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    Should you pay your customers for referrals?

    Five tips, how to build an amazing referral program for your business.

    It’s no surprise that Word of Mouth is important for your business. When people recommend you, should you pay them? How can you ensure that your business receives a constant flow of new customers?

    A referral fee is a type of commission paid or gift given to the person responsible for bringing a customer to your business. Sometimes, a fee is paid in exchange for the business introduction. Roofers want to know what the best way is to keep referral sources motivated and, more specifically, if you should pay for referrals. I believe that the key to motivating your referral sources is to first understand why they refer.

    Often your referral sources are motivated to refer because they believe in your company and they want to help the person they are referring receive some of the same value that they have already received from your company. When you offer payment for the act of referring you turn this social act into a financial one.

    When a referral source is motivated by a true belief in the value of what you have to offer, they will always be a much more potent representative of your brand to their friends, neighbors and colleagues.

    I’m going to cover the variables to consider when deciding on an ideal referral program in five key points. You are going to want to read on if you want to learn how to build an amazing referral program for your business.

    1. Already Spending Money on Marketing

    Point number one, as a business owner you already have expectations to pay for new business. You know your leads are going to cost you some money in the roofing industry. Commonly it is about $200 to acquire a new customer in the roofing market.

    I get it that some of us think that we’re not always paying for marketing. For example, you drive a wrapped vehicle to a gas station, and somebody comes out and says hey I like your wrap, do you have a business card. Now you might think oh sure just a free job right, well no it costs you to wrap that vehicle.

    So, $200 it’s kind of an average of how much we pay whether it’s a direct or indirect cost. Say somebody sees your yard sign and they give you a call. I mean a yard side cost you $50 so you beat the average on that deal. But overall if you spent let’s say fifty thousand dollars a year on marketing that is going to be your marketing cost.

    Between lead generation and branding expenses, and all of that, it comes down to about $200 average to acquire a new customer. I firmly believe that referrals should be right there in that range because if you’re already spending $200 elsewhere why wouldn’t you be ready to spend $200 on referrals so that’s point number one number.

    2. Understand the Demographics

    Point number two, referrals are not necessary for every roofing business locale. For example, if you’re doing business on a small remote island where all wealthy people live, and you are the only roofing company on the island then your good.

    You do not need to bother with offering anything for referrals. They probably don’t want your money anyways and they’re going to refer you because you are the only roofer in town. In that situation, those people have no expectations for you to reward them for giving you more jobs or referring their neighbors to you.

    Then there are some people that come from countries that have the expectation, it’s in their culture to be well reward for referrals. I have been on many an estimate where people in that area have come to me and they say hey, I’m a really big shot in this community how much are you willing to pay me or discount me if I refer all my friends and family to you.

    In some countries that is just part of negotiations, people like a little kickback. So, you need to understand your audience, your demographics, who you’re dealing with, what kind of neighborhood you’re in, what kind of people are they.

    So, understanding demographics is crucial. Referrals might not work for some people but will work magic for others.

    3. Appreciate People Sending You Leads

    Point number three, sometimes not offering anything in return for referrals might make you look bad. The roofing business is an extremely competitive business. Let’s say we have a hail damage situation and everybody in the neighborhood got pounded. Now there’s a real first knocking on every single door.

    You got in with one customer and that person is asking if you pay for referrals. Think about how you look if you say, no we don’t do that to this person.

    When a customer is asking you hey if I go the extra mile and tell my neighbors I really like you, I mean he’s pretty much offering to go the extra mile for you. Maybe he will be able to convince his neighbors to go with you because he likes you. He doesn’t have to do it, he might not care, but this customer is pretty much asking you, do you want to pay me to help grow your business.

    In this situation if you say nope we don’t do that here I mean come on, you don’t appreciate your business, you don’t appreciate people going the extra mile, and sending you leads, thinking about you, remembering you to others.

    I get the point that in some scenarios it should be expected. But if it is company policy to not pay for referrals it’s not really a big deal just make sure you have a good answer and don’t come off as a jerk. Don’t just say no just send me all your jobs and don’t expect anything back from me that was point number three.

    4. I Appreciate the Business Referrals Thank You

    Point number four, I agree that people should not be expecting anything in return for referrals, but they often do. Sometimes, it’s almost like a silent pact. When a customer knows that they bring value to your business.

    For example, they have referred a lot of people to you. They kind of ask about a referral but in a weird way so it’s all sort of hush hush about asking you for referral compensation.

    I always recommend that it should come from you, from the business owner, from your heart. You should be almost like forcing them know you appreciate them. Like here take this, I want you to have it, I appreciate the business.

    So, a lot of people do expect it because they know that they bring value to you. They know that you are making money. It is the right thing to refer but it’s not the right thing to ask for something in the return.

    You don’t have to give them a referral fee. A good referral program can be simply a gift, or it can be as small as a handshake and a thank you. It will always be appreciated. People love gifts and being told thank you and that is what it comes down to.

    5. Not a Referral Program be Grateful, Gift and Appreciation

    Point number five, if you are overly concerned about a referral program, give it a completely different name. Don’t even make it sound like a referral program. Try saying Thank You or providing them with positive feedback like a gift program.

    Whatever the referral program you chose, you just need to make sure that you do it. You want to reward people who help bring referrals to your business.

    As I mentioned already, you should have a marketing budget in place. Maybe some customers don’t want to take your gift, but you can say hey it’s already part of my marketing budget. Don’t make it sound like petty cash, like it’s your $200 that you were going to take your friends out with. It’s not even your money it’s your marketing budget you already have it in place.

    I guarantee you when you come to a customer as a grateful guy who likes and appreciates any business that comes his way nobody will ever be offended. For example, if I hire you and you did a great job and then I call my friend and say hey do you need your roof done this roofing contractor does amazing work and you get another ten thousand dollar job, that’s good you want to be appreciative in the right way.

    At this point your customer might or might not have referral expectations but if you go to them and say hey here’s $200 bucks or here’s like some amazing gift, maybe tickets to a game, I don’t care what you do but you thank them for the referral they will appreciate it.

    You will never ruin the relationship with your customers when you give them appreciation, you’re going to be their contractor of choice. They are probably going to refer more people to you just because you were grateful for the business.

    Remember you do not have to pay a customer for referrals. Maybe your marketing budget is maxed out. You can do anything you want that expresses appreciation. The point is, I highly recommend you don’t disregard the referral program because you need referrals and you want to motivate people to send you the business.

    Another tip I want to give you is I see roofers making this mistake all the time, don’t make it sound like you’re recruiting your homeowners to work for you. Remember they’re not you’re Canvassers. A lot of roofers say things like we pay $200 if you bring us referrals and that might frighten a customer about not going out and bringing you referrals.

    Those are not your employees, so make it sound like a gift, like appreciation and a thank you. Then customers will spread the word around about you and you will get a lot of business and you’ll never ruin one relationship.

    Well those are my five point about customer referral programs, tell me what you think in comments below. Do you agree or disagree, maybe you have other points you would like to mention, please comment below. Also, if you want to learn more about the roofing business please sign up for one of my roofing business classes. Thank you for reading.

    Dmitry Lipinskiy
    Host of Roofing Insights YouTube channel CEO of Storm Group Roofing Founder of Roofing Business School

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