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How Contractors Can Build a Referral Program to Drive More Sales

by BBB Staff | Jun 28, 2018 4:28:29 PM

No matter how carefully your marketing is designed, it follows the same premise – casting a net out into the world and hoping that someone who needs your services will notice you. The best traction for business growth isn't through scattershot methods, but rather through "warm" or "hot" leads – individuals or businesses already known to need or want what you have to offer. With that in mind, one of the smartest moves a contractor can make is setting up and maintaining their own referral program, a scenario in which individuals, typically existing customers, recommend a contractor's services and in return receive either a token of appreciation or a "finder's fee" for connecting demand with supply.

Step 1: Determine a Sustainable, Action-Spurring Reward

If your services run into the thousands of dollars, a $15 reward won't encourage much movement with your customer base – your existing price point already positions them as relatively well-off. Determine how much "wiggle room" you have in your profit margin and use that to determine what you can afford to lose in pursuit of a new project.

Step 2: Figure Out Your Compensation

After you've determined your ideal range of reward values, here are some questions to bear in mind:

  • Should I choose a flat-fee reward, or a percentage reward?
  • How will I provide the reward to the recommending party – cash, gift card, etc?
  • When will I provide the reward? When recommended work begins, or when it ends?
  • Have I discussed how this will impact my finances and taxes with my accountant?

If you find there isn't much financial room to work with, think about your customer base for alternate ideas:

  • Where do they shop? A gift card might provide a more enticing reward, despite a lower value.
  • What do they like to eat or drink? Offering a "meal for two" as a certificate may work well.
  • Can you provide them with a low-level service or discount on their next appointment with you?

Step 3: Empower Your Customer Base

While it's your referral program members that need to do the work, it's your job to facilitate their recommendations. Make sure your website is clear and concise, accessible on both computers and mobile devices, with a clear method of contact on every page. If you're able to work with your website team, it's a good idea to implement unique referral codes and embed them in images that can be shared on social media sites like Facebook. This takes a great deal of your effort out of the equation while accurately tracking individual referrals.

If you don't have a website or online recommendations aren't a good fit for your services, old-fashioned word of mouth will do too! Emphasize that both parties should mention the recommendation to you to receive the reward. If much of your business is conducted offline, make sure you have plenty of business cards and coupon-like flyers available for your current customers to hand to friends and family, along with a blank space where they can write in their name.

Step 4: Advanced Ideas

Once you've gotten the hang of a referral program, you might want to stretch your boundaries a bit. Referral programs can be as simple or complex as you want them to be, which gives you room to build out additional "levels" of referrals. If an individual refers, for example, more than three customers to you, he or she might receive an extra bonus for their hard work spreading the word. Businesses that recommend you to other businesses might get a discount on all future work, incentivizing them to talk up your services as often as possible.

Another opportunity to supercharge your referral program is with a two-way reward system. When an individual recommends you to a friend, the friend receives a promotion or discount alongside the original referrer, urging both of them to continue through with the recommendation even if they're "on the fence" about it.

A note of caution, as well: if your referral program gets to be a little bigger than you're able to comfortably manage with your regular workload, it's better to farm it out to a third-party service than risk losing trust in your customer base by dropping the ball. A number of referral programs exist nationwide for contractors.

Referrals are an excellent way to give your business a leg up, even in competitive industries like contracting. Reward your customers well, and they're sure to return the favor.

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