We’ve long known word-of-mouth is a highly effective means of marketing. A November 2013 survey (granted, one conducted by the US Word of Mouth Association in conjunction with the American Marketing Association) found 64 percent of marketing executives believe WOM marketing is more effective than traditional forms.
Virtually every other researcher agrees: consumers are more willing to trust and act on recommendations from people they know than any other form of paid media.
The internet and social media are both well suited to WOM. Does anyone make travel plans nowadays without first consulting Trip Advisor? What’s great about sites like this one is they’re independent and any potential for bias is quashed by the volume of contributors. The sum of all WOM is what ultimately counts.
When WOM is one-on-one everything changes, not least being the weight of the recommendation as it’s presumably coming from someone you know and trust.
Businesses and business people are always recommending and referring each other. In professional services such as law and accounting, they’re often compelled to as conflicts (real, perceived or potential) are a fact of life. If these firms are smart, they’ll refer the work to someone they know can, and will, perform it really well without being a serious, longer-term threat.
This year I established my own marketing agency and it feels like I’ve suddenly become privy to (or perhaps more alert to) how many paid referral arrangements are out there.
Sticking with the professional services, it’s not uncommon for firms that have weak C-suite relationships to appoint an advisory board of heavy hitters. Advisory board members are typically paid a retainer to, among other things, make appearances at firm events, make introductions, and generally talk up the firm.
This is where it gets a bit murky to me. The disclosure might appear in fine print some place but I do question how anyone can maintain objectivity when money is changing hands. Are you recommending this firm because it is a leader in its field, and represents a good fit for my business and my situation? Or are you recommending it because you’re being paid to?
In my mind, there’s a fine line between a referral bonus or scheme, and being paid to spruik. I also consider those who have these arrangements in place have an obligation to disclose them whenever they make a recommendation. It should be the same duty of disclosure as company directors are subjected to.
I don’t see it happening.
Human capital services – basically, marketing-related recruitment – is one of the adjacent services I offer. It’s neither intended to be, nor likely to be, my agency’s biggest revenue earner but it’s a service I provide for clients that want to benefit from my network, and my experience in structuring and leading high performing marketing functions.
Of late, I’ve been approached by two prominent competitors in this space, each seeking to enter into an arrangement with me whereby I refer this category of work to them in exchange for a fee. And we’re not talking about a David Jones gift card here – more like a healthy four-figure payment per occasion. It’s a clever idea as it would remove me as a competitor, and increase the likelihood they will receive my referral.
Just as I am opposed to agencies adding a fee to third party costs (for example, a PR firm topping up a media trainer’s invoice) so, too, am I uncomfortable with these under-the-counter deals.
I can’t think of any company or individual who I would recommend without some sort of qualification. When I ask for a recommendation, I want to know it’s authentic, considered and unbiased, not the consequence of a kick-back.
If you feel the same way I do, next time you ask someone for a referral also ask whether they will benefit financially from you acting upon it. You can then consider the suitability of the recommendation in that context.