Episode 57: “Referral Marketing is a Risky Business”

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Dr. Misner has just returned from the Canadian conference, where he had the opportunity to network with people from all around Canada.

Referral marketing is not the safest form of advertising. There are unique risks which are not an issue in other forms of marketing. When you give a referral, you give away a little piece of your reputation. That means you have to have confidence that the person you refer is going to do a good job. Therefore it’s important to have strong relationships with people you refer business to.

The fact that BNI has a membership committee in place to keep an eye on the long-term relationships within a chapter helps reduce the risks. And because BNI meets weekly, you can check up on referrals. It’s important to bring up any problems and give your fellow members the opportunity to address them and make the client happy.

Dr. Misner recommends the book The Speed of Trust, by Stephen M. R. Covey, (the son of the Stephen Covey who wrote The Seven Habits of Highly Effective People). Trust can save you millions of dollars in legal and accounting fees.

Be aware that building trust takes time—a good relationship can easily take a year to develop. And remember, referral marketing may not be the safest form, but it’s the most effective.

Brought to you by Networking Now.

Complete Transcription of BNI Podcast Episode 057 –

Priscilla Rice:
Hello everyone.  Welcome to the Official BNI Pocast brought to you by networkingnow.com, the leading sight on the net for networking downloadables.  I’m Priscilla Rice and I’m coming to you from Live Oak Recording Studio in Berkley, California.  I’m joined on the phone today by the founder and chairman of BNI, Dr. Ivan Misner.  Hello Ivan, how are you?

Ivan Misner:
Hi, I’m doing great.  I just had an opportunity to come back from the Canadian conference. It was a great event with lots of members.  I had the opportunity to network with people from all around Canada, particularly in the Ontario area.  It was very exciting.

That sounds really nice.  What are you going to share with us today?

Today, I’m going to talk about referral marketing, and how it is, in fact, a risky business.

How’s that?

During a recent live radio interview, the host of the program  asked me whether I consider referral marketing to be the safest form of advertising. Without the slightest hesitation, I said,”By all means, no.”

He was really shocked by that answer.  I went on to explain to him that I believe strongly in the tremendous benefits of word of mouth, and what word of mouth and referrals can bring.  However there are some unique risks associated with referral advertising or referral marketing that are not an issue with commercial or other forms of advertising.  When you give a referral, you give a little bit of your reputation away.  If the business you referred to someone does a good job, it helps your reputation.  But if they do a poor job, it hurts your reputation.

The payoffs of referral marketing are immenseaz when done correctly.  Referral marketing involves a really big risk, and that is,  giving away a piece of your reputation every time you give a referral to someone. So, if you tell a valued friend that a customer of yours is going to take good care of them, you have to have confidence that the associate of yours is in fact going to take good care of your referral.  That’s why it’s really important to build strong relationships. I think  BNI has done as well as it has as a networking organization, because it’s all about building relationships, and building that trust.

What do you do if your friend lets you down?  It comes back to haunt you.  Your customer begins to lose faith in you, and because of the loss of faith,  you might lose that customer down the road.  That’s why it’s so important to develop strong relationships with those whom you’re referring business to, and visa versa.  Once these strong connections are forged, you can rest easy knowing you can tell someone that a business associate or networking partner is going to take good care of them.  That is exactly what will happen.  If you use your BNI group as a way of building long term relationships, you can do that with confidence.  We have a membership committee in place that helps to take a look at those on going relationships, and if there is a problem with somebody not providing good service, the membership committee can step in.  It helps to make what could be a risky business, referral marketing, into a much safer process, because you’re basing it on long term relationships, and connections that are supported by a system to the membership committee in maintaining some level of quality control.

Because we meet weekly, you can also check up on a referral.

Yes.  How is that going?  Is it working out well?  You can also say to the member, “Hey, I spoke to the person I referred to you and they’re really happy, or they’re concerned, or there was an issue, or there was a problem.”  That’s really important.  I want to know.  I may get a referral, and the person I’m doing business with isn’t happy.  Sometimes they don’t tell you, but they might tell the person that referred you.  I want them to tell me, “hey, so and so’s not completely satisfied with something.  You might want to touch base with them.”  That gives me an opportunity to solve the problem before it becomes too big.  That’s the real value of the trust that’s established.

If somebody wants to learn more about this, do you have any books or anything they can research?

