… that is the question. Or is the solution to this quandary more simple than I make it out to be?
Maybe. Nevertheless, I’m the type who likes to examine the reasons behind a decision. So, should you pay a referral fee? Let’s examine the pros and cons through scenarios.
Staples
After high school, while my friends went off to college, I unfavorably worked at Staples selling business machines – printers, computers, hard drives, and the works. Alas, this was not by choice; my parents coaxed me to decline USC’s Marshall Business School Honors Program because … I don’t know why exactly.
Anyway, I did what any employee was hired to do – stand there, offer tidbits of advice, take 15-minute breaks, and stand some more. It was quite challenging … to stay awake.
About one week into my work, a Lexmark sales representative came to the store to talk about a new product line. Unfazed by the brand, I half-heartedly listened to the presentation.
It went something like, blah blah blah, blah blah … blah. “10% commission.”
My eyes stopped darting around the warehouse and sat my body straight. “How often do we get paid?” “… Wonderful. Write down every machine I sell and you’ll pay us at the end of the month. Got it.”
In less than a month, I sold so many machines that I had to attach an extra sheet for the commission sales list. I made more money selling machines than I did via salary, which wasn’t much to begin with. I was on a mission: to make enough money to woo Julie. Needless to say, mission accomplished. Thank you, Lexmark.
Apple
For the longest time, I was a huge PC nut. For those who didn’t know, I used to own two gaming cafes – the ones with large unilluminated rooms filled with gaming PCs and greasy boys. I even worked at UCLA’s IT department (all PCs) for two years to pay for college rent.
Then one day, I became a wedding photographer. Not wanting to be harpooned by my peers, I decided to buy a Mac Book Pro. It was the start of a beautiful relationship. Next came multiple iPods, numerous iPod Nanos, iMac, iPad, a few iPhones, and now Mac Book Air.
Additionally, if anyone asked me which product to buy, I always suggested Apple. And I don’t get a commission nor have stock shares in the company.
Referrals
I offered two scenarios from my life to express the possibilities of emblazoned enthusiasm; both of which probably made the aforementioned companies a lot of money.
This all ties back to the idea of market versus social norms. Staples was an example of market norm – I was paid to promote. Apple was an example of social norm – I promoted without pay. There are pros and cons for each scenario.
Pay Referral Fee | Market Norm (e.g., Staples)
| PRO | CON |
| Motivated by money, people will work hard to promote. However, there will be ulterior motives, thus less trust. | If money is inadequate or interest in brand wanes, people will cease to promote. |
Do Not Pay Referral Fee | Social Norm (e.g., Apple)
| PRO | CON |
| Brand evangelists do not need money to promote. They do it out of love. | You have to win their trust and love before they promote you. |
Unfortunately, to create brand evangelists is not that easy. I outlined 7-points in my upcoming book – Social Media Marketing for Digital Photographers.
Decisions
You have to ultimately pick one side. You can’t be both at the same time for the same situation. And it’s nearly impossible to switch back and forth. So, what will it be? You decide.
I told you it’s not so easy! Lastly, think long term.
If you’ve enjoyed this post, please share with your peers via social networks below. And comment one brand you’d gladly promote without pay (e.g., U2, Apple, Whole Foods, etc.).
Cheers,
Lawrence Chan
P.S. Julie and I have been dating for 8 years.
P.P.S. I’m going to watch Twilight Breaking Dawn Part 1 this Saturday. Exciting!
Image courtesy of Twilight
I’m a super fan of Chipotle and will promote it endlessly!
You and Julie are a cute couple!
I shamelessly promote my own photography and don’t pay referral fees….
I know that’s not what you meant…
Working on the principle of intermittent reinforcement I’m in the middle of an experiment to try to “grow” brand evangelists. Providing unadvertised gifts on a undetermined schedule to people who refer new clients is what I’m trying to do. In this way, my hope is that I’m reinforcing the behavior that I want to see from my past clients but they aren’t working towards that reward, their referrals a genuine because they don’t even know that a gift might becoming after the first or second referral.
That’s really clever. By disassociating gifts with referrals, it’s no longer an act of reciprocation. Rock on, Chris!
Turns out some of my education is actually paying off now, lol!
That is clever Chris… I always try to quietly reward my clients for referrals. I also promote referrals by always comping “something” to each client.
Thanks for sharing your thoughts. This is something I have wrestled with and as of yet have not offered any incentives for referrals. I lean towards gifting those clients that refer someone to me if I get the opportunity to work with them again. I do not have any problem talking up people that do good work for me. The good work received is ample reward. Likewise I hope to deliver something that moves my clients to talk about me in their circles.
