Referral Reward Programs and Referral Likelihood

by Suzanne Blake, M.B.A. Candidate

How can referrals affect your business positively? Conversely, what is the significance of the damage they can inflict? Referral reward programs can play a considerable role in establishing the effectiveness or ineffectiveness of referrals. In A Penny for Your Thoughts: Referral Reward Programs and Referral Likelihood, L. Feick and G. Ryu conducted a study in which they did four experiments to determine the impact that reward programs have on referrals. Their findings show that reward programs do matter; furthermore, brand strength, personal ties, and the person receiving the reward all have an impact on the effectiveness of the reward. As word-of-mouth (WOM) advertising can be a particularly difficult method to implement and measure, this article provides some very useful information that may assist in establishing effective WOM advertising. Please note, the industry studied here was not real estate, though the core findings will still be relevant to your field. The results of this research should not be applied blindly, but with serious thought as to how they might be relevant in your particular market. Specific types of marketing media, measures of time, and percentages should be altered to fit your industry.

1. "Consumers consider the value of potential cost for themselves and for the other consumer in rewarded referral."
THINK: Approach rewarded referrals from the perspective of the buyer rather than that of the seller. Think about what the rewards and benefits are for the home owner when s/he makes a recommendation. According to exchange theory, consumers will make a decision to provide a referral based on what's in it for themselves. Looking at rewarded referrals from this point of view will assist real estate agents in determining how to reward referrals.

2. "With strong ties, people tend to have communal relationships in which they feel general concern about the other person's welfare. They respond to the other's needs but do not expect anything in return... With weak ties, reciprocity is important; people expect to get back what they put in."
THINK: With this in mind, it makes sense that people would naturally refer close friends and family. However, to go out of their way to refer a more distant acquaintance, they may need some incentive or expect to get something out of the referral. If real estate agents can focus their rewards on those weaker relationships, they may have referrals that would not have occurred organically.

3. "Research shows that consumers respond to stronger and weaker brands differently." "[The] stronger commitment gives consumers of a stronger brand more confidence in making recommendations, thus increasing (unrewarded) referral likelihood."
THINK: When working with a strong realtor name brand, the agent should focus on the quality and prestige associated with that brand as it will help increase referrals. This methodology would also apply to a real estate agent who is well-established in the industry. By focusing on his/her proven track record, s/he will be able to generate more referrals. On the other hand, when working with lesser-known brands or when working as a new, lesser known real estate agent, rewards may be much more crucial to realizing positive referrals.

4. "Offering a reward increased referral likelihood by more than 20 percentage points for the weaker brand but by less than 10 percentage points for the stronger brand."
THINK: This experiment shows the validity of the previous point that reward incentives are more important for weaker brands or lesser known realtors than for strong brand names. The efforts of rewards programs have a greater magnitude when used by weaker brands.

5. "The first referrals from a customer will probably be family or close friends for whom the recommendation is likely to have occurred anyway. It is probably subsequent referrals, presumably weaker ties, that need encouragement."
THINK: This supports the second point that rewards should be focused on weaker tie relationships. According to the article, one way this can be realized is to offer rewards of higher value as referrals increase. Home buyers would be most likely to refer family members or very close friends first. A reward of greater value may be necessary to extend their recommendations to more distant friends.

6. "Making a referral without any extrinsic reward may create feelings of inequity for a customer; the referral is an unreciprocated favor done for the consumer and the company."
THINK: Rewarded referrals may not just be an added benefit to business. In fact, it may be advisable to think of rewarded referrals as a necessary part of doing business. In order to establish beneficial long-term relationships, people need to feel that there is balance in the relationship. Rewarding referrals is one way to establish this balance in the proverbial "bank of favors."

The New Real Estate Professional

By Saul Klein

The New Real Estate Professional
Salespeople and brokers appear overwhelmed by all the choices computers and technology offer. Emerging from the stress and confusion generated by countless choices is a new breed of real estate professional. What does this new real estate professional look like and how does he or she differentiate themselves from their competition?

An Information Specialist
As the new real estate professional, you recognize that the hottest commodity in the real estate business is information. Consumers can become overwhelmed and confused by the “information overload” generated by the Internet. You are adept at extracting information from the Internet and the local and/or regional MLS, and then re-assembling the information into knowledge, thus creating value for the consumer.

You will add value to the transaction in the ways you handle information for the property buyer and seller. What are the things you can do with information?

• filter
• sort
• customize
• manage
• analyze
• process
• display

For example, you can email a Comparative Market Analysis along with digital photos and key public record information, such as taxes and building permits. As the new real estate professional, you are in the information business!

A Web Surfer
Armed with a computer and Internet access, you are now an integral part of the new world of doing business within the online community. With the real estate industry in the early phases of doing business online, you are leading the charge. Although no one has all the answers on how to best use the Internet as a tool to market products and generate revenue, you continue to experiment with new approaches every day - and you are steadily finding success with consumers online.

