DJGold

djdonny · Posted: Wed Dec 20, 2006 5:27 pm Post subject: Commissions to Halls?

Hi,

Do any of you offer a "commission" to halls that recommend you, or have any other business relationship with them? Would this be completely legal, or does it tread on "kick-back" laws? I'm actually considering it with a couple of local restaurants, but I want to make sure it's legal and ethical.

Donny

dokai · Posted: Wed Dec 20, 2006 5:50 pm Post subject:

Personally, I think the banquet hall manager should recommend a DJ based on the DJ's performance, not whether or not the DJ is willing to offer kick-backs. I've heard some people justify this as "Well, I'd have to spend money to market to this new customer, so if the banquet hall sends the customer to me instead, and I pay them instead of buying a magazine ad, what's the difference?"

Now, if a hall was willing to give me an EXCLUSIVE deal on that hall in return for a discount for ALL of their clients, I'd be willing to consider that. But only if the discount went to the clients, not to the hall. I think that's fair because I'd (probably) install a system at that venue, since I'm the only one that'd be operating it, thereby making my job easier, thereby justifying a small discount.

Just my opinion, of course.

DJ Daddy · Joined: October 20th, 2004 Posts: 185 Location: MO

.

Locally, it's been done two ways.
One would be as mentioned above: If the DJ is booked via the venue and they receive $XY for this booking, the DJ gets $X and the venue pockets $Y. This would entail a marketing agreement. This assumes that the venue offers to arrange the DJ if the customer wishes.
Another way it is done with a couple of local venues is that only the venue's DJ performs at events at that particular venue. I presume it would still be a $XY arrangement as I'm not privy to the relationship between the venue and the DJ.

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Joseph Ivy · Joined: August 16th, 2006 Posts: 133 Location: Glendale, AZ

Absolutely not.

djdonny · Posted: Wed Dec 20, 2006 8:47 pm Post subject:

No, I'm not looking to be the hall's only DJ. I'm just looking at the possibility of offering a small amount back to venue managers any time they refer a client who books me for their hall (I would sell and write the contract myself, so it's just a referral). It would be a kind of thank-you-for-your-referral gift, but would be an ongoing agreement as a way to motivate the manager to pass out my cards or mention my name.

I see it as an alternate means of marketing, similar to hiring a real estate agent to sell a home.

Joseph: why not?

dokai · Posted: Thu Dec 21, 2006 8:10 am Post subject:

djdonny wrote:

Joseph: why not?

I'm not Joseph, but I'd still like to toss in my answer: conflict of interest.

The real estate agent represents the seller. This is known, and disclosed. I don't think the banquet manager is going to be recommending you and saying "And this DJ pays me to recommend him."

The banquet manager should only be referring to his customers the DJ that is the best choice for their event. If one of the several DJs available is paying the banquet manager a referral fee, then it is assumed that that DJ will get preferential treatment that's NOT based on whether or not he or she is the best fit for that particular event. This then causes the customer to not receive the best referral they could, which means the banquet manager isn't doing his job to the best of his ability.

Refer me because you think I'll make your customers the happiest they could be. Otherwise, refer someone else. Or, perhaps, don't refer ANYONE, and leave it to the customer to determine who the best fit is.

DJ Daddy · Joined: October 20th, 2004 Posts: 185 Location: MO

.

If you (generic you) have ever working with a booking agent or agent in general, it would be normal that the person booking the services of an entertainer would receive a fee of some sorts. That arrangement assumes that payment for the services rendered is made to the agent, not to the actual person performing.

A referral fee would be what you're talking about, Donny. That becomes a bit more touchy. If a third party just refers you to the customer and you do the actual selling, no fee should generally be considered. You know what comes to mind? A click-through fee on all the little banners on various websites.

Again, if a venue "sells" your services, they deserve a negotiated fee. Just saying "Give DJ Donny a call," I don't believe a fee is warranted.

Did the venue promise to give you a cut if you recommend them? Probably not (I tried that many moons ago).

