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Monday, December 01, 2008

Referral and finders' fee systems -- Bobby Darnell's approach

In a previous posting, you've read how Feazel Roofing in Columbus, OH, offers a $50 finder's fee for consumer referrals. Do finder's fees work for more advanced stuff, especially for advanced commercial or consulting assignments?

Bobby Darnell of Construction Marketing Consultants in Atlanta GA says that, in seven years of business, he has obtained about 10 per cent of his business volume through finders fee referrals. He offers a sliding scale of incentives, based on (1) the amount of work you do to provide the lead and the strength of the direct referral and (2) the value of the business you help generate for him.

He has granted me permission to make his lead finding system available, which you can download here.

Darnell says most people using his lead rewards program have contributed a single lead. The only potential conflict he had occurred when someone submitted a lead for a contact Darnell had already been working with -- in this case, he simply provided documentation proving the prior relationship.

Lead finders or 'bird dogs' are common in many industries, and good salespeople cultivate them. Obviously, if you are sharing leads for compensation, you should conduct yourself with integrity -- if you are working for a business, I think your boss should know about this sideline, especially if it relates in any way to your day job!

A good question when an organization has salespeople is whether the lead compensation system should operate in place or adjacent to your regular sales compensation systems. If the lead compensation is modest (for example the $50 to $100 'cost' at Feazel Roofing) this isn't a problem -- but if you go the full scale with a major lead for a big project as outlined in Bobby Darnell's system, clearly the lead cost has to come out of sales compensation, or you will blow your sales and marketing budgets.

Should your salespeople be able to set up their own bird dog and lead-finding systems without company involvement or approval (paying their leads suppliers directly out of their own pockets)? I'm not sure this is such a good idea -- it invites ethical and co-ordination challenges.

On the other hand, if the relationships are there, and the sales representatives openly discuss the process with their management, presumably everyone is well served by these arrangements.

Do you have any thoughts and experiences about bird dog or lead compensation systems?


Anonymous said...

hello nice blog!Keep it up.It's contain is very informatic and unique.

Anonymous said...

Good suggestion here, thanks for sharing. The issue of sliding scale "reward" referrals is also another good point we need to be reminded of.