Shortly after my wife and I moved
to the USA, I noticed an announcement in the apartment building we live in that
said: “recommend a friend to move here and you get 250$ when they sign the
rental contract” (citing from memory). From an economic point of view this made
perfect sense: you bring a client to a business and you get something in
return.
Only later I realized that this
type of incentive made sense when I saw it simply because, at the time, we
barely knew anyone on this side of the Atlantic. A few months later, two former
colleagues from Erasmus University moved from The Netherlands to the Washington
DC area and they were looking for a place to live. We wanted to help them and
showed them around the neighborhood. They were curious about the place we lived
in and they came over to our place. To make a long story short, I got a
business card from the leasing office of the building and gave them the
information. The leasing officer (a very nice lady) mentioned that the offer of
250$ was still valid, so if our “friends” leased an apartment from them, we
would get the incentive.
That was the moment when it
struck me that this type of incentive scheme was faulty. Although I wouldn’t mind
getting 250$, my motivation for recommending the apartment building wasn’t
financial. We can pay the rent and I think, considering market conditions, that
we get a reasonably good deal. We wanted our former colleagues to enjoy the
same price-quality ratio. Moreover, the prospect of getting some cash out of
the whole thing made me feel guilty. I truly, deeply hate the multi-level
marketing approach. The relationship with our former university colleagues was
social, not economical. In fact, as
someone who recently made the move from The Netherlands to the USA, we knew the
costs and inconveniences it involved. If anything I would have preferred for
our former colleagues to get the 250$.
Our former colleagues picked an apartment
in a different neighborhood and the 250$ never left the real-estate company.
A similar case happened with a
meal-delivery service we use. At the recommendation of my friend Arjan Haring
(from The Netherlands) we tried Hello Fresh – a meal delivery service. In a
nutshell, we pay each week 70$ and we receive a box with ingredients for three
meals for two. This (type of) service is fantastic for foodies such as myself
and my wife. We enjoy cooking and eating new stuff, but aren’t actively looking
for new recipes and ingredients. For our
food experience, Hello Fresh is a blessing.
As we were very excited about
this service, we talked about it with our few acquaintances in the US. Most of
them seemed intrigued and curious about it.
In the first month(s) of using
this service, Hello Fresh had an option for existing clients to “give a box”
for free. It was an (a)typical approach for bringing in new business based on
(existing) customer recommendations.
A bit later, however, they
changed this “give a box for free” approach to a split incentive scheme.
Basically, if we recommend the service to a “friend” and she subscribes, we get
30$ discount for our next order and the recipient gets 40$ off their first
order.
While there is some economic
sense in this split benefit approach, I began feeling uncomfortable
recommending Hello Fresh. I wouldn’t mind 30$, but the financial incentive
doesn’t match my motivation for recommending the service.
I recommend something because I want
others to enjoy the service we think is great, not to make money out of it.
While in the case of Hello Fresh
there might be some evidence-based reason for changing the approach to generate
leads from existing clients from “give a free box” to split-benefit, there’s a
big lesson to learn, particularly for marketers.
If you want to leverage your
existing clients’ social relationships for your business, you need to
understand their nature: SOCIAL.
Most people make a reasonably
good distinction between social norms and market norms. The element that makes
multi-level marketing utterly disgusting is that it perverts social
relationships into (wannabe) market / business relationships.
Social relationships are based on
imitation, reciprocity, status and alliances. Once you understand this, you can
properly leverage them for your business’ benefit.
Simply put, if you want me to
recommend your service to a friend (acquaintance, colleague etc.) help me
enhance my social relationship with her/him. If you allow me to make a gift in
the form of a discount, voucher or even allow me to offer them a full
experience for FREE, that makes me look good, gain reputation etc. with the
person with whom I am having a social relationship. This gain in strengthening
my social status or relationship with someone I know (well) is, for me, more
valuable than (the relatively small amount of) money you are offering as an
incentive.
2 comments:
I'm not sure offering financial incentives in situations like this is as ineffective as you seem to suggest.
The distinction between the social domain and the market domain is well known (albeit not necessarily well understood): we are generally quite willing to help a friend move a heavy wardrobe for no compensation, but unwilling to do so for a few dollars, pounds or euros.
I think that in this case the 'incentive' is not necessarily a transgression between these two domains, but could also be a nudge to counter inertia. Whether or not we'd recommend a flat, a mobile telecoms operator, or an insurance company to a friend is not a binary situation. If we're not at all happy, we might dissuade them, if we're reasonably happy we might give them a thumbs up, and if we are ecstatic about it we might actively recommend.
But do we always follow through on intentions, or possibilities? I would say not. And while I would definitely not change my mind as to whether I'd recommend something to a friend simply because they offer me money, I might be enticed to overcome my inertia by it. The money will never make me do something I definitely would not do otherwise, but it might make me do something that I would have done were it not that I am a bit lazy, and it's not a priority.
@koenfucius you are quite right about inertia, but overcoming it could be done through other means.
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