Thursday, November 12, 2009

How to pay for referrals

My column this week in the Financial Post provides a follow-up to my article two weeks earlier on referrals.

Reason: I had a fascinating note from Leonard Lee of Lee Valley Tools in response to the first column, and I wanted to let this legendary Canadian entrepreneur set the record straight in public.

Lee Valley put a lot of effort into learning how best to “encourage” satisfied customers to provide names of friends or colleagues who might be interested in his company’s products. But if you pay too much for referrals, the quality of those opportunities falls off fast.

Lee's solution: Lee Valley offered to give $5 to a charity (Nature Conservancy of Canada) for every name and address it received who ended up becoming a paying customer. As Mr.Lee points out, "This establishes a nebulous but real customer benefit, and forestalls someone sending us the Winnipeg telephone directory in hopes of earning a small fortune but at great waste to us.”

You can read the full column here:


J. B. Loewen said...

I ead this column last week, Rick. Great to get that level of response from such a notable entrepreneur.
It is a great topic. I give a lot of referrals but do not expect payment unless it has been agreed to before hand.
This is a good topic worth exploring more.

Gloria Hildebrandt said...

Thanks for this post. It has given us an idea to try ourselves. There is beauty and perhaps power in simple things.

Robyn Williams said...

I enjoyed this post. I thought the readers might appreciate this white paper which describes an interesting customer follow-up strategy which if done correctly can generate referrals. Below is a direct link to the white paper which bypasses the name and email collection web pages. This link should work until IT decides to change it.

- Robyn Williams