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A Referral Marketing Guide for Home Service Businesses

A group of people engaging in referral marketing.

What is Referral Marketing, and Why is it So Valuable?

It’s time to start thinking about referral marketing. 




92% of customers trust referrals from people they know above all other forms of advertising. 


Potential customers are a lot more likely to use your services if they come from a referrer they know and trust. And these successful referrals can improve your customer acquisition, customer retention, sales, and the overall vitality of your business.


Compared to other forms of marketing, referral marketing is unique in that it uses your existing base of happy and loyal customers to attract potential leads. In exchange for a referral, the referring customer (or referral source) is provided some form of a reward. 


For small businesses, especially those in home services, using referral marketing is a great tactic. Word of mouth marketing is powerful. Through effective referral techniques, you can incentivize your current customers to attract potential customers to your business who are more likely to engage with you from day one. 


Customers that you engage with through referral marketing are also more likely to stay with you. In fact, referred customers are said to have a 37% higher retention rate than customers gained through other means. When your happy customers spread the good word about your business, they indirectly act as brand advocates to their friends, family, and social circles.


In the long run, this can also help solidify your relationship with your customers. 


Still not convinced if referral marketing works? Here are three more powerful statistics that prove the power of referral marketing: 


  • 65% of new business opportunities come from referrals and recommendations: Through a robust referral marketing program, you can grow your business and take it to new heights by expanding your reach. This especially works in the case of home service businesses that function in local neighborhoods. Word of mouth is vital to their success!
  • Referred customers’ lifetime value is 16% higher than non-referred customers: A referred customer begins his/her relationship with you on a strong foundation of trust. With home service businesses, this is critical. Whether you’re a plumber, electrician, or stepping into a homeowner’s place to fix a new air conditioner, customers want to trust the people they let into their homes. The more they trust you, the longer the relationship will last
  • The conversion rates of referred customers are 30% higher than leads generated from other marketing channels: Again, trust is the key. You can use every lead generation and marketing tool out there, but unless customers see your business in a positive light, they won’t be as willing to engage with you.

For more powerful insights, check out our referral marketing statistics article here!

Why Does My Business Need Referral Marketing?

So, why should your business leverage referral marketing? Here are all the reasons to inspire your efforts: 


  • Saves marketing dollars (cost-effective)

Traditional marketing methods sometimes tend to be more expensive and time-consuming. Getting a customer to know your business and then trust your business can be laborious. With referral marketing, you have that trust established much quicker. As existing customers promote your business to other potential leads, you won’t have to spend as much of your budget on traditional marketing efforts and advertisements.


  • Increases customer engagement

Believe it or not, other forms of digital marketing also tie in with referral marketing. For example, through text marketing or even email marketing, you can keep customers who are part of your referral program up to date. You can fine-tune your content marketing plan to engage referrers and incentivize them through new and exciting referral rewards. 


  • Gain more loyal customers

Referrers essentially act as influencers and brand advocates within their networks. The moment they speak about your business to a friend, they generate buzz that helps your business grow its loyal customers!


  • Spread brand awareness and positive word of mouth

Through referral marketing, you may gain access to an audience that you otherwise may not have been able to tap into. Referral marketing has a powerful chain-link, word of mouth effect! Each satisfied existing customer acts as a link between your business and a potential, long-term lead. By establishing a referral marketing program, your business expands its chain, and with it, the chance to boost your profits! 

  • Increase sales

Did you know your referred customers can increase your profit margin by 25%? For home service businesses, customers don’t make one-off purchases. Most relationships are long-lasting due to the nature of the work being done and the requirement for annual maintenance, and more. Thus, landing just one referred customer can make a huge difference to your business’s sales figures over the long run. 

5 Referral Marketing Strategies


1. Perfect your business’s customer service experience to improve positive word of mouth

Remember: The success of a referral program is dependent on your existing satisfied customers. 


You want to knock it out of the park with your customer service and nail your customer’s expectations. This doesn’t just mean while on the job, but also other relationship-building tactics you can use. 


For example, tap into your customer data records and send customers a gift card or surprise gift on their birthdays!


Special birthday treatCheck out birthday gift coupon templates here!


Many businesses know about the importance of customer service, but don’t actually incorporate this into their strategy. It’s not enough to offer great pricing or quality of service for a job done. You have to go above and beyond to have your customers spread the good word about your business. 


It doesn’t have to be extravagant either. For another example, on your website landing page, consider adding a live chat function. This will allow new customers browsing through to get in touch with you easily, too, ramping up your customer support. 


Pro-tip: Check out Signpost’s live chat service to get you better connected with your customers!


2. Implement a referral program 

A referral program is a formalized program used by businesses to incentivize existing customers to refer their business in exchange for rewards. These rewards can come in many forms—gift coupons, discounts, and more! 


Referral program


Also called a “refer-a-friend program,” there are many ways you can go about building incentives for existing customers. Here are a few to inspire you. 


  • Mystery gift rewards: This is exactly what it sounds like. Customers that refer your business are rewarded with a surprise mystery gift. For home service businesses, this can include anywhere between 25-50% off service coupons, goody bags with brand merchandise, and more!
  • Social media referral contests with grand prizes: In this strategy, you can set up a social media contest where participants are rewarded for completing tasks related to the promotion of your business. For example, you might ask customers to like your page or share your business’s posts on Facebook, Instagram, Twitter, or more. Every share is a point, and the participant with the most points at the end of the contest period wins a grand prize! 
  • Charitable donation: Did you know that 66% of consumers believe it’s important for businesses and companies to be philanthropic and charitable? A great reward to incorporate is a donation on behalf of your customer to a local charity or cause of their choice!
  • Service or product upgrades: You could also reward customers with a free service or product upgrade. Depending on the nature of your home service business, this may differ. However, offering customers an upgraded, top-notch service at a discounted price is very incentivizing, especially if they regularly frequent your business.