Being diplomatic, explain that you appreciate their confidence in your services by recommending them. However, your fees are calculated so thin that adding referral fees to your pricing structure might diminish booking chances. Also, keeping track of who referred who to whom would probably lead to misunderstandings.

I wouldn't do it.

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Joseph Ivy · Joined: August 16th, 2006 Posts: 133 Location: Glendale, AZ

dokai pretty much said it well. I'll add one caveat though.

My clients don't like the idea of a vendor getting paid to recommend DJs. I've discussed it with my clients and they consider such payments to be kickbacks.

As far as getting more bookings, the kickback method works for that.

djdonny · Posted: Thu Dec 21, 2006 5:52 pm Post subject:

Okay, very good points, guys. Just a couple of responses first ...

Quote: The real estate agent represents the seller. This is known, and disclosed.

If I did enter these agreements, I would want to disclose it somehow. (I've already thought of this.) A statement such as this could be added to my contract: "Sound Sensation has established business relationships with certain regional venues which may include payment of fees for their referrals." In fact, I may want to add a similar statement to the back of the special business cards that the venues hand out for referrals.

Quote: I don't think the banquet manager is going to be recommending you and saying "And this DJ pays me to recommend him."

I wouldn't want the manager to recommend me, just refer me. Since posting this topic I have spoken with a lawyer friend about it. He said that it is common for lawyers to refer clients whom they can't help to other lawyers who can (eg, different specializations of law), and that those referred lawyers often pay something back to the referrer. He also said that the key is that the referring lawyer should only offer the referral without making any effort to persuade the client to use that lawyer.

Based on his comments, I would think it's OK for the venue to offer the referral as "If you're looking for a DJ, you can call him," but not as, "If you're looking for a great DJ, I highly recommend you call him." I could even include another statement on the business card along the lines that "The venue makes no claim regarding the quality of the services provided by the DJ, nor is the client in any way required to hire the referred DJ."

All that being said, there is something about this that still bothers me, which is why I posted. However, if there was full disclosure of this relationship right on the business cards the venue hands out, as well as on my contract, and if the managers were told to simply refer me by handing out these cards (not to recommend me or to persuade the client), would that change your minds at all?

This is a good discussion which is making me think. Thanks for your input.

djdonny · Posted: Thu Dec 21, 2006 6:10 pm Post subject:

Here's perhaps a better analogy. How is this relationship different from a DJ linking to an affiliate party supplies site (like MakesParties) and getting back 20% commission? In fact, nowhere in the MakesParties store's FAQs does it mention that a commission relationship may have been made with a referring affiliate, nor do the DJ sites disclose this.

dokai · Posted: Thu Dec 21, 2006 6:16 pm Post subject:

Your referral analogy doesn't quite fit. We're not talking about one DJ referring a client to you after declining the business because he or she is already booked. Nor are we talking about a venue manager referring a client to another venue because of schedule conflict, again declining the business. We're talking about one contractor, who IS entering into a business arrangement with a client, telling the client about another contractor that provides a completely different service. Different animal all together, imho.

That said, your efforts to be up-front about everything makes me less uneasy about things, although I still can't claim that I like it. However, I'd be concerned that all the legalise printed on everything is very likely to frighten away potential clients. "Why did they add this disclaimer on the back of the business cards? Did they get sued when the DJ sucked?" That type of thing.

Last thing: That's a mighty fine line between "referring" and "recommending". I don't think the average client is going to differentiate between the two. I think that the average client is going to hear "If you're still looking for a DJ, you should call this guy", and then interpret that as a recommendation. After all, why would the venue manager, who is a professional in the wedding industry, say such a thing if the DJ in question wasn't the best for their event?

djdonny · Posted: Thu Dec 21, 2006 6:26 pm Post subject:

Quote: We're talking about one contractor, who IS entering into a business arrangement with a client, telling the client about another contractor that provides a completely different service.

Good point about the venue having already entered into an agreement with the client. And I agree there's a fine line between referring and recommending.

