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THIS WEEK
Cash For Comment - The Changing Face of Referral Fees
ALSO IN THIS EDITION
Cash For Comment - The Changing Face of Referral Fees
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Referral fees. Affiliate fees. Street teams. Blogging fees. Hostess gifts. Cash for comment. Pay per say. There are literally hundreds of ways to earn money promoting someone else's products. But, if you do business with the USA, the rules are changing. What we regularly see is these trends will then be adopted by other countries, which is why it pays to keep abreast of the developments, no matter where you live.
Let's start with some basic information about cash for comment. If you are in business at some point you will come across this issue. Should you reward people who say great things about you and drive customers you may not otherwise have served? How should you reward them? How often?
Say, if it costs you $50 to gain a new customer through traditional advertising, but you have found Joe, who runs a sports store down the road loves what you do and has been sending you 2-3 new customers every week, should you give Joe a gift to thank him? Most people would automatically say "Yes, sure".
Now, what about if you give Joe $35 for every customer he sends your way, as a way to thank him and to encourage him to send more business. Now we are getting into grey territory. Would he have recommended your business if he wasn't being paid? Would people believe his recommendation as much, knowing he is getting a "kick-back"?
 Referral business and word-of-mouth business is big business. People tend to trust more a referral from a friend, than just coming in cold. We trust if a friend has had a great (or not so great) experience with a business and we will amend our buying process accordingly.
Just look at the boom in social media sites where we can rate our happiness or dissatisfaction with goods or services. People tend to check out these sites before making major purchases such as fridges, cars, TVs etc, to see if the item is as good as the marketing makes out, or if other people have experienced it as a bit of a lemon.
Businesses actively seek referral business, and are willing to pay to get referrals. But this is where the lines start to be blurred. At what point should people tell you that they are getting a referral fee/affiliate fee for sending you to a business or service?
This thorny issue is the subject of changes under the Federal Trade Commission's Guidelines for the Use of Endorsements and Testimonials in Advertising. I need to remind readers that I am not a lawyer and this article is in no way legal advice, so you need to do your own due diligence on the legal changes and what this means for your business.
The changes relate to when you need to disclose there is a "material connection" between the advertiser and you, the endorser.
In broad terms, if a person receives something of value in relation to their comment, if their comments can be considered "sponsored" in any way they need to disclose this as part of their comment. This "sponsoring" is wide enough to includes things such as money, in-kind compensation, contra arrangements, free samples and free services.
The proviso is that the connection between the person and the company is "not reasonably expected" – so you will not see earnings disclaimers on regular TV ads for example as you expect actors to be paid for doing an ad.
Some examples the FTC refers to as needing to be disclosed:
- drug companies sponsoring research,
- a star endorsing a product during an interview or on their social media page (and not in an ad),
- a hidden camera ad filming "real people" commenting on a food product or service (and getting a free meal or voucher in thanks),
- bloggers being sent products to trial and review on their website,
- people commenting on forums about how great a product is (while they are employed by the company),
- people in "street teams" who get points when they talk about a product.
A few more scenarios to help flesh this out.
- If a blogger buys a product with their own money and praises it, then it is not an endorsement.
- If they are paid by someone to review a product (no matter what they say about it), it is an endorsement and needs to be disclosed.
- If they review a product off their own bat, and then provide a link to buy the product from the other person and they get a percentage of the sale then they need to disclose it.
Some legal eagles in the USA have suggested that this provision is broad enough to cover things like network marketing and multi-level marketing programs.
The reasons for these changes are to help consumers work out what weight to give to the endorsements. If they know a person is being paid to comment, they may make different decisions than if they thought the person was commenting from a neutral base.
A few other twists with the legislation relate to the legal liability of endorsers and advertisers for endorsements. Advertisers are now liable for "false or unsubstantiated statements made through their endorsements, for failing to disclose material connections between themselves and their endorsers".
This means the advertiser is now liable if the person (for example – a blogger) says the wrong thing.
This means all businesses that pay some form of referral fee, or affiliate payment need to put in place guidelines to their affiliates on what can and can't be said, as well as a monitoring program to ensure people who promote its products complies with the law. This is a whole new ball game and the affiliate marketing industry will be challenged in the implementation of these new guidelines.
I predict the next few months is going to be an interesting one for many businesses as they come to grips with this level of transparency, and work out how to word the relevant disclosures. In the end though, it can only help to clean up the marketing game and give consumers more information on which to base their decisions.
| HR Tip of the Week: Spotters Fees for New Staff |
 While we are on the issue of referral fees, when you are looking for new employees do you encourage your existing staff to suggest the vacancy to their friends and family? Many businesses leave filling vacancies all to the recruitment agencies, potentially leaving a great uptapped pool of talent behind.
If a friend or family recommends your business, they also give the candidate a warts and all view of what it is like to work there. This means if the person is successfully employed they tend to have a realistic view of what they are getting into (which helps with retention).
Smart businesses have some form of spotters fee or referral program in place. Remember, budget wise you have the amount you would have spent on a recruitment agency to play with, so make your program meaningful. Here's just a few tips for a successful program:
1. Ask the candidates at interview who recommended them to apply (if not already mentioned in their application). Note this on the application for the files. You want it clearly documented from the start - and not having to rely on memory months down the track.
2. Have three parts to the reward: A thank-you and nominal gift on the initial referral, one on successful hire, the final and highest value reward on successful completion of the probation. This way you increase the likely support the person will get in their new role from the person who recommended they apply.
3. Advertise your referral program on your website, your intranet and your HR policies. Let your team regularly know you have the program in place, as well as reminding them each time you have a vacancy.
4. Pay promptly. Don't make people have to beg for their payments - put in auto systems to make payment an automatic thing.
 As a writer I spend a lot of time honing my craft, working on ways I can improve my writing so my clients get even better results.
One of the areas I focussed on this year related to creating even more powerful proposals for my clients, which is why I bought the Proposal Templates and Sample Proposals pack.
To be honest, it is a darn good pack, great for service businesses, web designers, grant writers and schools looking for education grants. I took away some really useful pointers, which I have applied to the more complex proposals we have been tackling for our clients.
If you are looking for a simple, straight forward proposal, with lots of practical templates to help you along the way then you can certainly learn a lot from this pack. Check out the Proposal Templates and Sample Proposals and see if it is appropriate for your business.
Of course, if you need something a bit more complex, then give us a call. We have written some quite successful tenders, RFO's and proposals for our clients this year and would love to help you on your next project.
Earnings disclaimer: I bought this product to test it out and learn from. I loved it so much that I signed up to be an affiliate for it (so yes, I do get an affiliate fee if you buy one of the packs).
Sometimes I get a comment "hey, I could get that writing done for $2 in India". In this post I share a case study on why good copywriters charge accordingly.
exuberantly yours
Ingrid
Heart Harmony
PS: This week's Small Business Tips blog included a video post about "Doing the Same Thing ... With a Twist".
Legal stuff: This newsletter is intended only a general guideline for Australian businesses. You should seek specific advice for your situation rather than relying only on this newsletter
Earnings disclaimer. Some of the content may include advertorial information, which means I may receive financial compensation for the products I recommend. But - unless I know and trust the product, I will not recommend it.
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