There’s a really, really good book that I’ve been recommending for a while now called, The Speed of Trust, written by Steven M.R. Covey. He’s the son of Steven Covey, who wrote, The Seven Habits of Highly Effective People.  I’ve become pretty good friends with Steven M.R. Covey.  I really have enjoyed his book, The Speed of Trust.  I highly recommend it because it fits.  It talks about when you establish trust with people, it’s almost like it has financial value.  The trust has value.  It brings value to the table when you trust somebody.  It’s like having cash.  When there’s a lack of trust, it reduces the value of the relationship.  He talks about how trust absolutely has a financial impact in a company and how people don’t realize the financial impact of trust.  He has a great story in there about how Warren Buffet bought a company that was owned by Wal-Mart.  He bought the company on a hand shake.  It was worth tens of millions of dollars.  In his chairman’s report, he opens it up with things that are unheard of in a chairman’s report.  He said, “We bought the company from Wal-Mart,  and we did not do our due diligence.  Now, you never say,”We didn’t check up on them beforehand.  But that’s what he said, “We did not do our due diligence and we saved millions of dollars because we trusted that they would deliver exactly what they said they would deliver, and they did.  I had a long term relationship with these people.  They delivered exactly what they said they would do, and so we saved millions of dollars in legal and accounting fees.  We bought it on a handshake and we didn’t do all of the due diligence. But we had a long term relationship which in fact saved us millions, which increased the share holder value of our company.

This is a very powerful comment.  When you think about a hundred million dollar deal versus a thousand dollar project, it’s even more likely to happen on a smaller project.  If you can build that trust even on a smaller level, it still has value and happens often.  The more you can trust these people that you’re working with…I guess what I’m saying is, it doesn’t have to be a hundred million dollar deal to be applicable.  In fact, I would argue it’s easier to make it applicable in a smaller deal.  Does that make sense?

Now, he doesn’t talk about how long it takes you to develop trust, right?

He does, yes.  And that’s one of the reasons why I like the book.  He says it takes time which really fits with BNI very well,  because we’ve always said it takes time.  You’re not going to build a relationship with somebody in a month,  two months, or three months.  Maybe in six months to a year, you’re really building a relationship with somebody.  His research and findings really track what BNI has found over the years.  I highly recommend his book, The Speed of Trust.  It just came out in soft cover and BNI members can get it all over the world through their local Amazon’s.

Is there anything else you would like to add?

No, I think that’s it.  Just remember referral marketing is not the safest form of marketing.  But it is, I think, the most effective once you really take into consideration the value of trust.

OK great.  We’ve run out of time, and that’s it for this week.  Thank you Dr. Misner.

Thank you.

I want to remind our listeners that this pod cast has been brought to you by Networkingnow.com the leading site on the net for networking download ables.  Thanks so much for listening.  This is Priscilla Rice and we hope you will join us next week for another great episode of the Official BNI Podcast.


  1. says

    Dear Dr. Misner,

    I know many professionals who totally quit making referrals because their reputations had gotten so chewed up.

    No blind faith, but rather a conservative dose of skepticism is needful.

    Just today I was thinking how some people over rate themselves. When I pass a new referral to one of my “A” list clients; I do extensive follow up.

    Whenever possible, I use myself as the referred customer first.

    Great observation and reality check in this post, Dr. Misner.

    Tom Doiron

  2. says

    Dr. Misner thanks for a thought provoking podcast. BNI members know that it is a risky business, that is why many of us will use services or purchases first before giving a referral. We do need to “save face” every week, so our conduct needs to be #1. I’m sad to say that I am a very trusting person & it cost me a lot in the past. BNI has given me hope to be able to continue to trust. Those of us in BNI need to speak up & put in writing problems with other members so the group can be a strong trusted group. Let the Membership Committee do their job by keeping them informed. Thanks for the information.

  3. says

    Dear Dr.Misner,
    Referral marketing is one of the risky propositions. In normal manner this would have gone unchecked.But constant referral checks by membership committee do over come this matter.
    Periodic review of these points makes a good networking group.
    Thank you very much for putting this point directly as it is!
    Narendra Damani-Proud member of BNI Awesome Bangalore

  4. Robert Best says

    First i must say thank you . What a wonderful topic . trust. It is so important in my business that a lot of work comes from the fact that iam trusted ,and the relationships are great with my clients.

Solutions-focused comments are welcome