On our recent California trip, we struck up a conversation in a hotel lobby with a charter pilot. We talked a little about what he did and told him about what we were doing. Naturally, the topic of referral marketing came up.
When we explained the idea, he started to laugh.
“You guys should be talking to charter companies!” He said.
“I know, right? But why are you laughing?”
“Because some charter companies actively discourage referral marketing!”
“If a pilot like me knows somebody who wants to book a charter flight, I don’t refer him to my employer. I refer him to a broker.”
“Why wouldn’t you refer him to your own company? Don’t they want the business?”
“Oh, they probably do, but they don’t pay their pilots a commission or referral fee or anything. Most brokers will pay you a percentage as a referral fee, and they’ll probably give the flight to my company and I’ll end up flying those passengers anyway. So it’s in my best interest to refer them to a broker, who then refers them back to me.”
“So, your company pays the broker fees, but they wouldn’t pay an employee that brings them business for a referral directly?”
John and I looked at each other agape for most of a second.
“So, do all pilots handle referrals this way?”
“A lot of us do, yeah. It’s the best way to do it from our perspective.”
“Does your company know about this?”
“Probably. How could they not?”
Many companies find employee referrals extremely beneficial to their business. When handled correctly (not like the example above)
- Employees have the opportunity and motive to interact with customers and obtain referrals.
- Referred customers cost less to acquire (in marketing costs, salesperson time, broker fees and even phone bills)
- Referred customers are more likely to be satisfied with the service.
- Referred customers are more likely to provide additional referrals!
(Last three points are from Your Referral Engine by John Jansch)
Anyone have any idea why some companies fail to provide incentives for their employees to make referrals directly? Please leave a comment!