Anyone who watches TV is all too familiar with advertising offering help in obtaining everything from legal representation to medical devices, insurance, tax bill reductions and other products or services “at no cost to you.” Many of these ads have one thing in common – lines and lines of very fine print that flash by faster than anyone but a certified speed reader with super-duper-vison can possibly take in.
If, however, you had the time and desire to run down these legal disclaimers and descriptions, you will discover that the ads are not for the product or service advertised; instead, it’s only for a referral service. What they are really selling is your valuable business to someone else.
Worse, if they refer you to someone who turns out to be lousy or expensive you have almost no recourse against the referral service. A typical disclaimer states that the referral service is not affiliated with any of the companies providing the underlying products or services. They also point out that they are not insurance nor are their offers intended to replace insurance and that the “plan member” (you) is obligated to pay for all products and services.
So, what’s free? They say the information they provide is free – but the truth is if you use their services that information may actually cost you a bundle in the end.
That’s right, most referral services charge for their services, they just don’t charge you directly; they charge those they refer you to instead. There is no free lunch, this extra charge for the middleman has to be paid by someone; in the end and that is almost always you, the consumer.
As a promotion for those starting a referral business explained; “How can you make money? If you provide the service free to consumers, you can either charge a monthly or annual fee to business listed with your service, or you can collect a commission on each successful referral.”
The money goes the long way around, but it still comes out of your pocket if you use the service. Additionally, referral services can have a clear conflict of interest by that nature of that arrangement, when referring you they would naturally be more likely to look for the best deal for them rather than the best deal for you.
Another problem is the potential for “shot gunning” – sending your referral to several unsuitable suppliers in the hope that one of them, any one of them, will capture your business and pay the commission.
There are some exceptions, if you are a regular customer of a reliable retailer or long-term local business you may find that their buying services or advice can get you a bargain or at least a fair price with little hassle on big ticket items or supply expertise you do not have and, critically, they have a vested interest in keeping you happy. Finding a reputable firm still requires work on your part.
Your patronage, the business you offer, is an important part of your bargaining power in any transaction that’s why others can sell it for a profit; by giving it away to a referral service that relies on fine print to obscure their true purpose you are surrendering a valuable asset and limiting your choices in exchange for nothing.
Be careful out there – the sharks are always circling looking for unsuspecting bait and your money is blood in the water.
