How to incentivize solar customers to provide more referrals
We were inspired to begin our series on solar referrals after talking with a solar business owner whose customers love him, but wasn’t seeing the referral volume to match. Our first article describes the Fogg Behavior Model and how three core elements are required for a customer to provide a referral - ability, trigger, and motivation. In our last post, we discussed 5 key moments in the solar journey that serve as a trigger to generate referrals. In this post, we’ll address how solar businesses can effectively motivate their customers to refer friends and neighbors.
Consider this anecdote from a friend in Wisconsin about the first big solar contract he signed. He recalled, “We had a prospect who was stringing us along for 3 years. It got to the point where his original sales rep told me he didn’t want to talk to him any more. I was new, so I took over. I spoke with this guy all the time, and I really went over the top in customer experience. Once his project finally closed, we featured his install on our website, sent photos to the manufacturer, and wrote a case study about his experience. He’s been a huge source of referrals ever since.”
Referral leads are exclusive, close at substantially higher rates than other leads, and can significantly lower a solar business's high cost of customer acquisition. My friend and I began to discuss how his company could develop a process to replicate this customer experience and optimize their referral lead channel. I asked, “Why do you think this customer of yours sends you guys so many referrals?” he replied, “Well, this guy loves solar and he loves our company.”
That’s the key to referrals. My friend created an experience that led his customer to associate a positive feeling with his decision to choose my friend's company. This positive association was now manifesting in the form of a steady stream of qualified and intrinsically motivated referral leads.
An intrinsically motivated behavior is a behavior where the individual inherently likes performing the behavior or simply put, they feel good about what they’re doing. Applied to solar, intrinsically motivated customers will refer a friend and neighbor simply because they like your company and they want to promote your company without the need for an external reward.
Contrast that with extrinsic motivation where the individual is compelled to act by the prospect of earning an external reward, not by the action itself. Residential solar companies across the industry have adopted referral rewards ranging from $250-$1,000 for a referral that leads to a completed project. Paying a customer for a referral lead is an external motivation in its purest form. Common examples of other referral rewards within the solar industry include gift cards, free products, and free services.
To understand which is better, let’s consider a different hypothetical example from our everyday lives. Imagine two kids, Kid 1 and Kid 2, who are both equally skilled and part of a neighborhood little league. Kid 1 goes to the batting cage because he loves baseball. Kid 2 goes to the batting cage because his father always buys him a hamburger on the way home from practice. Both kids end up at the batting cage, but one is motivated by his love of baseball, the other by his love of hamburgers. Which of these kids would you expect to spend more time in the batting cage and post a higher average over the season? Kid 1, of course. How did Kid 1 learn to enjoy practice? He would likely remember a positive experience stemming from his time in the batting cage. Perhaps it was the cheers for a home run, or high fives from hitting in the winning run.
In this fictional example, Kid 1 is inherently motivated to practice because he understands it will help him hit his next home run. Kid 2 may understand that spending time in the batting cage will help him hit a home run, but he’s certain he’ll be getting a hamburger after hitting the minimum number of balls.
That’s why at Bodhi, we advocate that solar companies appeal to intrinsic motivation. Like Kid 1 in the example, research has shown that intrinsically motivativated people have longer lasting and more deeply committed behavior. When applied to solar, intrinsically motivated solar customers (your Champions) will provide referrals for as long as they can remember their positive experience with your company and maybe longer. The quality of the referrals will also be higher due to strong trust among the two parties. Best of all - they don’t cost anything! As JD Smith at Arch Electric told us:
“Some of our customers have been almost-offended when we’ve offered to pay them for a referral.”
Unfortunately, appealing to intrinsic motivation requires commitment and patience. Case in point, consider the effort my friend at the top of the post put in. That’s one reason why paying for referrals is widespread in solar. It’s simple and generally effective.
However, this extrinsically motivated behavior can come at a cost beyond the initial incentive. By compensating customers with a reward for bringing in new business, a solar company is essentially turning its customers into outside sales reps. Though this may work for certain personality types, sales is not necessarily a role that your customers would be knowingly glad they signed up for.
For the customers this does appeal to, what a company gains in an outsized sales force, they give up in control. What are your customers telling their acquaintances to get them to sign up? Do they actually have trust established with their referral? Can you be certain they will continue to provide you with referrals if they learn your competitor pays $100 more?
Furthermore, one of the reasons solar customers provide referrals is for “self-enhancement” or more simply put, the proud feeling they get knowing that they’re providing good advice to their friends and family. In doing this, it is key to understand that your customers are putting their credibility on the line which they most likely value a lot more than the prospect of a $500 or $1,000 reward.
If intrinsic motivation can be hard to achieve and extrinsic motivation can be costly, what is there for a solar company to do? Let’s go back to the little league baseball analogy.
Imagine how excited baseball-loving Kid 1 would be if he also got a hamburger on the way home from practice. Not only did he get to do his favorite activity of playing baseball, he also got a hamburger!
This basic example illustrates the value of offering double-sided, or give-and-get, referral incentives. In a double-sided reward structure, both the Champion who makes the referral, and the individual who was referred receive a reward. This structure has been demonstrated to be effective in motivating extrinsically motivated champions without sacrificing self-enhancement for intrinsically motivated customers.
Applied to solar, your Champions will receive a reward of value, and more importantly, their motivation for forwarding you a friend’s contact info for solicitation is less likely to be viewed as self-serving. Additionally, when your referral Champion knows their friend is getting something of value by being referred by them, they can view themselves as both “helpful and generous.” What a combo!
If a solar business is presently offering a $300 single-sided referral reward, they could simply modify the structure so the Champion and the referred friend each receive $150. The total reward expense for the solar business does not need to increase.
A customer’s positive feeling and association of their decision to go solar with your company is the key to unlocking the value of intrinsically motivated referrals. Solar businesses that are able to establish this association by providing a consistent and amazing solar customer experience will stand to benefit from a stream of referrals across the lifelong relationship inherent in a solar project. Double-sided referral incentives are effective at motivating reward-driven Champions, without alienating the intrinsically motivated Champions. The final step in capturing referrals is to make it as easy as possible for your customers to submit them. Tools like Bodhi have proven effective for capturing solar referrals.
Are you seeing the success you expect from your referral program? Do you feel pressure to increase your reward to increase referrals? Contact us!