It’s a good question to struggle with, thanks for bringing it up.
Check out Chris S.’s comment above; pretty neat – http://tofurious.com/marketing-tips/pros-cons-to-pay-referral-fee/comment-page-1/#comment-17733
“Decisions
You have to ultimately pick one side. You can’t be both at the same time for the same situation. And it’s nearly impossible to switch back and forth. So, what will it be? You decide.”
I don’t understand the (implied) choice, nor why it would be limited to only one or the other. The world is not black & white. What action are you asking us to choose?
Further, let’s consider the informed well reasoned customer or consumer. Will they not weigh the choices on their own merits, including the subjective factors?
You’re right about subjective. It’s up to the user to decide where to draw the line (even if it’s not clear, but clarity is better). For example, is bingo a social norm, even if it involves a super tiny cash prize?
It’s sort of like getting paid with kisses by a partner … gray area for sure – reciprocated services, but potentially social.
Lawrence,
Your article is rather vague, which turns it into sort of a ‘confirmation bias’.
Again: What action are you asking us to choose? Is this about buying an Apple or office machine, or about the wedding photography industry?
If the later – what practice do you adopt in your own business?
Please elaborate.
Yes, Apple all the way.
Hi Lawrence!
Long time reader, first time commenter :)
Just wanted to say that I REALLY love this article – I’m not a photographer, but as a business owner, your articles are always fascinating and relevant. As per your request for a brand I happily promote: I’m an overly-excited Apple supporter and have no qualms telling everyone I meet.
ALSO, congratulations on having such a great relationship with Julie! (I dated my husband for 9 years before taking the wedding plunge!) If you’re planning to get engaged at some point, I’d be happy to create her dream ring. Check here to learn why my business is different from “average” jewelry stores: http://www.VanessaNicole.com
Thanks for always providing great content! I LOVE your e-book, btw :)
~Vanessa Mitchell
Vanessa Nicole Jewels
Wow 9 years! That is something! By the way, very nice rings on your site. I like Megan Metts’s ring – http://www.vanessanicoleengagementrings.com/wp-content/uploads/2011/03/Facebook-Review-Megan-Metts.jpg
Not a fan of solitaires, but that looks elegantly simple.
Dude……….8 years? Put a ring on her finger and hire me to photograph it. :) Great article, thanks for the insights.
We still have some things to do before marriage … like motorcycles. :)
Hi Lawrence!!
I am such a fan! Love reading your posts! Love the way you think!
I just pre purchased your book!
Can’t wait to see that awesome amazon box on my doorstep!!!
Thanks so much for your insight! Love the way your brain works!!!
Glad you like the posts! Thanks for your support :) xoxo
Great thought provoking read, that is why I look forward to your emails! they dont “tell” me stuff I already know or have heard but ask questions and leave the answers up to my own thoughful speculation! very nice in an industry saturated with “how to’s”!!!!! Similar to Chris S., I offer a (hidden) client perks program, not one that is 100% advertised, but one that unfolds thru out the year. I run my client list from Jan – Dec and then the whole NEXT year, they receive perks from me. This includes, New Year’s Gifts (as a thank you for being my client in the previous year), free seasonal downloads (think valentines day cards for preschool/school exchange – I do primarily children and newborn photography, they LOVE custom downloadable “products ” with their kids pics to use thru out the year), special CLient-Only -Mini-Sessions, and a couple of random “drawings ” for a free gift or print product for past years clients. By the time I get half way through the year, man, they are LOVING their client perks AND shamelessly promoting me to their friends. They especially like this becasue they were not expecting it. I want my customers to feel like they paid for more than just a session and products, they bought into a “club” a “group”, ect! This is my second year to focus on this type of client care and it has been great! It is a wini-win for me because most of the perks they are receiving is serving a double purpose of advertising for me! Not to mention ALOT of repeat clients…..i mean, after all, they want to stay in the exclusive club!!! :-)
typo….”one that is NOT advertised”!!!!
This is such a hot topic, especially in Hawaii where 20% referral fees are the norm.
Oh that’s interesting! It is hard to teach old dogs new tricks, but worth an experiment if you’re game.
Great points, thanks. Would love to hear more about ieas on referrals for leads from other photographers and profressionals (peers) VS referrals from clients.
Thanks for some little nuggets of knowledge, i love checking out your stuff, i agree, i want people to refer us, because they love us, not because i’m paying them. something to shoot for in 2012. aloha