The Two Times You Should Refer a Customer to a Competitor

You may be thinking, “Wait—why would I ever want to refer a customer, potential or otherwise, to a competitor?” Good—this article’s for you.

In fact, there are two such situations. One won’t surprise you. The other is even more obvious—but even easier to miss.

Why We Don’t Give Referrals to Competitors

It’s not as dumb a question as it sounds. Competitors are those we compete against; what we win, they lose, what they win, we lose.

That certainly means we don’t want to lose direct competition. But as the idea of competition has become like mother’s milk in business, we tend to take it one step further: we want to prevent competitors from winning, even if we’re not directly involved.

So: we hate to lose, and we hate to see them win. Two distinct reasons we don’t give referrals to competitors.

The Competitive Gospel Applied to Selling

The Gospel of Competition says that the whole point of business, including selling, is to win.

The business strategists tell us that key to being successful is being number one or number two in your business.

The football strategists tell us winning is not the main thing, it’s the only thing.

The military theorists tell us the enemy of my enemy is my friend.

The problem with the Gospel of Competition is that, taken to extremes, it competes with the Gospel of the Customer.

The Gospel of the Customer Applied to Selling

The Gospel of the Customer says that the whole point of business, including selling, is to help the customer. If you succeed in doing that, then most likely you will also ‘win’ in the competitive market place.

Though if those two goals come in conflict, you’ve got a serious problem. What if the right thing for the customer involves helping your competitor? That turns out to be a serious question of business identity.

Competitive Referral Number One

The most obvious referral to send to a competitor is a very difficult customer. If you worship the Gospel of Competition, you can justify this on the grounds that it gets rid of a problem for you, and causes a problem for your competitor. Machiavelli would be proud.

But there’s a better reason for doing this—if you believe in the Customer Gospel.

If you believe the Customer Gospel, then you believe in relationships and trust, and the economic benefits for all that come about through collaboration and transparency.

A difficult customer for you, then, is likely to be a customer that doesn’t believe in those things. And a competitor for you is probably a competitor who also doesn’t believe in those virtues, at least not as much.

In that scenario, you do all three parties a bit of a favor, though you perhaps the most. You align transactional sellers and buyers, while focusing on relationship customers yourself. You gain competitive advantage—but everyone’s at least a little better off. That’s good.

Competitive Referral Number Two

The more—or less—obvious situation is when your competitor actually is better suited to serve the customer than you are. Then what do you do?

In this case, not only do you lose a sale (maybe), but you lose one to your competitor. If it’s an existing customer, you risk giving your customer exposure to a competitor—risking them leaving you forever.

Why would you ever do such a thing?

Because if you would never, on principle, give a lead to a competitor—even if they are better suited than you—then you cannot be trusted; you have just said, in principle, that you would always put your own selfish interests ahead of those of your customer.

I once heard a physician make this point directly:

“In my 25 years as a doctor, I have never heard a pharmaceutical rep from any company ever recommend a drug from any other company. Consequently, I don’t trust any of them.”

What’s at stake is your trustworthiness. It depends heavily on your willingness to take the long view, and focus on your customers’ needs ahead of your own—rather than continually trying to gain competitive advantage at every transaction.

And–paradoxically—in the long run, you probably end up getting the competitive advantage as a collateral effect anyway.

17 replies
  1. Ed Drozda
    Ed Drozda says:

    Great post and all so true. I no longer see the word competition as a bad word. In fact if I were to define competition now I would do so with one word- possibility. Knowing that others do what I do (whether or not they do it better) reminds me to be the best I can- possibility. Knowing that when someone needs my services and I feel a “competitor” is better suited for that person- possibility. There is always enough to go around- especially when we acknowledge possibility.

  2. peter vajda
    peter vajda says:

    I think Ed has it perfectly. When we disabuse ourselves of the premise, “story,” misperception or misunderstanding that life is a zero-sum game, we can be more open to possibility, trust, integrity, and to regarding others without jealousy, fear or resentment.

    Your graphic says, “Are you running the right race?” Charlie, we’re all running that race. But we don’t have to be in the lead every second. That doesn’t mean failure, being less than, losing out or “if you win, I lose.” Personal bests happen all the time, in life and in business. I don’t have to trip, foul or otherwise hamper the others or even wish them to fail – the zero-sum approach – in order to experience success and “winning.”

  3. Ed Drozda
    Ed Drozda says:

    Thanks Peter; let me say I do not feel that Charlie rejects my notions. I believe he does support them. If I missed that I do apologize. (The apology does leave the space for possibility- yup, I really do belive in that).

  4. Andrea Howe
    Andrea Howe says:

    Ed, I really appreciate your comment about “There is always enough to go around.” You’ve identified a key mindset that is a fundamental driver of trustworthiness. If we operate from a context of scarcity/”the pie is only so big” then the choices seem narrower and the pressure to focus on our own self-interests mounts. If we fundamentally believe there is always enough to go around, then suddenly things like giving a piece of business away don’t seem so threatening or illogical.

  5. Shaula
    Shaula says:

    Andrea, it would be wonderful if you (or one of your colleagues) could tackle the fallacy of scarcity and it’s relationship to trusting and trustworthiness in a post one day. It’s a great topic, and not one I see anyone but your crew discussing.

  6. Bradley Barrett
    Bradley Barrett says:

    Any tips regarding techniques for when I send a customer to my competition that encourages the customer to say who sent them? I receive new customers every week from a friendly competitor and every time the new customer calls they let me know they were referred from my competitor. What do they say to that customer that makes them compelled to tell me who referred them? I want my referrals to have the same impact and importance. I.e. – When I receive a referral from this competitor my ears perk up and the importance to pleasing this new potential customer is of highest priority. I view this as a pre-qualified customer.
    Any tips or suggested reading would be appreciated.

    • Charles H. Green
      Charles H. Green says:


      Interesting situation; I commend you and your competitor for having the bigger picture customer viewpoint in mind in your conduct.

      I would note that if there are referrals from your competitor who do NOT identify themselves as such, you would have no way of knowing. But I’d doubt that is the case.

      I’d guess that your competitor is telling their customers to go to you for reasons that are good for the customer; and, as I argued here, that is not common. I’d guess therefore that the customers are impressed, and naturally mention the referral BECAUSE they are impressed.

      I’d suggest you not worry about it. First of all, if your motives are clean, they will tend to get mentioned naturally by customers who are impressed with your motives, just as are those coming to you from your competitor.

      Anything you do to put your thumb on the scale and try to glean more impact that might be seen as reflecting positively on you runs the risk of making you look self-oriented, and undercuts the pure customer focus of the referral in the first place.

      Trust in the natural tendency of customers to be impressed, and to naturally talk about the good approach you have taken.

      And though you didn’t ask, it might not hurt to drop a short note to your competitor, saying how impressed you are that their commitment to customer focus is strong enough to put it above their own short-term self interest. Don’t think of it as a thank-you note – that makes it sound commercial. Instead, think of it as respect note – commenting on your respect for their practices.


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