An Email User
You are an email powerhouse. No more telephone tag, time zone concerns, long distance charges, interrupted conversations, or piles of unanswered correspondence.

Email is one of the most effective marketing, advertising, risk reduction, and communication tools available in business. With a click of the mouse, and then a copy and paste of some hot news reports, you easily create a personal electronic newsletter filled with solid content. Another click brings up a distribution list of hundreds of clients/prospects with email addresses around the globe; another click and the e-newsletter is sent instantly to the computers of everyone on your list. No stamps to lick, no envelopes to stuff. All at the push of a button, at the speed of light.
You are sure to display your permanent email address on business cards, letterhead, vehicle plates, car magnets, billboards, sign riders, property ads, and even mention it on your voice mail message. You actively solicit the email address of every potential client and prospect - capturing email addresses with permission becomes an important daily task. You check for email messages as frequently as checking for voice mail (if not more often) and then make sure to respond promptly, recognizing that consumers are not going to wait before contacting another real estate licensee.

A Web Site to Brag About
Recognizing that “content is king,” you develop a web site employing useful hypertext links (an electronic cross-reference) to other web sites - the idea being to showcase your professionalism and expertise. You endeavor to keep the material fresh and updated, perhaps sending email alerts when updates are made so consumers are encouraged to “bookmark” and revisit your site regularly. Listing information is the key to a “stickier” web site, so make sure you are familiar with your local MLS rules pertaining to “Internet Data Exchange” and “Virtual Office Web Sites” (IDX and VOW).

You view your web site as a publishing vehicle, though never more important than word of mouth and good service. Consumers locate the web site by using any one of the several branded domain names you've registered which all point to your main site.

Work From a Mobile Office
As the new real estate professional, your office is comprised of all the devices you carry with you. There is the smart phone, the laptop with a wireless modem, the PDA (personal digital assistant) handheld device (containing the complete MLS inventory and access to the electronic Lock Box), the programmable financial calculator, the scanner, and the portable printer.
Your computer can link into the company computer and receive messages, fax MLS listings, and access other helpful data. Meetings and conferences are conducted more efficiently online through email and password protected company Intranet. There are fewer and shorter live meetings to attend because most of the background information, agenda, confirmations, updates, and follow-up are handled online.

Focus on Growth, Self-Development and New Skills
You remain aware of the major cultural changes occurring in the information age. You work to develop clients and prospects who are comfortable maintaining an “electronic rapport” with a competent real estate professional - one who can keep the client up to date with email, newsletters, property photos, and transaction documents transmitted electronically. You use traditional as well as electronic techniques to provide clients and prospects with local community information and resources.

Get involved with Social Networking sites such as RealTown.com, Facebook, and others. Connect through sites such as Twitter and LinkedIn.
You are able to complete the mandatory state-approved continuing education requirements through computer-based education courses when offered online in various states. You tune into private networks for online interviews and seminars by panels of national experts. As an Association member, you now have a way to make leadership accountable online for some of their decisions - talk about grass-roots participation. Each member has a clear voice in the process.

Use a Technical Real Estate Assistant
You might consider hiring a virtual assistant, an individual who is highly skilled in all phases of real estate technology and the Internet. Some offices will have a professional assistant assigned to several licensees. Likely, these assistants will be former real estate associates who have focused their energies on understanding and applying the new technology to enhance their employer's business practice. The assistant will also be responsible for performing back-ups to protect valuable information and files stored in the computer. In some cases, the ‘virtual assistant’ may operate from another part of the country.

Engage the Consumer
For better or worse, the days of the “real estate mortician” are gone forever. You know the real estate morticians - they are the real estate licensees who throw buyers into the back seat of the car and drive them around until they are dead. No more! Today's connected consumers want to be actively engaged in the process.

Moreover, they demand that the real estate salespeople working on their behalf add real value to the transaction. For the selling consumer, that means interpreting and applying the wealth of information in their best interests. For the buying consumer, that means finding and sharing property information quickly and efficiently to prevent loss of opportunity.

Join Online Communities
Welcome to the community of the world, a world where the new real estate professional can choose to associate and communicate with different groups of people at the push of a button, at the speed of light, on a local connection. The Internet connects people with people. It is the network of networks.

A result of connecting people is the creation of “community”. Online communities are re-inventing the way we communicate, learn, and share information. Individuals, associations and businesses are discovering the power, versatility and affordability of Internet communities as a reliable resource for information on just about any topic you can imagine.

You are a Master Networker
You will participate online with several discussion groups networking with professionals and consumers sharing common interests - perhaps a group of commercial brokers, buyer brokers, real estate attorneys, or educators. It is like being at a national convention 365 days out of the year. It pays to network. Online networking is just another way of expanding key contacts.

