URL: http://www.entrepreneur.com/entrepreneurextra/article57414.html

If there's one thing I've learned, it's that everyone loves referrals--and everyone loves to be recognized for giving referrals. Referral clients are easier to close, have fewer complaints, are more loyal, remain clients longer and are more trusting.

In an international survey I conducted with Robert Davis (published in our book Business by Referral), nearly a quarter of all the respondents considered incentives an effective generator of referrals. Incentives can range from simple recognition, such as a thank-you, to monetary rewards based on business generated.

It goes without saying, then, that building an incentive program is important in any successful business. So how do you do this?

I've heard of many novel ways that businesspeople reward those who send them referrals. A female consultant sends bouquets of flowers to men. A music store owner sends concert tickets. A financial planner sends change purses and money clips.

One realtor I met in Northern California told me that for almost six years, he had offered a $100 finders' fee to anyone giving him a referral that led to a listing or a sale. 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 in his own vineyard. A thought occurred to him: Why not take the next step? He began processing the grapes and bottling his own vintage wine. After the first harvest, he had a graphic artist design a beautiful label, which he affixed to each bottle. He told 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.

He 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 cost him less than $10 to produce. This special vintage wine makes him infinitely more money than giving away a handful of $100 finder's fees.

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 quite simple: because it's special. When given as a thank-you, a bottle of wine that can't be bought can be worth 10 times what it cost to produce.

Finding the right incentive can be a big challenge for individuals who are trying to build their referral business. To make it easier on yourself, be sure to get opinions and feeback from others who have a significant interest in your success.

Most important, never underestimate the value of recognizing the people who send you business. A well-thought-out incentive program will add much to your word-of-mouth efforts.

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Ivan Misner is co-author of the New York Times bestseller Masters of Networking. He is the founder and CEO of BNI, the world's largest referral organization with more than 2,400 chapters in 13 countries around the world. He also teaches business courses at California State Polytechnic University, Pomona, and resides in Southern California with his wife and three children. Dr. Misner can be reached at misner@bni.com.