In the last issue, we discussed the simple secret to capturing business from repeat customers. This week, I’d like to focus on the second source of your database goldmine — referral leads.

The Importance of Referral Leads

According to a survey conducted by the National Association of Home Builders (NAHB), professional remodelers attribute 37 percent of their leads to client referrals. You may find the percentage to be far greater in your own company. A national survey by Remodeling magazine supports the notion that a majority of remodeling business comes from personal referrals. In the survey, homeowners were asked to list the sources that they used to find a contractor. Some 70% counted on either direct remodeling experience or their friends or relatives to help them find a contractor.

Because this source of business is so important to your company, make it a top priority to create a program that encourages referrals.

Referrals are win-win. They assure the homeowner that the remodeler they are contacting is professional and delivers what has been promised.  For remodelers, they deliver a prospect who typically values more than just price and is much more likely to buy than the random lead from the phone book or a newspaper ad.

There’s no argument that the highest quality lead is a referral. Remodelers have found that:

• The close ratio on these leads far surpasses that of any other source.
• The cost of a referral lead is the least expensive of any other.
• The referrer often gives the prospect a lot of information about the company, which sets the tone for the remodeler to make the sale.

By speaking to their friend or neighbor about their project, a prospect probably knows:

• You’re not the cheapest remodeler in town, but you offer good value.
• You deliver what you promise.
• Your personnel are pleasant, friendly, and courteous craftspeople.
• You keep the job site clean and neat.
• You have worked for others who are similar to the prospect, and those other customers are happy with your work.

Remember, referrals come from a larger group of people than just your previous customers. Friends, social acquaintances, and business associates also can send referrals your way.

We call this extended group your Circle of Influence. This includes not only previous customers, but also business associates like suppliers, your insurance agent, and the director of your local association as well as personal contacts like the PTA president and the parents you’ve met through your child’s Little League.

Stop now and create a list of these influential people. Then create a program that will help these people think of your company when they’re presented with an opportunity to refer you.

What about you?

What programs and systems do you have in place to ensure your customers are spreading the word about you? I look forward to hearing your comments below.