Earning a customer's business is a victory. Having a customer return is even better. But when that customer starts referring business to you, it is like striking gold. You have gained a company ambassador. Referrals provide the propulsion for an enterprise to thrive. They are a reflection of your company’s worth and are gifts that keep giving if you know how to nurture them.

Referrals are an important engine that drives our business,” said Steve Young, president of Oklahoma Electrical Supply Co. (OESCO), based in Oklahoma City and Tulsa. “But you have to earn that endorsement. It’s a relationship typically built over time. Receive the respect and confidence of your customers, and they’ll be your ambassadors to win new customers. I think our customers talk to each other more than we know. ”

Young added his company doesn’t have a formal referral program, but through several strategic efforts, he uses customer endorsement to build business serving commercial, institutional and industrial markets.

Finding niches

“We all know the value of a good working relationship with a general contractor [GC],” Young said. “It certainly pays off for us with new projects and markets. For instance, with one longtime GC, we’ve now done three jobs outside the state representing a new niche for us in prison construction.”

Young cited several other niches—including casino construction and healthcare facilities—that grew out of introductions from return customers.

“Not every EC does healthcare in our area (or casinos or prisons),” Young said. “We do. Niches open the door to new customers that can be rich in referrals if we do a good job.”

OESCO’s subsidiary business, Infosys, also opens doors to referrals that go back and forth between the companies. Infosys specializes in integrating specialized technologies from cabling and fiber optics to access control and closed-circuit television.

“Participating in design/build can also be a niche,” Young said. “We ask to be a team member early on in a project. We also offer a lot of preconstruction services, like budgeting, to help the GC. Project managers who know our work from past experience understand we are a contractor that does the job well, on time and within budget. These are calling cards for referral business.”

A strategic approach

Lisa McNeil works with construction subcontractors to help them be successful and run their businesses better. She serves as a business enhancement coach for Nexstar Inc. in Little Canada, Minn. McNeil estimates 65 percent of all business comes from referrals.

“We help contractors look at their businesses and understand the essential, yet expensive, cost of their marketing and the real cost of acquiring one customer,” McNeil said. “By bringing this point home, the value of referrals becomes that much more compelling because it translates into free money—a customer brought in by another customer. We emphasize that business owners must strategize and plan how they’ll obtain repeat business, build relationships and foster referrals.”

McNeil has a name for customer ambassadors: raving fans.

“You need to be the best of the best to truly drive referral business,” she said. “You have to earn it. Remember, as an EC, you have to think of yourself as a service provider beyond repair and installation. Half the battle is a change of mindset. The best thing we see with contractors who really get it is how their businesses start flourishing.”

A large portion of ECs that come through Nexstar’s doors are involved in residential construction.

“With homeowners, you sometimes need to ask lifestyle questions to build repeat business and expand your value. On a service call, observe and make suggestions. Propose some recessed lighting over their gorgeous fireplace. If they are landscaping, recommend how lighting can enhance the work at night and add security. Maybe there’s a lack of ceiling fans or wall controls for their fans. The more you provide a service and meet their needs, the more likely they’ll suggest you to friends and neighbors. Your work might even serve as a home showcase for others to notice.”

Knowing your audience also is important to building a relationship. Mailers or newsletters tailored to the customer rather than your company can help position you for the repeat business that builds referrals.

“ECs seeking residential work need to know that 70 percent of their customers will be female,” McNeil said. “If you communicate your commitment to their enjoyment of their home, you’re speaking their language and opening up a world of return business possibilities from remodeling and security, to smart house technology, landscape lighting and so forth. Remember, people invest in their homes especially when construction slows. They stay put and remodel.”

McNeil has suggested adding recipes, home decorating tips and other soft features in a mailer or newsletter. Though she gets some initial resistance from the male technicians in her classes, she said that the “largely female constituent will respond when they feel you know them. You’ll gain their confidence. Trust me. It beats a simple and expensive Yellow Page ad by a long shot.”

