3 must haves for your solar referral program according to behavioral science
A couple of years ago, an owner of a regional solar company in North Carolina said to me, “I don’t understand why we’re not getting many referrals.” He explained that they had good reviews (4.9 stars on Google) and high Net Promoter Scores according to surveys conducted by Enphase. These great stats, however, did not translate into high referral rates.
When I asked him how he was capturing referrals, I started to understand why. The only way his customers could submit referrals was through a form on their website, a form where the only way to get to it was through a link found in the footer of the webpage. Looking at this from the lens of the Fogg Behavior Model, the reason for the lower referral rates was pretty clear.
Much has been made about the high customer acquisition costs in residential solar. Even while equipment costs have steadily decreased in the past 5 years, CAC is rising and now constitutes around 20% of the system price.
Referrals are one of the best ways to lower CAC. Customers of Bodhi report that close rates for referrals are about 50%, compared to only 2-5% for non-exclusive purchased leads. It’s not surprising why one of our clients refers to these purchased leads as “Trash.”
The other benefit of referrals is that they normally contract at higher prices because referrals are less likely to shop around for other quotes. For example, I referred my backyard neighbor to Lighthouse Solar. He trusted my opinion and didn’t ask any other companies for competing quotes. In the end, he even chose the premium option that Lighthouse was offering him.
Given how important referrals are for a scaling solar business, in this post, we’ll dive into how the Fogg Behavior Model can be used as part of a multi-step strategy to increase your referral rates.
The Fogg Behavior Model (FBM) is a behavioral science framework that describes how and why people take action. If understood well enough, this framework can also be used to help influence people to take a specific desired action like generating a referral.
In the FBM, any particular behavior is due to the convergence of 3 elements: motivation, ability, and a trigger. Motivation is the desire to perform that action and can range from being poorly motivated to highly motivated. Ability is the person’s capacity to take that action and can aslo range from easy to do to downright impossible. Triggers are prompts for the person to carry out that behavior and can be externally sourced like an alarm clock or a result of one’s own actions. If any one of these elements is not present, the behavior is not taken. The video below shows Professor BJ Fogg, the inventor of the framework, explaining the three elements.
There’s an interesting interplay between motivation and ability in the FBM. The easier the ability to perform the action, the less motivated the person has to be. This interplay is represented as the “Action Line” in the graph below. If the person’s motivation and ability to perform the action is to the right of the line (easy to do, high motivation), a trigger or prompt will likely succeed in causing that action to be taken. On the other hand, if it’s to the left of the line (hard to do, low motivation), the prompt will fail. See Figure 1.
A great example in solar of this interplay is the introduction of different financing options. Back in the days, solar was not only expensive, but it also required a large upfront investment. Because the ability to purchase solar was “hard”, only the highly motivated went solar. The introduction of PPA’s and leases led to the first big wave of residential solar adoption in the early 2010’s. More recently, A second wave of adoption followed when solar loans became widely available through financing companies like Dividend Finance and Sungage Financial. These financing options made it easier for people that were slightly less motivated than the early, early adopters to finally take the plunge and go solar.
The same fundamental principles can be used to help influence your customers to refer more of their friends more often.
The motivation to provide a referral by your customers falls into two categories: Extrinsic and Intrinsic. Extrinsically motivated referrals are those that are driven by an external factor like a monetary incentive or a free product . Most solar companies offer anywhere between $250 to $1000 as incentive if the referred person signs a contract.
Intrinsically motivated referrals are those that are driven by your customers simply wanting to talk about you without the need of being rewarded. Here at Bodhi, we’re big believers in appealing to intrinsic motivation because they are longer lasting, open up other revenue generating opportunities, and don’t cost anything. In fact, one of Bodhi’s clients told us,
“Some of our customers have been almost-offended when we’ve offered to pay them for a referral.”
Of course, appealing to the intrinsic motivation requires delivering a great solar customer experience. It means meeting your customers’ high expectations with personalized and timely project updates or soliciting feedback during the installation process to uncover any hidden frustrations. The better the experience, the more motivated your customers will be, and the more likely they will be to the right of the Action Line to submit a referral.
The key question is how can your customers who are thinking of referring a friend actually do it? Your customer can mention your company, but you don’t know about this referral and you don’t have the contact information to follow up. Your customer can share their salesperson’s contact information, but this assumes they have the salesperson’s email memorized or phone number saved on their phone. Or your customer can submit a form on your website assuming they actually know such a form exists.
Alternatively, your customers can submit referrals inside a customer portal that they’ve already been using to receive project updates or monitor their solar production. Ideally, this portal is easily accessible through just a few taps of the finger on their phone right at the moment they have the thought of providing a referral. This is one of the key reasons that a customer experience platform like Bodhi with its mobile 1st design and in-app referral tools is an essential layer in a solar company’s solar software stack.
Unfortunately, the last must have is out of your hands. You might think that sending them emails about your referral program or notifications in your company app to submit a referral are “triggers” in the FBM, but they are really reminders that your referral program exists.
The real triggers for submitting a referral is the conversation that your customers are having with their friends and family. It’s when the conversation turns to phrases like “What’s that on your roof?” or “How’s that solar thing working out for you?” or “I’m thinking about solar. Who do you recommend?”
It’s at those exact moments when you hope that you have Must have #1 and Must have #2 already in place to easily capture the referral that will inevitably come next.
Using the FBM and considering the interplay of motivation and ability, we can understand now why the solar company mentioned at the beginning of the post wasn’t receiving as many referrals as they would have expected. Their customers had the motivation to provide a referral based on the NPS scores and positive customer reviews. The ability element of the FBM, on the other hand, fell into the “hard” category. The only ways a customer could provide a referral was through a website form that was hard to navigate to or by manually passing along the salesperson’s contact information, assuming they still had it. So in this case the ability was insufficient given the particular level of motivation.
Knowing this, it’s now easy to come up with a fix. The company needs to make it real easy for their customers to submit referrals - for example, with a referral function inside a customer app.
Taking a broader perspective, the same concept can be applied to a solar company’s entire customer base to help scale the business. In the FBM, the customer base can be represented as an area on the motivation-ability graph with a range of motivations and abilities. It could be that initially only a small fraction of that customer base have the sufficient combination of motivation and ability to be above the Action Line.
However, if a company can improve their odds either by providing customers with an easy to use referral tool or by improving the solar customer experience, a much larger fraction of the customer base will be above the Action Line. Because of the interplay of both elements, a small improvement on both can result in a big increase in referrals. See Figure 2.
If you’re interested in how other solar companies have been able to put the Fogg Behavior Model into practice, read this case study about Lighthouse Solar and how they improved the number of their referrals by 30%.
And if you’d like to talk more about more ways to grow your solar business organically through referrals rather than trashy leads, contact us.