3. Join a referral network

referral network comprises businesses and business professionals that act as potential lead generation sources, sending suitable clients your way! These businesses will be similar, but ultimately non-competing in nature to yours. 


Partnering with members of a referral network also increases the opportunity for affiliate marketing and exclusive partner programs. That is, you can exchange referrals for specific services. 


For example, if you’re in the roofing business, you can provide customers with information about a plumber in your network, thus cross-promoting. They would do the same for you, leading to two-way referrals.


Some popular referral networks include: 


  • Your local Chamber of Commerce: A chamber of commerce refers to a network of local businesses in a particular market or those within a specific industry. These networks offer their members various benefits, opportunities to participate in and host networking events, and a common goal of furthering the business potential of every company in the network. Find your local Chamber of Commerce today! 
  • Local, regional, or national trade associations: Finding a local, regional, or national trade association will help you network with others in the industry and build your functional knowledge, skills, and chance for referrals!
  • BNI (Business Network International): Considered to be one of the most extensive global professional networks, BNI works on a transactional concept for referrals. Members share referrals that will benefit others in the network and receive ones on the same basis. The more referrals you give, the more you get.
  • Facebook and LinkedIn groups: Last but not least, you have social networks you can tap into. LinkedIn is a social network for professionals and offers you the opportunity to join groups, message other users, follow popular threads, and even publish your own articles. Similarly, through Facebook, you can grow community engagement through local groups, engage through paid ad campaigns, and connect better with your customers. 

4. Maintain and grow your business’s positive online reviews

The value of social proof is indisputable. Today, customers want offline recommendations and be able to verify the information by checking out a company’s online reviews. They will look your business up on the internet and read the reviews and ratings from other customers. 


They’ve gotten a glowing recommendation from a friend or family, but now they want an unbiased opinion. This is why the need to maintain and grow your business’s online reviews is paramount.


Yelp reviewSource

Through Signpost, you can manage your online reputation like a pro by partnering with us to help you respond professionally to negative reviews, grow your 5-star ratings, and more!


5. Implement email marketing with built-in referral links

Unlike most digital marketing platforms, email marketing is more personable. Sending a message that will land directly in your customer’s inbox means you have to make every word count. A referral message can be added to your email campaigns easily.


For example, if you’re sending a customer a thank-you message for the business done, you can add a referral link. If they’re happy with your service, they are more likely to recommend your business!


Pro-tip: Opt for Signpost’s marketing automation service to take your overall digital marketing efforts to even greater heights!

Referral Marketing Best Practices


1. Always show appreciation for your referral source 


Thanks for the referral.


Make sure you show the referrer how much their referral means to you. Beyond the rewards you give them, go ahead and send them a thank-you note after you land a successful customer through their referral. It’s good relationship-building and can encourage them to send even more referrals your way!


2. Know what your customers want from your business (making sure the rewards/prizes are aligned with your customer base) 

Incentivizing referrals for your business means learning what your customers value and aligning your rewards on that basis. If you don’t create a worthwhile incentive, your referral marketing program may never see the success you wish for it. 


A good incentive will:


  • Provide a worthwhile, desirable reward that is of value to the customer.
  • Incentivize them to take action ASAP and make a referral.
  • Equip them with the right tools or resources to make a referral.
  • Make them excited to share that incentive with others.

3. Incentivize the customer, not just your own business 

For your referral marketing program to take off, your business must be customer-centric. Think wholly around your customers’ wants and customize a referral program that suits their purchasing patterns, demographics, and behavior.


While giving away discount coupons or service upgrades doesn’t seem like it’d benefit your business, keep in mind that a referral program is all about incentivizing customers. They are the magic of your referral program! 


Rewards and gifts are a necessary part of the referral process. And if successful, the cost of discount coupons will be well worth it.

4. Ask for referrals at the right time 

Timing is critical when asking for referrals. One of the most effective times to ask for a referral is immediately after the service has been completed when the customer is running on a ‘shopper’s high’ and has displayed satisfaction in your work.


Nailing that timing can make all the difference. 


5. Minimize the customers’ efforts and automate where possible 

Using automated referral marketing software is a great way to introduce efficiency into your customer referral program. Investing in referral marketing automation can help increase the ROI of your campaigns and structure the rewards program more effectively. 


You will also be able to ensure the continued satisfaction of your customers by tracking metrics and continuously improving.


6. Pass on the referrals

If you are building your referrals through a network, it’s a matter of goodwill and ethics to pay it forward. Your referral network is a two-sided relationship. 


For every referral you get, try to pass them on! 


This increases growth opportunities for your business while simultaneously strengthening your partnerships within the industry and your network! It’s a win-win for everyone involved.


Boost Your Marketing Efforts with Signpost

You don’t have to be an expert marketer to develop a referral marketing campaign. You also don’t have to do it alone.


Signpost can help you take your home service business to the next level by automating your marketing efforts, managing your online reviews, and more!


Book a demo with us today to get started on your journey!

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