Residential and commercial customers

“We have commercial and residential sides to our business, and both are very different when it comes to referrals,” said Dan Schaeffer, president of Schaeffer Electric Co. Inc., St. Louis.

“On the commercial side, we view repeat business as referrals because we may be invited onto a new team and project based on our past relationship with a GC,” Schaeffer said. “Unfortunately, bidding can be based on the lowest price, regardless of your history with the GC. However, a good relationship can give you an edge. It’s a comfort level where the GC will talk you up to the project partners.”

Schaeffer Electric works to provide superior service and asks smaller commercial business owners or homeowner customers to track the job his company is doing.

“Our service survey cards get a good return. Even longtime customers fill them out. When there’s a complaint, I might personally call and see where we fell short. The survey is a great tool in maintaining and building customer relations.”

“Building repeat business with residential customers is dependent on their experience with the service guy who shows up at the door,” Schaeffer said. “We emphasize with our service crew how they should discuss repairs and solutions with a customer. If done right, they are showing interest and concern and can even upsell service issues that might require future attention. One thing we don’t want to do is hard sell.”

Using drop cloths, professional appearance and so forth also create a favorable impression.

“We know these efforts pay off. It’s not unusual for us to get a call from a new customer who says, ‘I heard about you from my neighbor,’” Schaeffer said.

Remodeling represents the residential market for Schaeffer Electric. Like OESCO, adding a differentiator from its competition has helped. Schaeffer created a division to provide outdoor low-voltage lighting.

“This gives us another entree into the home with landscaping and a viable one for referral business,” Schaeffer said.

“In the end, our entire company has to set a tenor of helpfulness and problem solving from the person who answers the phone to estimators and the guys in the field,” he said. “Though we don’t track our referral business, we have a good sense of it. For example, we don’t have a salesperson out on the street beating the bushes for business. That’s an indicator of our referral business strength.”

Not all referrals are alike

Referrals come in all shapes and sizes. For Jeff Heyn, marketing director for Wasatch Electric in Salt Lake City, endorsements are marketing vehicles.

“We have an active program where we create project write- ups that illustrate our capabilities. Within those are customers who are happily referenced and speak to their positive experience with us,” Heyn said.

He uses these “case studies” to introduce Wasatch Electric to potential new customers.

“They help us tell our story as a referral and marketing piece. You can talk and talk about how good you are and what you can do, but the moment someone else speaks for you and recommends you, the persuasiveness of the pitch has just jumped a thousand times.”

Heyn said that his company has developed a library of these documents. One successful project might be perfect in helping win a new job. In bid projects, such write-ups often are folded into 40-page submittals.

“We view them as letters of recommendation from current or past clients,” Heyn said. “I might create one, or a project manager or someone from the estimating department. Our entire company sees the value in seeking endorsement to profile company success.”

Credibility off the job

If you are lucky enough to have been in business for some time, even from generation to generation, you have earned community currency called name recognition.

“Name recognition and interaction with the community all help in referral business,” Young said. “It’s another way to build relationships, be it the GC who also goes to your church or the mechanical contractor you know from a civic group.”

“Make a name for yourself in your community, and it will pay off 10-fold in generating business,” McNeil said. “Be at sporting events. Be a member of the chamber. Have a booth at a country fair. Sponsor something. Maybe it’s a teacher appreciation program, kids’ fitness, [or] a comfort station at a soccer game, offering cooling fans and a free bottle of water with your name.”

“Earning referrals is purposeful work,” McNeil said. “A person’s average referral is five to seven people if they had a positive experience with a company. Look at every customer as a friend and one you shouldn’t be shy in asking for a referral. Referrals should be a deliberate part of your marketing plan. Every time you act with a process in place, you can guarantee the outcome.”

GAVIN is the owner of Gavo Communications, a marketing services firm serving the construction and the landscaping industries. He writes trend, design and other business articles.