The Referral Paradox

The Referral Paradox results from the belief that happy clients should logically lead to lots of referrals.

But the reality is that happy clients rarely lead to referrals.

And to make matters worse, the typical response to this is to offer the happy client a referral bonus. And that doesn't work either!

Perplexing, yes?

Actually, no.

Here's what's going on: To understand the situation, look at it purely in terms of incentives. A Happy Client (HC), by their very nature, has an incentive to talk about what's making them happy. If your clients are happy, they ARE talking. Guaranteed.

Moving down the incentive chain, we come to the friend. HC talks you up all the time. By now the Friend thinks you sound great. They're excited and they've made a mental note, "Gotta try X-Co."

But, even with that mental note they're still unlikely to act. Think of all the disincentives to action. Your number might not be in front of them at the right time. Calling you involves leaving the comfort zone. Trying you requires money and effort. And most important of all, it involves changing the routine.

Here's what you do about it: Recognize that HC wants to recruit their friends. Your job is to give them the tools they need to do that. What's that tool? The tool is an incentive they can give to the Friend. Give HC a freebie to give as a GIFT to the Friend. Then make it easy, clear and comfortable for the Friend to take the next steps.

Paradox solved.