Every home improvement company covets referrals. Two big reasons: They cost less to get than just about any other kind of lead; and they close at much higher rates.

Randy Shepherd, co-owner of Renewal by Andersen of Colorado, notes that closing rates on appointments for all types of leads is 33% industry-wide, but double that when the lead is a referral. Referral leads are so good that, in an effort to get more, Shepherd recently revamped his company's referral reward program.

BUILD ON TRUST For many companies, a major obstacle to getting a customer referral is that customers subjected to a high-stress selling situation are loathe to refer relatives or friends. So when Renewal by Andersen of Colorado decided to take a look at its referral program, the first thing it did was to interview 100 customers by phone to ask why they'd done business with the contractor.

The No. 1 reason: Trust. The company then used that information to revamp its referral reward program, now called Spread the Word. “We've changed our entire paradigm with this program,” Shepherd says. “Most people think about what's in it for the neighbor or friend. We promise they'll be treated with the utmost respect and professionalism.”

SWEET DEAL Before it revamped its program, Renewal's existing customers who made referrals were rewarded with dinner at a restaurant of their choice. In addition, a company rep dropped the customer's name in a hat, and three times a year held a drawing for free vacations.

Now the company offers those customers who come to it through its referral program a 5% discount and a dinner, in addition to giving them the chance to win a vacation. “When we began to focus more on what we could do for the [referred person], our referral business began to climb,” Shepherd says.

INSTALLERS PART OF IT Renewal by Andersen of Colorado works hard to get referrals with each job. Customers are asked or reminded six times (including during the sale) for referrals. That's because lead time between contract signing and collection of the final check can be as long as six weeks — plenty of time for customers to forget, Shepherd notes.

Another aspect of the program is that installers are rewarded for the referrals they get. Earlier this year, Renewal's installers began dropping off company literature and a DVD at houses in the neighborhoods where they were working. Resulting calls to the company call center then become their referrals, once an appointment is set. Installers get a dinner for two and a chance at a vacation. Shepherd figures the company could produce 200 new referrals per month if it gets one new job from every existing job.