How to Grow a Referral-Based Business |
How to Grow a Referral-Based Business
How to Grow a Referral-Based Business

When considering a home project, where do you turn to for help in finding the right company for you? Your neighbors who just finished a major home renovation, your friends who just built a custom home, to your family members who just replaced their windows and doors, or to the social media connections who are working with home artisans. Word of mouth referrals are a powerful force in any industry, and a satisfied customer can be your best source of advertisement.

The math is simple: get more referrals, grow your business.

The Power of Referrals: By the Numbers

Speaking of math, let’s dig into some numbers. This is why building a referral-based business is essential, particularly for home improvement professionals:

  • 94% of consumers trust referrals from people they know
  • People are 4 times more likely to buy when they are referred by a friend
  • 77% of people are more likely to buy a new product when they learn about it from friends or family
  • 84% of consumers “completely” or “somewhat” trust recommendations from friends, family, and colleagues
  • Word of mouth is a “key influencer” in the purchase decisions of 74% of consumers and is the primary factor for between 20 – 50% of decisions

Research conducted by the Wharton School of the University of Pennsylvania found that referred customers are more loyal, have a higher lifetime value, are more profitable, and are much less expensive to acquire than other customers.

The bottom line: consumers trust their peers more than they trust brands – at least until they build a relationship – and referred customers offer tremendous value. Leveraging this is key in building a strong, sustainable business.

How to Build a Referral-Based Business

First and foremost: be referable. When people recommend a business, they are putting their own reputation on the line. If it works out, they look like a hero. If not, then they erode trust with their friends, family, or connections. You need to be reliable, dependable, trustworthy, and responsive while delivering top quality, value, and service. When you do this, and do it consistently, you’re referable.

Build Your Reputation on What You Do Best

You may be a full-service home improvement professional. But what does that mean? People need to know that you can fulfill a specific need – and deliver on a promise – before they refer you to a friend, family member, or coworker. People want to entrust their home improvement needs to an expert who they can trust, who has extensive skills with their particular type of project. If your offerings are either too broad or ill-defined, it can confuse people, and kill your chances getting referrals.

Build your brand and your reputation on what you do best; this makes it easy for your customers to refer you.

Focus on Your Ideal Clients/Customers

According to the Pareto Principle, 80% of your business will come from 20% of your customers. Find those 20%; they’re your ideal customers. This does not mean you deliver subpar service to the other 80% (you can imagine how well that’ll work out for you!). It does mean, however, that you should focus your referral efforts on your top 20% of customers. These are the people most likely to be ecstatic with your service and the results they’ve achieved – and they are more likely to refer other high value customers.

Don’t Be Subtle

If you’d like to get more referrals… ask for referrals. If you’ve done a superb job, customers want to give them to you. It comes down to our need to be social. Marketing expert Seth Godin writes:

More than features, more than benefits, we are driven to become a member in good standing of the tribe. We want to be respected by those we aspire to connect with, we want to know what we ought to do to be part of that circle.

We want to share our knowledge and show our fellow tribespeople that we’re helpful.  Customers just may not know how to refer you – or even if you want them to. Ask. See if they know anyone who fits the description of your ideal customer and who could benefit from working with you.

It’s best to ask for a referral after you’ve scored a big win or a customer has complimented your work. It can feel a bit more organic and natural this way. For example, a customer says, “Wow! I am so pleased with the doors and windows you installed! They’re terrific, and I’ve already noticed a difference in my energy use.” Great! Thank them and then mention that you’re happy to help if they know of anyone else who could benefit from your services.

Give and Take

When you are a part of a business community, like Home Artisans of Indiana, you can create referral partnerships with complementary home improvement professionals. Because the community is curated, you can be sure they operate with the same level of quality, value, and integrity as you do. It also creates a more streamlined, seamless experience for customers. It’s a reciprocal, mutually beneficial relationship.

Thank Your Referral Sources

It is essential that those who refer you feel acknowledged and appreciated. A simple “thank you” means a lot. Rather than an email, which can easily get lost in the abyss of the inbox, call, send a handwritten note, or send a small gift.

A referral-based business is built on trust, quality, and exceptional service. When you are referable, you have the capacity to grow your company, increase customer value, and boost the bottom line. Take the first step by joining Home Artisans of Indiana; we build better businesses together.

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