Increase Word-of-Mouth Sales

Many home builders ask prospects how they heard of them. Typically, when a prospect says that he or she was referred by a friend or family member, that fact might be documented, but it often dies there. Yet that is some of the most important information a sales team can have to act upon — and most do little.

It seems obvious, but let it sink in: The prospects who are most likely to buy from you are the ones who have been referred by family members and friends. Because of this third-party endorsement, referral-generated home buyers are the most cost-efficient, profitable and loyal sources of new business. Not only do they tend to buy quicker, they tend to negotiate less, purchase upgrades and refer more business to you.

According to Avid's own research, referral prospects are twice as likely to make a purchase within six months as a marketed prospect.

Tom Hopkins, author of "Sales Prospecting for Dummies," maintains that your closing ratio for non-qualified leads is 10 percent versus 60 percent with referred leads. So it makes sense for your team to spend less time with cold prospects and more time identifying and servicing referred prospects. That doesn't mean ignoring prospects who are not pre-qualified. Rather, it means realigning your resources to get the biggest return on your investment. The best in satisfaction are focusing hard on these referral customers and experiencing higher conversions because of this focus.

Sell your customer satisfaction referrals by identifying who referred customers and when. Have a good strategy to bring the refferer into the sales process from the get-go. And be careful of rewarding the referrer over the prospective customers. (See the sidebar for further explanation.)

To meet the economic challenges of tomorrow, home builders need to start a referral program today. After all, without a battalion of avid customers in your communities, you have fewer volunteer salespeople working for your success.