Questions

Should we offer a referral bonus to my clients?

Our clients are dental clinics and a good new client spends $10k-$20k with us the first year. In this industry, word of mouth is very important for trust. We have personal relationships with each of our clients. There's one client who likes to nag a bit to get a lower price. I offered the client a 10% referral bonus but she said that she would refer us clients anyways without the fee. If we offer the bonus then it's not internally motivated and we feel like they are doing it for the money but not because of our good service and relationship they have with us.

4answers

I think you have your answer if clients are welling to refer without a fee. If there is a fundamental reason (for instance, you want to influence the pipeline for new prospects), then why don't you segment some of your clients and test the monetary referral aspect at a lower than intended rate. If you find the quality of prospects doesn't tarnish when doing so, you can release it out to all clients. However, if there is no effect or you are not getting the return from those prospects they refer - you can always discontinue the referral program (and go back to clients referring without a fee).

I think you will have a gut feeling + seeing the #'s if there are cases where clients are doing it for the money (i.e. prospect quality is down).

If this answer resonated with you - feel free to request a followup call.

Many thanks and good luck!


Answered 3 years ago

Every referral plan must consider three key components to drive desired results: 1) Profit Margin - your profit margin will determine if and how much referral incentive you are able to offer. 2) Referral Amount - I can't tell you how many times I have seen referral programs that monetarily are not worth the effort as a customer. 3) Ease of Use - How easy is it to retain the bonus? This a key driver driving behavior.

Hope this helped!


Answered 3 years ago

I'd say client referrals are different from resellers. Value Added Resellers are typically partners in adjacent markets that sell your product for a fee (typically 20%).

Client referrals should be free! If you have ever read the book Predictably Irrational, it mentions cases like this; studies have been shown that the intrinsic motivation (helping someone for free and feeling good about it) is a much more powerful motivator than actually getting paid for helping others.

Provided that you have strong relationships with your customers and they like your product, they should want to help you and their friends (helping their friends by telling them about your product!).


Answered 3 years ago

Hi, it has been my experience and observation over decades that humans sometimes keep good product and service knowledge to themselves. Here are a couple ways you can expand your referral network:
1. Client-based referrals Another form of compensation could be discounting services instead of paying a fee
2. Equipment manufacture reps could refer clinics to you for a commission


Answered 2 years ago

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