Monday, January 19, 2009

Referral Marketing - Why Incentive Schemes Don't Always Work

Those who know me well know that I like to swim to keep fit. Where possible I try to swim up to five times a week. I attend a health club close to where I live. The pool is based in a beautiful stately home with an 18 hole golf course in the grounds. It's an idyllic setting, somewhere you think people would be proud to be a member.

The Health Club, like many, is having a push for new members. Over the years they have offered various incentives to their existing members to refer them. These have ranged from free periods of membership and perks for their guests to iPods or pure cash incentives.

Few seem to have worked. At the moment they have resorted to direct mail to local households and people on their mailing list, offering free periods of membership and waiving registration fees to encourage people to join.

When many businesses recognise that referrals from existing clients are the most effective source of new business, why is it that their efforts are failing so visibly? This weekend might provide a clue.

I went along for a swim on both Saturday and Sunday. Unfortunately there was a problem with the boiler and the pool water was much colder than usual. Suffice it to say, I had a couple of 'refreshing' swims!

No problem with that you may think. After all, such things are bound to happen and they did post signs clearly stating, and apologising for, the problem. The trouble is, it wasn't an isolated problem. Two weeks ago the showers didn't work. Before that the spa wasn't working, the sauna was out of action, the steam room was shut.....

You probably get the picture.

On top of all of these malfunctions, the clock by the pool has been five minutes slow.....for at least three years. For a long time the clock outside the changing rooms had stopped, frequently the showers lack gel, the hand towel holder is empty. The majority of lockers don't have keys. All of these are tiny issues on their own, but add up to give a picture of a company that shows no care, and doesn't look after their customers.

Over my two visits at the weekend, I was party to four different conversations between Members criticising the way the Club is run. I hasten to say I didn't start any of them!

If you don't look after your customers, how can you possibly expect them to refer you? People are far more likely to spread bad news than good and it's more likely that they'll tell people how you're managing to get things wrong than refer you just to get an iPod.

If you want people to refer you, you need to give them something positive to talk about. Something so good, it gives them a story. You need to substantially exceed their expectations. You can start by getting the simple things right.

If you fail their expectations at all, they'll be talking about you anyway, and not just among themselves. It just won't be what you'd want to hear.


  1. Totally agree with you Andy !

    I would also like to add that incentive schemes in general work for commodoties, but not for higher priced products or services where a relationship between people is involved.

    On the contrary, many times people who are offered an incentive feel "bribed" and are more hesitant to refer people.

    Have a great networking day !


    Jan Vermeiren, Founder of Networking Coach (

  2. Thanks for your comment Jan.

    You are spot on. Too many people immediately reach for financial incentives when they not only aren't necessary but can be counter-productive.

    Not everyone is motivated purely by financial greed. I do think that the current economic climate will, however, lead to more people accepting cash incentives.