Participate in an Online Business Network
As your business moves from paper-based commerce to electronic commerce, the players in the typical real estate transaction become linked electronically. Available transaction management systems will streamline the processing and closing of the transaction. You become an expert transaction manager. On command, you can alert the appraiser, surveyor, attorney, home inspector, title company, and lender via email to start work and to submit reports and documents electronically. Those players who are not up to date with the new technology will not be part of the closing process - and may be looking for a different line of work.

Technology as a Tool of the Trade
Even though you are the new real estate professional, you still keep technology in perspective - some days you find yourself using a #2 lead pencil more than your laptop. You use the computer to become more efficient in business - for example, to create standard presentations and computerized checklists and action plans to keep track of deadlines, creating a “paperless trail” for each transaction.

The tools enable you to gather much of the needed transaction information - less time tracking down information translates into more face-to-face quality time with qualified clients. With new mapping software, much of the statistical information about a property (surrounding schools, comparable sales, taxes, census, and environment) can be quickly assembled into an attractive graphical presentation piece.

Winning with technology...
...is more than the technology...it is a state of mind. Will you ever learn it all? It doesn't matter. The technology will continue to change faster than your capability to keep up with it... but you can always stay one step ahead of the competition, and that's the whole idea.

As Dr. Denis Waitley says: “Beginning is half done!”

Developing Multi-Cultural Etiquette

By George Smith & David Compton

With the influx of foreign investors in today's market, it is important that you properly prepare to effectively interact with them. To pursue these investors, we suggest that you go to www.google.com and type in “Consular Offices, California,” (or whichever state you are in) to advise them about the wonderful investment opportunities in American properties. We also suggest that you search under the category “Foreign Trade Offices” in your state.

Let's talk specifically about developing “multi-cultural” manners. When interacting with a person of another culture or ethnicity, it is important to apply the “Platinum Rule” as opposed to the “Golden Rule.” The “Platinum Rule” says that you should treat the other person as THEY (not you) want to be treated. This means respecting the traits and traditions that have been infused into their behavior by their culture. While one can always apply the phrase “When In Rome...”, the real estate profession and the N.A.R. have recognized the need to go the extra mile to create that zone of comfort essential for effective interaction.

The following “Norms” are, for the most part, universal in their application.

• Learn at least a few phrases of their language if different from your own.
• Show appreciation for the other's customs, music, and art; do not criticize them.
• Be sensitive and non-judgmental on politics and religion; avoid discussing these if possible.
• Build on the other's cultural heritage to enhance communication, rather than trying to impose your own.
• Show good intentions and consideration and follow-up on promises.
• Extend respect to those who the customer cares about - for instance, the elderly, children, family, religious affiliations, and whatever groups the customer identifies with.
• Use common sense and credit the other person for having it as well.
• Acknowledge mistakes and apologize when appropriate.
• Minimize talk about the United States.
• In general, try to listen more and talk less.
• Do not tell the other what to do; you do not know what is appropriate.
• Do not talk about family unless they are present or the other person mentions them.
• Help the other see the “Big Picture” by sharing information.
• Seek to share the other person's ceremonies and celebrations.
• Recognize that you will need to be more formal and take more time in doing business than is your normal practice.
• Be punctual, even if it does not seem to be customary for the culture you are dealing with; many cultures regard tardiness as a character flaw, and they know that in American culture we would be insulted if another person was late for a meeting.
• Get names and contact information correct.
• Take the blame for language barriers and difficulties.
• Do not tell jokes; they have a very high probability of being misunderstood.
• Show deference and respect to the elderly; stand when they enter, wait for them to speak or when they extend their hands in greeting.
• Treat members of the opposite gender with respect. Always err on the side of formality.
• Be patient and forgiving if a member of the opposite gender has trouble determining how to treat you; remember that other cultures differ on the roles of men and women in business relationships and may have difficulty adjusting to the expectations in the United States.
• Skip the efforts to try to create an “instant friendship”.
• Respect the concept of “face” as in “saving face” - never do anything to embarrass another person, either in that person's eyes, in the eyes of others, or in your own eyes. In the same way, do not sacrifice your own “face” in front of others as well.
• Try to fit in and be comfortable without making a fool of yourself.
• While these are important behaviors to embrace, there are other behaviors that you will want to avoid. Just to be on the safe side, and until you learn better from your customer, avoid the following behaviors:
• Standing with your hands in your pockets
• Using first names
• Asking personal questions
• Asking about their family
• Crossing your legs
• Showing the soles of your shoes
• Fleeing or invading the other's personal space
• Seeking direct eye contact
• Initiating any physical contact
• Showing impatience

Putting positive attitudes, communication skills and multicultural manners into action with the varieties of people in your marketplace is certainly necessary on a personal level each and every day. Be aware that you may also need to make some changes in the way you and your office deal with specific business situations that involve multiple cultures.