Trade Referral Discounts?

HepaCore

Set the Stage:
Two local HO: Cust-A and Cust-B

Cust-A hires a general contractor to install hardwood floors in his/her home. The contractor performs a quality job at a pretty good price. The contractor offers a 10% referral discount for additional flooring in Cust-A's home. However, A doesn't need more flooring but is looking for a contractor to get their kitchen renovated.

Same situation occurs for Cust-B who renovated their bathroom. Their contractor offers a 5% referral discount but Customer-B doesn't need their second bath renovated but is looking for flooring contractor.

What if:
What if Cust-A and Cust-B could trade their referral discounts for the services they truly need? For example: Let's say Customer-A receives that 10% discount on additional work. Cust-B also received their 5% discount on addtional work. Could they swap discounts and get the services they need from both contractors
(Cust-A gets the 5%off Renovations & Cust-B gets 10% off flooring)?

The contractors are happy already. They received their referrals. But this method could provide 2 jobs for the price of one referral. Take for granted both local contractors are in agreement to use this method and both contractors can verify the referrals / discounts are valid.

Thoughts?

dumplin1078

my brain hurts!

__________________
"I hate to tell you this, but you're a man. You're going to spend your life gettin' up one more time than you get knocked down." John Wayne

HepaCore

HA! I did my best to summarize. Basically, would you allow your customers trade their "referral" discounts that you provide with other customers requiring your services.

Stone Mountain

Let me get this straight. you do a job for Customer A. Then he asks for more work in his house, so you give him a 10% "referral" discount.
First of all, what do you mean by referral? He is referring to himself?

Second; Why on earth would you do that?
He was already happy with the price you gave him. He was already happy with the quality level of your work. Based on those two factors, that he is already aware of, he asks for more work, at pricing levels he's already agreed to. You are just cutting your own throat.

Now if the same customer refers me to customer B, I would happily give Customer A a spiff of some sort: a bottle of booze, a certificate to a nice restaurant, $50 or $100 cash, but that's the limit.

__________________
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www.fenceanddeck.ca

HepaCore

First of all, what do you mean by referral?
Referral meaning: A customer who receives services tells a friend/neighbor of your services for future transaction.

He is referring to himself?
He is not referring himself but friends/family to your services. The contractor provides a finders fee in the amount of 10% off any further work on his home.

Jamcojay

I used to Build pools than I got smart.

What I used was incentives to home owners.

1. I built a pool for homeowner: If said home owner successfully referred a new customer to me. I would Pay home owner "A" $299.00 after successful completion of home owner "b's" pool.

It was a great system because it turned every customer into a potential salesman.

Dustball

I think some confusion comes from what was said above. Wouldn't the contractor offer a 10% "repeat business discount", not a "referral discount"? The initial customer does not see any benefit from referring another potential customer. Maybe you're thinking of a "referral bonus" where the initial customer gets 10% or a set amount for referring someone else?

HepaCore

Is it unheard of to offer discounts off additional work as an incentive for current customers to refer jobs?

dougchips

I have heard of it, problem is sometimes they might not have any other projects planed. I offer to cut them a check ($75-$150) for referals.

Referals are the 2nd highest for closing rates.

$75-$150 is a cheap lead cost for that high of a quality lead.

I only pay the referal fee if they buy.

HepaCore

That is true. What good is a discount if the customer doesnt need additional work. However, it would work if customers had a way to "trade" their discounts. Sorta like gift cards to the mall. You want his discount and he wants yours. The contractors involved could end up making more money in the end.

dougchips

#1 explain "trade their discounts"

#2 American express will let card holders buy american express gift cards at a 3% discount (you would have to give away a ton to have the 3% add up to much)

HepaCore

#1 explain "trade their discounts"
Sure. It's allowing two customers, who received different services, swap their referral awards. For example: Mr. Jones received a 10% addtional work referral discount on windows but is looking to install floors next. Mrs. Jackson received a 10% additional work referral discount on flooring but is looking to install windows next.

Wouldn't it be "neat" if Mr. Jones and Mrs. Jackson could find each other to swap their discounts. Mr. Jones would swap discounts with Mrs. Jackson to get 10% off his flooring. Mrs. Jackson would swap with Mr. Jones to get 10% off his windows.