Many company owners would love to have what Alure Home Improvement has. The Long Island company, which topped the full-service list in the Remodeling 550, generated about $39 million last year. Some 60% of that $39 million came from referrals or past customers.

Some home improvement companies built their businesses canvassing. Some by mastering advertising and media. Alure built its business with leads from past customers, which cost far less to produce and which close at 60% to 70%.

Set up a System

Much more common, though, is the home improvement company that gets maybe 3% to 5% of its business from past customers, and is stuck there.

How do you get to 60%? It takes work, systems, and managing those systems. Say you get fired up over the weekend and on Monday you call a meeting to announce that you’re offering a bonus for leads that employees bring in or you are setting up a referral reward program that reps must mention on every call. A month later, everyone has forgotten about it. It takes time. One company I worked with has been at it for nine years, but it took two to three years for it to see measurable results for its efforts after putting the plan into action.

How to Get There

• First, be referable. You become referable by committing your organization to outstanding customer service. You become referable at the point where 95% of your customers are satisfied. Naturally, every company owner thinks his operation delivers superior service. But there’s only one way to know and that’s to ask using either a third-party customer survey service such as  GuildQuality or by querying customers yourself.

• Second, make repeat/referral business a goal and establish that goal as a company priority. Track results weekly and monthly with your lead source data. Would you like to go from 5% to 10% this year? How about in three years getting to 30%, without diminishing the business you’re already generating with your marketing? Sound like a goal?

• Third, build to last. Set quotas and create rewards. Design a program that rewards the salespeople, installers, admin staff, and customers who bring you new customer contacts. Make referrals an institution in your company, that is, a part of your company’s management structure with systems you can’t ignore or dispense with because they’re part of who you are.

• Fourth, communicate. Check the laws in your state and create a referral reward program. Make that program part of what you say to the customer a small part. The bigger part is you being interesting, entertaining, or informative via email or via your print newsletter with messages that reinforce the way-above-average service you delivered on the job. You’ll get the majority of your referrals not because customers are getting a reward but because they want to help friends, neighbors, or family members make a good decision.

• Fifth, invest in the process. Contrary to popular mythology, referrals aren’t free. First, plan on spending some extra money to ensure that every customer is thrilled. Consider some small token reward for just being your customer. The point is to call attention to the way you’re different from other companies. Then spend some money on the follow-up marketing that keeps you regularly in front of customers.

And here's one additional benefit: Leads have been tough to come by since the onset of the recession, but right now leads are becoming a little easier to get. It’s salespeople who are getting harder to find. If you have repeat and referral customers, it’s easy to sell them. If you had an institution in your building to make referrals happen, who wouldn’t want that job?  —Marketing and sales consultant Rick Menendez has worked for some of the largest home improvement companies. Reach him at thericker@cox.net or 757.7464664.