The Referral Gap
Referrals are the most cost effective way to connect with new clients. Here’s the catch: About 83% satisfied clients are willing to give a referral, but only 29% actually do. That’s a HUGE gap. Here’s what to do about it.
I see referrals as the gold standard of lead generation. In my experience, customer referrals convert to sales at a rate of around 40%, and I’ve seen conversion rates as high as 60% for referrals from business partners.
The trouble is that referrals do happen organically, but they’re not a given even if the customer loves the work that you do. According to a survey by researchers at Texas Tech University, 83% of satisfied customers are willing to give a referral, but only 29% actually do. That’s a huge gap.
The referral gap refers to the majority of satisfied customers – 54% according to the Texas Tech study – who are willing to give referrals but rarely do. I’ve found that closing the referral gap is the best opportunity most solar and energy efficiency installers have to drive sustained growth.
Overview of the Referral Gap
Why so few referrals?
According to a series of studies by the National Renewable Energy Laboratory (NREL), most solar contractors either don’t consistently ask for referrals, or if they do, they ask in a passive way: “Hey, if you have friends or family interested in solar, please send them my way.” The customer says, “You bet!”
There’s only one thing worse than inconsistently or passively asking for referrals: Irking customers with referral requests. If you’ve been asked for a referral but ignored it, pause and consider for a moment:
- What caused you to ignore the request?
- Did you mistrust in the person who asked?
- Was there something about the way you were asked that put you off?
Most people tend to tune out referrals when the request comes across as confusing or when it feels more like an advertisement. These requests feel inauthentic and interruptive rather than beneficial.
There’s a better way to ask for referrals. Ask your clients directly, then consistently follow up in a way that keeps the interests of your clients at the forefront.
Success looks like this
Over the years, I’ve tried just about everything to increase referrals. Canvassers, door hangers, even hand-delivered referral cards – nothing seemed to work.
That’s when I started fine-tuning my approach to referrals for solar and energy efficiency contractors. Over a two year period, monthly referrals for one of my clients increased by 344% or an average of seven percent every month for 24 consecutive months.
Success looks like this: When your customers think about solar, they think about you. You’re the authority that not only installed a PV system that they love, but also, you’re top of mind because you stay in touch. If a friend or family member mentions high energy bills or an interest in solar, they always recommend you. Over time, you see strong, steady growth in the number of referrals from your customers.
Here’s a thumbnail sketch of the approach I use to drive referrals:
- Offer: Create a referral offer that motivates customers but doesn’t erase profits.
- Ask: Ask directly for referrals, especially after projects. Automate email sequences.
- Remind: Remind past customers about your referral program. Send a newsletter.
A referral program that works
I’m confident that with the right foundation, any solar or energy efficiency company can use this approach to increase referrals. If you’d like help launching a new or improved referral program, get in touch anytime.
With solar in particular, the long game wins
I’ve learned a lot from the Solar Energy Evolution and Diffusion Studies (SEEDS) by NREL. The studies go deep into the characteristics, motivations, and barriers to photovoltaic (PV) adoption. They offer a rigorous, evidence-based approach to understand what works and what doesn’t work for solar marketing and sales.
NREL researchers point out referrals are the most cost effective way for solar professionals to acquire new customers. Unfortunately, most professionals give up on leads and referrals too soon. On average, solar professionals give up on a lead within three months, and they give up on getting referrals after three to six months.
This is a HUGE missed opportunity. Most people spend more than a year considering solar before making a decision. According to solar market research done by Cadmus for Energy Trust of Oregon, 52% of people considered solar for more than a year before deciding to move forward. 32% spent more than two years making a decision.
How long did you consider solar before deciding?
When it comes to earning referrals, your oldest customers are your strongest allies. They know the quality of your work and have the most credibility to address any long-term concerns felt by prospective customers.
This is another important point to remember: With referrals, your goal shouldn’t be rapid, short-term lead generation. Aim for strong, sustained growth over months and years.
Bill is the Principal at Volta Strategies. He’s spent almost a decade marketing solar and energy efficiency companies, driving sustained, double-digit growth and millions of dollars in new revenue for his clients.