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Referral fees for a service based company... tantamount to bribery?

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Brendan Johnson
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Posted: 28th Aug 2009 - 16:39 Quote

You say 'bribery' like it's a BAD thing? Whatever works. "Lie, cheat, steal - as long as you keep your integrity" that's my motto!

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Posted: 29th Aug 2009 - 02:17 Quote

Great discussion everyone, I was half-afraid of getting flamed!

Although I like the idea of informal referrals based around relationships (like 4N), I am quite interested in getting work in specific fields... software in the scientific simulation vein (especially medical). While I might come across someone in that field through 4N, even with the "sell through the room principle" it seems a little hit and miss as a way to target quite specific areas... and I have no clue how to look for potential clients in said areas.

 

 

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Mike Morrison
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Posted: 29th Aug 2009 - 03:07 Quote

We deal with a steady volume of start-up businesses, and as part of the process we go through we set up free consultations with a whole bunch of people (accountants, solicitors, business banking etc). We've been offered 'kickbacks' or referral fees quite a few times - often because they felt they should be giving us something in return for the amount of new clients we were sending their way.

Each time we've refused.

End of the day, we don't want financial motives influencing who we refer our clients to - not only does that give us the freedom and flexibility to make sure we only refer to top drawer people (most of whom we've met through 4N), but I think it encourages reciprocity.

We don't pass referrals because we want a cut, or to build up favours to be cashed in, or because we're part of some archaic "networking" organisation who mandates that we do it - we pass them because it costs us nothing to do so, it helps our clients, improves our service offering, builds relationships with the business community, and makes us feel all sticky and warm inside.

Would you exchange that for a few quid thrown back your way?

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Posted: 29th Aug 2009 - 10:10 Quote

My mortgage advisor has what seems the best of both worlds. Some mortgage providers will pay him a commission if we pick their product, others won't. Regardless, he always recommends the best deal even if it means he gets no money at all for his time.

Slightly on a tangent, but one of the reasons we've recommended him to our friends and virtually everyone we know well seems to have used his company.

 

 

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X Member
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Posted: 29th Aug 2009 - 11:12 Quote
Quote (Insurance Broker):

We do have some paid introducers - they receive a share of the first year's income for a case.

I agree with Simon - as long its not costing the customer anything and is within our regulators rules then it can work well.

I concur with the above.

I will pay an introducers fee to like-minded professionals where their client clearly needs our services.

The integrity issue here is not adding that cost to our normal fees for the client to pay. Quite the reverse, often the introducer's fee is used to offset the client's fee at their end, so everyone wins.

An alternative is for roughly equal replication of referrals between the two parties over time, but to promise, say, five different Accountancy firms a steady stream of clients when clearly it is not going to happen seems far less honest/ethical than giving away a share of our profit at no cost to the client.

Mark

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Neil Capstick
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Posted: 29th Aug 2009 - 11:46 Quote
Quote:

Many companies offer referral bonuses if you recommend customers. I was wondering if this was a good business model. For instance if I said "if you get me in touch with someone and they use us for a project, we'll pay you 10% of gross profit of the first Ā£100k"... on one hand it sounds quite ok, commission based marketing of a sort. On the other it seems a little like bribery... pick my company and I'll make it worth your while. I suppose it depends who is getting the money - a 3rd party or someone working in the customer's business?

Apart from the fact it's not part of 4N's model (people give you leads because they like you and trust you are a good choice) what does anyone think? I've not come across it before, but then recruitment/marketing is not an area I know much about anyway.

Hi John

I have just offered a referral bonus exclusively to 4N members. I prefer to offer this because discretion and confidentiallity play a big part in what I do. So I am hoping that it will offer a confidential and discrete route to market for both the client and myself. I do undertake quite overt recruitment at times but a lot of the time when I am headhunting, the company wishes to remain anonymous. Some companies get quite paranoid about who knows that they are actively recruiting senior managers especially if they left "under a cloud". There can be an awful lot of cloak and dagger stuff!!

I am not attempting to bribe anyone to use my services over another (but you have made me think quite hard about it :) ) I am just trying to operate that side of my business with discretion. This presents me with a tension between offering a discrete service and getting enough clients.

I will monitor the success of the referral scheme and feedback to you but I would also be very interested in anyone's ideas on how I can operate a discrete, confidential and highly personalised service without (potentially) losing some of my "invisiblilty". The success of this service is often helped by being under the radar.

Regards

Neil

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