However, consider the affiliate party store scenario. As DJ's who have already entered into a agreement with clients, we refer the clients (recommend that they go?) to our online party store to purchase products from a completely different type of vendor. Do we disclose our affiliate 20% commission relationship with the client?

dokai · Posted: Thu Dec 21, 2006 6:40 pm Post subject:

djdonny wrote: Here's perhaps a better analogy. How is this relationship different from a DJ linking to an affiliate party supplies site (like MakesParties) and getting back 20% commission? In fact, nowhere in the MakesParties store's FAQs does it mention that a commission relationship may have been made with a referring affiliate, nor do the DJ sites disclose this.

Because it's a different type of relationship. You're essentially renting out billboard space to MakesParties, and getting paid for that when someone buys something after arriving there from your website. But you're not recommending them, any more than a billboard company recommends the clients that rent space on their billboards. And even then, you ARE running the slight risk that someone who is displeased with the service and/or product received from MakesParties might feel that you're partially responsible. If MakesParties suddenly started cashing checks but not shipping product, and their reputation tanked, would you want their banner on your website?

While this is a closer analogy, it still doesn't take into consideration the rapport and trust that's being established between the venue manager and the clients, and the implied recommendation that's going to exist no matter how neutral he or she tries to sound when your company is mentioned. That implied recommendation is going to carry some weight unless it's countered with legal jargon similar to what you described earlier, and you already know what I thought about that.

This is a great thread! Thanks for making me think! :wink:

dokai · Posted: Thu Dec 21, 2006 6:53 pm Post subject:

djdonny wrote: However, consider the affiliate party store scenario. As DJ's who have already entered into a agreement with clients, we refer the clients (recommend that they go?) to our online party store to purchase products from a completely different type of vendor. Do we disclose our affiliate 20% commission relationship with the client?

Hmmmm, that would depend on whether or not MakesParties is our SUPPLIER, or our PARTNER.

Lots of DJs purchase and use props of various types. I used to buy a lot of glow products from SureGlow, for example, back when I was doing a lot of "kiddie" events. I don't get kickbacks from SureGlow when I sell their glow products, but I do make a profit from it. The client doesn't know anything about SureGlow, but I'm sure that they don't think that I'm mixing the chemicals myself in my backyard. In other words, I'm certain that they realize that there's a supplier that's selling me the product, and that I'm making a profit when I sell it. As far as the client is concerned, however, they're buying MY glow products. I would feel comfortable making 20% profit, or commission, from similar transactions from MakesParties. It's just a different pay-out method, i.e., I'm making a commission off the sales instead of buying product from a supplier and then marking it up myself and then re-selling it as MY product. Either way, the quality of the product is going to reflect on my business. But it's still being sold to the client as part of MY business. I'm accepting a degree of responsibility in return for the profit.

If your venue was endorsing you by saying "And this is our in-house DJ company", then that would be a similar situation. But that's not what you're describing.

djdonny · Posted: Fri Dec 22, 2006 4:41 pm Post subject:

I'm going to have to think this through a bit more. I'm not sold either way.

Thanks for the discussion though!

davidjones@a2zmobilemusic · Posted: Thu Jan 11, 2007 9:14 am Post subject: Re: Commissions to Halls?

djdonny wrote: Hi,

Do any of you offer a "commission" to halls that recommend you, or have any other business relationship with them? Would this be completely legal, or does it tread on "kick-back" laws? I'm actually considering it with a couple of local restaurants, but I want to make sure it's legal and ethical.

Donny

i am the preferred dj at one venue that i pay 10% towards their charity.
the ladt that runs the place also runs a school for mentally challenged children. i just bump it up 10% and explain to clients and they actually don't mind the higher rates........... maybe thats another sign to raise rates again@!!

SteveCie · Posted: Wed Feb 06, 2008 11:41 am Post subject: Re: Commissions to Halls?

Money makes the world go around.
I pay a reward referal fee to anyone who refers a client to me that I book.

I don't care if it's the banquet manager, the bus boy, the waitress, the doorman, the janitor, the limo driver, whomever.

I get more bookings...PERIOD.
The avarage referal reward is $100.

There is nothing unehtical about it. It's business.