23 May Are Referrals worth your time?
By Chuck Fischer, VP / Account Supervisor
Just how important are referrals to your business? Take into consideration the following facts and judge for yourself.
- Referrals get consumers to switch to or try a home service company for the first time.
85% of homeowners indicated that the one thing that will get them to use a new home service company is a friend or family member telling them about a great experience. (GKV Homepulse)
- Homeowners trust referrals.
100% of homeowners indicated that they completely or somewhat trust recommendations from family and friends. (GKV Homepulse)
88% of homeowners indicated that they completely or somewhat trust the opinions of consumers posted online. (GKV Homepulse)
- Referred customers are more valuable.
The lifetime value for a new referred customer is 16% higher than non-referrals. (Wharton Business School study)
- Referred customers are more loyal.
A referred customer leaves a company 18% slower than the average customer. (Wharton Business School study)
So, if you don’t have a referral program, now is a great time to create one. And if you have a referral program, how can you make it better? From our proprietary GKV HomePulse study, below are 3 key items to consider when executing your referral program:
1. Focus on superior customer service and a second-to-none customer experience.
Customers want to tell their story about a great experience. 94% of customers are definitely or probably willing to refer a home service company to others after having a good or positive experience. But it goes both ways. 83% of customer are definitely or probably likely to tell others not to use a home service company after having a bad or negative experience.
Don’t lose current and future customers. Make it easy for your customers to tell others how great you are. From the first call to the final bill, deliver a superior customer experience.
2. Target, test, track and do more of what’s working.
A significant growth opportunity for home service companies is that consumers just don’t know who to call when a home service issue arises. When a consumer does not know who to call, they primarily ask a friend for a recommendation (60%) or search the web (38%). Be sure your top customers are evangelizing about your company’s services and that they recommend your company when someone asks who they should use.
- Target: Develop a profile of your top customers — age, income, age of home, geography of home, how frequently they use your services, how much they spend with you annually, etc. These are the customers you want evangelizing about your company’s services and making recommendations to homeowners just like them.
- Test: Test a variety of incentives and communications (see list below) to see what drives the most referrals.
- Track: Regularly monitor to see which customers are referring and who is being referred.
- Do more of what’s working … while continuing to test and track.
3. Show your appreciation and incent satisfied customers to tell others.
While some satisfied customers may not need an incentive to tell others about a positive experience, show your appreciation to customers who share the love. Below is a list of incentives that satisfied customers would value, in order of importance, as part of a referral program:
- Money/cash — 54%
- Free services/products — 34%
- Gift cards — 32%
- Free upgrades — 30%
- Exclusive discounts on services (e.g. 25% off) — 28%
- Free tickets to movies, sporting events, theater, shows, etc. — 19%
- Company credit — 17%
- Free premiums/merchandise (e.g. umbrella, pens, car chargers, etc.) — 10%
- Contests (e.g. win a trip) — 6%
Referrals are worth your time. There is no better way to build brand advocacy than through a referral program. And an effective referral program will grow your business.
Contact Chuck Fischer at email@example.com to find out how we can help your company grow.
Survey results are from a random sample of adults from across the country who own a home and are the primary decision maker for home service issues.