What a recommendation costs the person making it, honestly

4 days ago
3 min read

Updated: 2 days ago

Introduction

Businesses treat referrals as free. From the customer's side they are not. Recommending somebody involves staking a relationship on a third party's future performance, spending social capital that cannot easily be rebuilt, and accepting a share of responsibility for whatever happens next.

Most people do this calculation without thinking about it, and it explains behaviour that otherwise looks inconsistent. A customer who rates you highly, likes you personally and still says nothing is not being ungenerous. They are weighing a real cost against a benefit that accrues mostly to you.

Lowering that cost is a more productive approach than increasing the incentive.

1. What a recommendation costs the person making it starts with reputation

The main cost.

If the experience goes badly, the recommender is implicated in it. That risk is carried personally and cannot be transferred. It is the largest factor by some distance. A single bad outcome is remembered for years.

2. The relationship is at stake, not the money

The nature of the risk.

A poor referral damages a friendship or a professional standing, which is worth far more than the value of the transaction. Incentives do not address this. Only confidence in you does. No payment compensates for an awkward conversation.

3. There is effort involved

The practical cost.

Finding your details, remembering the name, making an introduction, following up. Small frictions are sufficient to prevent an intended recommendation. Removing them is straightforward. Most lost referrals are lost here.

4. They may have to explain what you do

The articulation cost.

If describing your work is difficult, the recommender has to do that work themselves and may get it wrong. Complexity raises the cost substantially. A ready sentence lowers it. Write it for them rather than hoping.

5. There is a risk of appearing to have an interest

The awkwardness cost.

Anybody who might be thought to benefit from the referral hesitates, particularly in professional settings. Incentive schemes can increase this rather than reduce it. It is worth considering before offering one. Ask whether a reward would help or hinder in your trade.

6. Timing has to be right

The occasion cost.

Raising it unprompted feels like promotion, so most people wait to be asked. That wait can last a long time. Nothing about your business changes this except being memorable.

7. Lower the cost rather than raise the reward

The strategic conclusion.

Make yourself easy to describe, easy to contact and reliably good, and the calculation changes on its own. This is more effective than any scheme. It is also permanent.

8. Make the introduction easy to pass on

The practical remedy.

Something forwardable — a short message, a page, a name and number in one line — removes most of the effort. Give them the thing rather than the intention. This alone increases the rate.

9. Reduce the perceived risk explicitly

The reassurance.

Telling somebody that you will look after anybody they send, and then visibly doing so, addresses the actual concern. Report back on how it went. That closes the loop and lowers the cost of the next one.

Be careful about assuming a reward removes the cost. Money offered for a referral changes the nature of the act and can make an otherwise willing person uncomfortable, particularly where their professional judgement is what gives the recommendation value.

Conclusion

Treat a recommendation as something that costs the customer, and reduce that cost.

Recognise that their reputation and relationships are what is at risk rather than anything financial, remove the practical effort of making an introduction, give them a ready sentence so they need not explain your work themselves, be careful that incentives do not create an appearance of interest, be memorable enough that they think of you when the occasion arrives, make something easy to forward, and always report back on how the referral was handled.