Construction Marketing

Why Most Referral Programs Fail & How to Fix It

Tim Brown of Hook Agency sat down with Chad Diller of Landscape Leadership to discuss why so many business referral programs fail and what can be done to improve them. Before we…

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Tim Brown of Hook Agency sat down with Chad Diller of Landscape Leadership to discuss why so many business referral programs fail and what can be done to improve them. Before we dive into the reasons referral programs are often unsuccessful, it’s important to touch on why referral programs are important in the first place. With a good referral program, you get:

  • Leads that are easy to close (About 85% of referral leads close, according to Diller)
  • Gain hundreds of thousands of dollars in annual revenue. In roofing, this can look more like millions of dollars
  • The gift that keeps on giving. More happy customers means more referrals down the line

6 Reasons Referral Programs Fail + Their Fixes

Most businesses that have an unsuccessful referral program typically make multiple of these mistakes. These are the six most common referral program fails and how to fix them:

  • The Incentive Is Unimpressive or Unmemorable 
  • The Incentives Are Skimpy
  • Credits Off of Their Bill Aren’t Tangible
  • The Referral Process Is Too Confusing
  • You Don’t Promote the Program Enough
  • You Don’t Follow Through With the Incentive

1. The Incentive Is Unimpressive or Unmemorable

So many companies offer similar, lackluster incentives for referrals. If the incentive isn’t exciting or incredibly desirable, your existing customers won’t feel compelled to participate. They have more important things to do than recommend your business! Low dollar amounts simply don’t catch people’s attention enough to make them want to take action.

The Fix

Offer exciting incentives! Your incentives should make your competitors nervous, and as Chad Diller says, they should wonder, “How the heck are they giving away that much money?” 

Aim for a dollar amount that really catches people’s attention. 3 digit numbers are usually best.

2. The Incentives Are Skimpy

This referral program fail directly ties into #1. It doesn’t look good when you’re only willing to trade a very small amount of money for a favor that would earn your company thousands of dollars in annual revenue. You should truly thank your customer for their help and contribution to your company’s growth. A $25 dollar incentive for a $10,000 sale won’t make anyone feel valued.

The Fix

Be generous! Look at how much it costs to acquire a customer at your business. Maybe it’s a couple hundred dollars or a few thousand. Be willing to give away a significant portion of that cost as a thank you to your existing customers for doing the work for you. 

3. Credits Off of Their Bill Aren’t Tangible

One of the most popular incentives (and also one that is not very successful) is offering existing customers a credit off of their next bill in exchange for referring a customer. The problem with this incentive is that it’s not tangible. 

Money doesn’t feel real if it’s just getting automatically deducted from a bank account. Your customers likely aren’t going to think about the things they can buy or do with money deducted from their bill.

The Fix

Replace credits with physical gifts! Send them a check in the mail, offer the money in the form of a Visa gift card, or make the prize a gift card to a local business. This way, your customers will imagine how they will spend the money and get excited about the potential experiences they will have if they refer someone. 

4. The Referral Process Is Too Confusing

Too often, businesses choose to implement a referral process that is easiest for themselves, not for the customer. At the end of the day, people are busy, and they have more important things to do. If they can’t easily find where or how to refer someone to you, they’ll give up and move on to other things in their life. 

The Fix

Make it as easy as possible for the customer! Be willing to implement processes that take a little extra effort for you if they mean less effort for your customers. Also, be open to having multiple processes so that your customer can choose what’s easiest for them. Some ideas include:

  • An online form on your website
  • A special referral hotline phone number
  • Mail-in options with pre-paid postage
business woman in a blue shirt talking on the phone in an office

5. You Don’t Promote the Program Enough

If you only mention your referral program once when you first implement it, people are likely to forget about it. Your own team is also likely to forget about the referral program if you only mention it once, never bring it up again, and wonder why you aren’t getting more referrals…

The Fix

Talk about it— a lot! For a referral program to be successful, you need to keep it at the forefront of everyone’s minds. Here are some effective ways to keep your referral program fresh in people’s memories:

  • Tell your new customers when they sign
  • Remind existing customers in email newsletters
  • Send physical postcards to existing customers during busy seasons for your service (ie- roofing ramps up in spring and summer)
  • Include a reminder with invoices
  • Make it easy to find on your website
  • Mention it in the sales process
  • Mention it to a customer who leaves a satisfied online review or gives positive feedback in a survey

6. You Don’t Follow Through With the Incentive

This one hurts. Not only will your referral program fail if you don’t follow through with the gift that you promised to your customers, but you will also lose a portion of their trust, which is definitely more detrimental to your business. If you’re going to offer a great incentive for referrals, be prepared to follow through with your promise, or don’t instill a referral program in the first place.

The Fix

Keep your word! Follow through with a quick response to your customers who give a referral. Thank them for sending over someone’s information, and tell them you’ll be in touch with the result. And then actually be in touch! Report back to the customer regardless of the outcome. 

If their referral signs a deal that meets the terms of your incentive, let them know that their gift will be on the way immediately. And even if their referral doesn’t complete a sale or a sale that meets the terms of the incentive, thank them for the referral anyway, and let them know how much you appreciate them for it. 

Be Intentional About Referral Programs, and Watch Success Roll In

Is your business guilty of any of these six referral program fails? Give these fixes a try, and see how much more success you’ll find with referrals. Remember, referrals are some of, if not the easiest leads to close. They are incredibly valuable to growing your business, so you don’t want to neglect to create a high-quality referral program. 

Give these tips from Chad Diller a try, and let us know your thoughts!

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