far better than I could.

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