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Thread: How much would you pay or do you expect for referral fees?

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    Default How much would you pay or do you expect for referral fees?

    I guess referral fees (or kickbacks) are different in each industry. Some call it commission, affiliate payouts...but it's all the same.

    What do you guys consider an appropriate referral fee? Specifically how much of a percentage of the sale do you think is fair to payout to a referrer?

    As a referrer, what would you consider an appropriate percentage to receive?

    Does it make it easier to swallow when you know up front that all referrals from a certain place are going to be a certain amount kicked back, so that you can recoup or make up the cost ?

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    I'm also curious about this. I'm hoping to be able to set up some referral relationships this year and would love to know what people consider appropriate as far as referral fees.

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    the magical percent i dont mind paying is 10 percent

    for some people i pass leads back and forth and pay them nothing

    other times i give them a $100 gift certificate for a high end meal...if its a large enough project i take them out and typically drop $400+ for the meal

    when someone gives me a lead they always get a thank you phone call. If it turns into a job i get them something..these 'special' people always get plumbing fixtures from me at cost as a special benefit and sometimes i do the work for free also...

    bottom line...give them something and dont be cheap...for me giving $100 reward is nothing when you consider many of the projects are $3000-6000 range....when i get a $200 project i dont give anything except a thank you phone call...

    i use the 10 percent rule for everything i do advertising wise...i expect the phone book to get me 10x what i paid for it or any other forms of advertising.....my profit on remodeling is 20-30 percent, so giving 10 percent is right in line for my business....if your profit margin is lower then i wouldnt go that high

    people who send you leads/referrals are golden....treat them as good as you can...as long as they get something they all will keep sending business to you....ignore them or be cheap and they will find someone else to refer to.......the best gift you can give is a referral in return!!!!!

    one friend of mine gave me a lead and it ended up being a $42,000 job...10 percent of my yearly income from 1 job.....im taking her and a guest out next month for the most expensive meal of her life...the skies the limit for her...i will also be concentration on getting her a referral asap....i am buying a new sports car next month from that job alone!!!......referrals are awesome!!!
    Last edited by huggytree; 11-26-2010 at 09:14 PM.

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    I typically pay 10%-20% on any referral that comes in or I give them the equivalent in services.
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    I don't look at it as having a magical percent that's right. I see it as competition the same as most all aspects of business. If you offer 10 percent affiliate commission and another site offers 20 percent on a similarly priced and similar quality product which one would you expect me to promote?

    Same thing as a seller. If most others in the industry offer a 30 percent commission for the same or similar product then I figure I need to offer that same commission if I want people to promote my product.

    I'm using affiliate products here as an example, but it's the same for any commission on any product or service. One other consideration is your profit per sale and would you ultimately make more money by selling more for less profit or would you better selling fewer at a greater profit per unit. I don't think you can look at this simply as what's the single correct rate for commission.
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    I think you are looking at it backwards. I mean how much would you pay for a business referral? How much would you pay someone for selling your service? Or, if you were the one doing the referral, how much would you expect to receive?

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    i think the percent all depends on what your profit margin is....if its 100 percent or 10 percent the amount for the referral would be drastically different

    how much can you afford to give is the correct price

    how little can you give and get future referrals is also the correct price

    the sweet spot

    everyone has always been happy with my token $100 restaurant gift certificate...ive always gotten future referrals from all of them...i was giving so many out at one point i looked into buying $1,000 worth at a time for a discount.

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    Let's say that you are a part of an association or contractors group. If you already know ahead of time that all jobs referred to you from there are a 10 percent referral fee ( and you are still setting your own prices) , then you can still keep your normal profit margin, right?

    This seems to be a normal practice in most industries. I've been seeing it for years. From agents and managers, to websites that book travel.
    It's a simple affiliate agreement and there are affiliates everywhere.
    It's how most business is done.
    Last edited by Harold Mansfield; 11-28-2010 at 08:14 PM.

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    I wonder at the idea that referrals, affiliate transactions and commissioned sales are the same and deserve the same payment percentage. To me, they are each entirely different. The original question was only about referrals so I'll limit myself to answering that.

    A referal is a satisfied customer telling a friend about the good service or product they received from a merchant. They are telling the friend to help the friend not to help the merchant. Therefore, the merchant is under no obligation to pay anything, and if the referral was genuinely given the referrer is not likely to expect any compensation for giving it. So, anything the merchant decides to give to the referrer is as an expression of gratitude and not a payment for services rendered. As such, it is not subject to any "standard" payment amount.

    This has nothig to do with sales. You may choose to pay for leads from uninvolved parties, or pay commissions to hired sales people, but these are not referrals, in my book.
    Last edited by Spider; 11-28-2010 at 09:00 PM.

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