Does your marketing budget include money for referral leads? Having customers do your marketing for you via referrals can lower lead costs while raising sales conversion rates. But you won’t get recommendations simply by wishing and hoping. 

Contractors need to budget for more referrals, says Brian Kaskavalciyan, president of g|Four Marketing Group, in Miami, and author of The Definitive Guide to Relationship Marketing. Kaskavalciyan says that the biggest obstacle to generating more referral leads—the hardest kind of lead to get— is the business owner’s belief that those leads will naturally follow if the company does a passable job. “If you’re willing to spend $300 on a TV lead or an Internet lead that closes at 27%, why not spend those dollars on a lead that closes in the 40% to 50% range?” Kaskavalciyan asks. 

To get more referral leads:

  1. Establish your target. Start with intention. “The first thing I suggest is to set a goal for the year,” says speaker and author Dennis Schaefer. “Make every client aware that you’re looking to please them and that you won’t ask for a referral unless you’ve exceeded their expectations.” This process starts at signing but doesn’t end there. Assume, Schaefer says, that nine out of 10 clients are on Facebook. Ask them to post project pictures and discuss their experience there.
  2. Track referrals like you track any other lead source. Toms River Door & Window, in Toms River, N.J., recently contracted with lead-generation consultant Chash Giovenco to improve marketing ratios by, among other things, boosting referrals. Giovenco made referral leads trackable in the marketing database and set a goal that in 2015 15% of business would come from that lead source. 
  3. Provide homeowners with an easy, obvious way to refer you. You may think that you and your company do an outstanding job. Homeowners may think so too, but that doesn’t equate to a referral. Customers need a process that allows them to easily take satisfaction a step further. There are plenty of great systems. Toms River Door & Window used to send a small check to customers when a job came in that had resulted from their recommendation, “but there was no hoopla,” Giovenco says. She upped the reward to a percentage of the job and created both a referral package that includes cards that customers can fill out to ensure that they get rewarded, and a simple one-page form to log the cards.
  4. Make it personal. Twenty years ago, San Antonio contractor Scott Barr set out to move his company’s referral rate from single digits to 50% of business. Today referrals make up 45%, largely because direct marketing efforts also expanded. Homeowners, Barr says, like to have one person to deal with from start to finish. And that person is the one who, in “the honeymoon phase” immediately after the job is finished, should close the loop by requesting referrals.
  5. Give clients something to write home about. Exceeding customer expectations is a lofty ambition. It’s also vague. You should make it specific. For instance, Bee Window, in Indianapolis, decided to wow customers with its one-and-done installation procedure. Everything installed in one day, no return trips needed. In an age when online retailer Amazon is seriously toying with the idea of same-day delivery via drone, co-owner George Faerber says, the home improvement company aims to reduce the six-week period between signing to completion by a third. Referrals are “not about the sales rep asking,” Faerber says, “but rather, about delivering an extraordinary experience, then following up by letting customers know how they can help you.
  6. Spread the word. These days, that help can come either as a referral or as an online review. No matter how happy they are with the work your company did for them, marketing and sales consultant Tony Hoty says, most homeowners aren’t going to take the time to do the heavy lifting. It’s not their calling, so Hoty suggests doing it for them. That can take the form of either calling past customers and offering to reimburse them for recommendations that become jobs, or indicating to new customers that such recommendations equate to a discount. With their agreement, Hoty says, handwrite a letter under the customer’s name, “tactfully boasting” about their recent home improvement project, along with a photo of the homeowner next to the company yard sign, with the phone number visible. Handwrite the address and the return address and hand-deliver the letter to neighborhood homes. “Let your customers know that for every job you get in their neighborhood, you’ll compensate them with a $100 referral fee.”