Referral Marketing 101

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Referral

MARKETING 101 If you aren’t asking for referrals when you finish a successful renovation for a happy client, you are missing out on future work.

The average ‘close’ rate on referrals is more than 30 per cent.

That compares to something like 5 per cent on leads that come to you from the web. The key to getting referrals is to ask for them.

By Mike Draper www.renovantage.com

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lmost every contractor I talk to tells me that, although they get a lot of business through referrals, they want more. Not only do they wish they could get more referrals, they wish they knew how to get more referrals.

Let’s start off this discussion by looking at two ways to get referrals. One, which is passive (it happens without your participation, usually), is called Word of Mouth (WOM) marketing. The second,

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better way to get referrals is called Referral Marketing.

WOM marketing isn’t really marketing since, as we’ve established, you don’t really do anything to create the WOM lead. The lead comes to you or it doesn’t. You don’t know if someone called you because they were referred to you. And you also don’t know how many times your name was given out by a happy client of yours but the prospective

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new customers didn’t call!

There are even more problems with this passive approach. If you do get a call, you don’t know if someone gave your name to the type of person you want to do work for. Or if that incoming call is for the type of work that you want to do. The whole problem with WOM marketing is that it’s all uncontrolled, random and, in essence, a crapshoot.

Take control In business, we want to have control over our own success. If we have control, we can take action to make our business grow and, ultimately, make more money. We want to be able to do more of a good thing and less of a bad thing. Passive WOM marketing means that we can only grow by chance as our name gets passed along.

So, let’s look at a better way to operate. Let’s look at referral marketing. This is a more active form of marketing whereby you, the contractor, can do specific things that will create more business through referrals. One specific thing that you can do under this model is to provide an incentive to someone when they give a referral to a friend or relative. I am not suggesting that this tactic is all there is to referral marketing. Or that you will like that tactic. But this is what referral marketing consists of, having actionable tools and tactics to get more referrals.

Before we go much further, let’s establish our terms. What is a referral? A referral is: “A business opportunity initiated for you by a third party – a transfer of trust.”

And what is referral marketing? Referral marketing is: “The systematic cultivation of business opportunities by referrals.”

business through referral marketing. The first is that a referral is a transfer of trust. The potential new client who receives a referral from one of your happy customers is trusting that their friend (or relative or business associate) is telling them the truth about you and that their friend wouldn’t misguide them.

So, the trust of the person you have done great work for is transferred to the recipient. And your (hopefully) new prospect already has a level of trust in your capabilities.

That initial trust is a very, very good thing. As we all know, in the renovation business, when a homeowner has trust in a contractor, the whole quoting and proposal process is going to run much more smoothly. In the best of all possible worlds, your brand new prospect won’t even get more quotes because they already have so much trust in you.

After all, they’ve just been referred to you by someone that they themselves trust. And you’ve just done a superb job on a project for the person that referred you. The potential to either reduce or eliminate competitive bidding is now very real. Imagine: No competition, or very little competition. No price wars. No long, drawn out bidding and decision processes.

Referrals will typically close faster, close easier and often with greater margins for the contractor.

There is more good news. The average close rate of a referral is over 30 per cent, whereas an internetbased lead could be as low as five per cent. How many internet leads have you received where you called the homeowner only to find out you were the tenth contractor they have called? Compare that close ratio with the typical close rates of direct mail marketing, which can be as low as one per cent. No wonder everyone wants more referrals.

“A referral is a transfer of trust.”

Taking action to generate referrals Two key concepts There are two key concepts in these definitions that are critical to understanding and growing your

It’s absolutely critical that you understand the need to get out of the habit of letting referrals just “come” to you, passively. www.canadiancontractor.ca

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Here is a list of actions that you can take to make those referrals materialize >> 1. Ask for a referral!

It sounds so simple, yet not enough contractors do it. I was guilty of this bad habit myself, until recently. I have a Renovantage client that I have been coaching for a long time. He asked me two weeks ago if I was looking for more clients. I was floored. Here I was, helping my client to make major changes in his business and he didn’t know that I was looking to do this for more clients like him! It was 100 per cent my fault. I hadn’t asked him if he knew of another company like his that could benefit from my coaching.

>> 2. Finish the current project

on a high note.

The last 10 per cent of a job is where it’s very human to start thinking about your next job, to rush to completion, to just want that project to end! But you need to buckle down and do your very best work at the end of a job. Not only is your 10 per cent holdback in play here, you will be looking to get a referral at this stage for future work.

>> 3. Don’t try to make up for

losses already sustained on a project.

When you have a project where you have made a mistake or where you have had to eat some costs, the worst thing you can do, from a referral marketing perspective, is to try to make up the loss on the project by charging too much for extras or – cardinal sin – for things that you know should already have been included. Suck up the

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mistake and complete the project on a high note.

You are far more likely to impress the homeowner that you are a stand-up contractor if you eat your losses and just get it done the right way. A great referral will go a long way towards helping you win new business where you will make the profit you “should” have made on this job.

>> 4. Go the extra mile.

Take the time to treat your client with the utmost respect as you wrap up a job. Take their complaints about any deficiencies seriously, and fix them as soon as you can without whining. Your client won’t remember the 90 per cent of the job that you did brilliantly if the last 10 per cent of it was hurried, slipshod or slapdash.

>> 5. Follow up before the

warranty expires.

At first glance, this advice may seem like a big waste of time, but you should consider two things. First, if there is a warranty problem and you don’t fix it, the problem will bother your client for a long time and the likelihood of them passing your name along will be diminished. Whereas, if you fixed the warranty item ahead of time, your client will be so impressed that they will want to tell their friends how great you are. When you go for the walk through, there is a much higher probability that the homeowner will ask you to take a look at something that they were thinking of doing, like that basement upgrade or master bath upgrade. By following up in this way, you will set yourself apart from the 99 per cent of

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other contractors who, assuredly, will not find the time to generate positive impressions in this way.

>> 6. Stay in touch in a systematic,

ongoing way with all clients you have worked for.

Email them a newsletter. Send birthday cards.

Send Christmas cards, if appropriate. With the permission of new clients, send photos of new work that you are doing, with a little note that you are excited about some new product or technique you have discovered. And if you get referrals from clients, for goodness’ sake, thank them.

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7. Let clients know what type of work you like best.

If you let your clients know what kind of referral you are looking for, you are more likely to receive exactly the type of lead you want. If your client doesn’t know what your ideal referral is, they will either send you a whole bunch of referrals that you don’t want or they won’t send you any at all. When you receive referrals you really don’t want, the typical reaction is to not do a good job

following up on them, therefore you won’t win them.

When this occurs, the original homeowner is going to stop referring you. When your client knows what type of referral you are looking for, they will be far more inclined to provide you with the referral.

>> Summing up As you can see, the difference between Word of Mouth (WOM) marketing and true Referral Marketing is absolutely critical to understand. If you don’t think you are getting enough referrals, either you are doing poor work or you are doing great work but being too passive about referrals. You have to be very active in what you do to generate more referrals for your business. Execute on the ideas in this article and you will see the increased benefits of going the extra mile for your clients. Ultimately, you will receive more referrals. And, you are going to make a lot more money.

Mike Draper is a business coach for Renovantage (www.renovantage.com) and a frequent contributor to Canadian Contractor. See his columns and videos online at www.canadiancontractor.ca (type Mike Draper into the search bar for easy access).

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