Do Finder’s Fees Work?

Historically, finder’s fees or referral rewards have been used as an incentive for giving someone referrals.  Although finder’s fees can be appropriate, I don’t believe they are necessarily the best technique to employ in most situations.  Here is an excellent example of a non-monetary incentive system:

One Realtor I met in Northern California told me that for almost six years he had offered a one-hundred-dollar finder’s fee to anyone giving him a referral that led to a listing or sale.  However, he said that in all that time he had given only about a dozen finder’s fees, so he decided to try another kind of incentive.

Living on a large parcel of land in prime wine country, he had begun growing grapes on his own vineyard.  Therefore, a thought occurred to him:  Why not take the next step?  He began processing the grapes and bottling his own special vintage wine.  After his first harvest, he had a graphic artist design a beautiful label, which he affixed to each bottle.  Instructing all his friends that he did not sell this wine, he gave it as a gift to anyone providing him with a bona fide referral.

The Realtor gave away dozens of cases in the first three years – half the time it took him to give only one dozen cash finder’s fees.  Yet each bottle of wine cost him less than ten dollars to produce.  Therefore, this special vintage wine makes him infinitely more money than giving away a handful of hundred-dollar finder’s fees. I got a call from the Realtor and he shared me this story…

Success Uncorked

“Last Friday I got a phone call from a woman I didn’t know.  Out of the blue she gave me two referrals.  As I wrote down the information, I asked her how she had heard of me.

“She said, ‘I had dinner last night at a friend’s house.  He served wine.  I took a sip.  “Wow, great wine!” I told him.  “Where did you buy it?”  “You can’t buy it,” he said.  “The only way you can get it is to give this real estate agent a referral.”

“’I have two referrals,’ she said.  ‘Can I get two bottles?’

“So I gladly sent her two bottles.  Furthermore, both referrals turned into more business, and each of them cost me only ten dollars.”

It sometimes amazes me, even now, how something as simple as a bottle of wine can be such a powerful incentive for people to give you referrals.  But the explanation is really quite simple:  because it’s special.  A bottle of wine that can’t be bought can be worth ten times what it cost to produce when traded for something as valuable as a business referral.