Why You Need a Referral Program for Your Service Business
There’s a reason why referral programs are so popular across various industries — they work.
Customers trust word-of-mouth more than anything else. Getting recommendations from your clients is a great way to grow your client base and get more business.
According to the Nielsen Global Trust in Advertising Survey, 83% of people trust recommendations from friends and family.
Picture this: a homeowner is looking for a cleaner and does their own research. They come up with prospective cleaning service providers. Later that day, a friend recommends a cleaner they’ve hired. The homeowner decides to go with their friend’s recommendation.
Why? They trusted their friend more than anything else — including their own research.
In this article we’ll cover:
1. What is a service business referral program?
2. Why a referral program is important for your service business
3. How to make your referral program work for your customers
4. How to perfect your referral program stages
What is a service business referral program?
A basic referral program works like this:
1. You provide a service for a customer and deliver a great experience.
2. The customer recommends the service to others and is the referrer.
3. The person that receives the recommendation is the referee.
4. When the referee uses your service, both the referrer and the referee receive an incentive or reward.
Why a referral program is important for your service business
Referral programs encourage word of mouth referrals, which can be your strongest marketing channel.
They help you identify your most loyal customers—those are the folks who have sent a large number of referrals your way.
“It’s really word of mouth that helped our business grow to where it is today.”
Your most loyal customers are important to pinpoint. You can continue to reward those customers and let them know their business is appreciated.
More importantly, repeat customers cost 5x less to acquire and help fuel your bottom line.
Referral programs can also increase your return on investment (ROI) over time. Let’s say you offer $50 off your referee’s first service. That’s a modest price to pay for a new customer that will likely return.
Thinking about your referral program ROI in terms of cost vs. revenue. This is the (cost of incentives + cost of running the program), and how much revenue you get back in sales.
You have a positive ROI if your sales revenue is higher than the total amount you’ve spent on the program. That’s the place you want to be!
How to make your referral program work for your customers
1. Communicate your referral program to your ‘power’ customers
Your power customers are the customers that love your service and are loyal to your company. Strategically use your referral program with customers that have a positive experience with you. That way, there’s an increased chance they’ll make a referral.
Start by explaining how your referral program works, and what incentives you can offer your customers if they refer you.
You can also inform your power customers about other services you provide. For example, they know you provide plumbing services, but maybe they don’t know that you also offer HVAC services.
Be clear in your ask when you tell your loyal customers about your referral programs. What do you want from them when you inform them about the program?
Doing this will make it easier for them to understand how they can help you and while also benefiting. It’ll also make the experience as simple as possible.
2. Decide what incentive you want to offer
Your offered incentive has to make sense for your finances, the referrer, and the referee.
Incentives don’t need to be the same for every person, but they should be seen as valuable to all participants. When everyone benefits, your referral program can grow and scale faster.
Here are some examples of incentives you could offer:
- Referrer: $100 off your next service with us. Referee: $100 off your first service with us.
- Referrer: $50 gift card to a coffee shop. Referee: $50 off your first service with us.
- Referrer: Value-add to the next service with us. Referee: Value-add to the first service with us.
Remember that you don’t have to offer money! For example:
- Added free services to your regular offerings such as an extra window cleaning, tree trimming, or fertilization.
- Free products included in the next appointment, such as a bottle of disinfectant, lawn seed, hose extensions, a power drill, or a wrench kit.
- Discounted rates for services such as $5 oven cleaning, $20 deep clean, or $10 junk removal and hauling.
3. Email your customers
Once you’ve settled on an offering, you can send your ‘power’ customers an email summarizing your referral program.
Make sure the benefits are easy to understand so they’ll be more likely to participate. You can also leave behind a flyer after you leave your next appointment.
Don’t forget to make sure your loyal customers are getting their rewards as well. You can:
- Ask new customers if they’ve been referred. This will ensure your customers receive the incentive they deserve (and were expecting).
- Ask your loyal customers if they’ve referred anyone, and thank them for their hard work. Remind them about your referral policy to ensure that they get their friends and family to book services with you before receiving their reward.
- Ask the referrer to copy, forward, or attach your company email in the recommendations they make to their friends. That way you can easily keep track of referrals.
It shouldn’t cost your customers a lot of effort to refer your services to others. Make the process as easy as possible.
How to perfect your referral program stages
A referral program is not something you set and forget. Just like a marketing strategy, it needs to constantly be optimized.
It takes time to learn the sharing habits of your customers and how their networks respond. Their preferences change, and some things work while other things don’t. You’ll probably have to make adjustments as you go.
Start by breaking down the program into different components:
- Participation: The place where your power customers start participating in your referral program, like through your website. If your program runs using shareable links, you can encourage your customers to copy those links on one of your webpages.
- Referrals: The offer you send or share with customers.
- Impressions: The number of times your brand is seen because of your referral program, e.g. visits to your website, Facebook page, etc.
- Responses: The number of requests, inquiring emails, or calls you get from a referral.
- Conversions: The number of jobs won through your referral program.
Refer back to each stage of your referral program regularly and check on the performance. Look at:
- How many of your customers are spreading the word about your business
- How many new customers are coming to your business’s website from the referrals
- How many of those referrals are starting requests
- How many of those requests are converted to won jobs
You can easily use spreadsheets to track your referral program’s performance and remember to keep it simple.