Community relationships are an essential part of an independent agent’s success. The stronger your local network, the better you’re able to generate quality leads and grow your customer base. For independent agents, relationships within the community translate into one essential component — referrals.

And referrals are an agent’s best friend. They tend to be high quality and extremely targeted leads. In fact, it’s the most potent forms of advertising, writes Megan Mosley at Referral Rock. She points to findings that show 84 percent of people trust recommendations they receive from people they know.

One particular type of relationship that can produce referrals is with local contractors, architects and builders. Here are some reasons why this is beneficial and what you can do to strengthen these professional relationships.

It’s a Connection to Homeowners Insurance Customers

Builders and contractors are of course involved in the construction and remodeling process. A builder handles the nuts and bolts of home construction, including setting the foundation, framing and roofing. A general contractor deals with smaller yet critical tasks like installing flooring, cabinets and windows.

Between them and perhaps the architect who drew up the plans, they’re dealing with homeowners from project initiation to completion. As you might imagine, there’s a lot of rapport built during this time. Contractors and builders often get to know customers on a personal level, gaining their trust by the end of the project. This makes it reasonable to assume that many customers would be open to recommendations from their contractor regarding homeowners insurance.

In a building or remodeling situation, the contractors’ customers could become the insurance agent’s homeowners insurance customers. Not only would the trust established by the contractor be valuable, but the timing is right. It’s an extremely timely referral where customers are pointed to you right when they need homeowners insurance the most.

So it’s easy to see why taking the time to develop and nurture relationships with local building professionals is a smart business decision.

Efficiently Grow Your Customer Base

The Women on Business team points how efficient referral partnerships can be. Once established, a referral partner helps build your network of targeted leads and customers. This means you don’t have to spend as much time sourcing and reaching out to new prospects individually.

And it’s proven to work. In fact, 43 percent of companies who regularly receive referrals acquire more than 35 percent of their customers this way.

It also helps financially because you don’t have require you to spend a ton of money to generate new business. In addition to social media, referral marketing is one of the most cost-effective advertising methods available.

Referrals Tend to Be Loyal

There’s also a correlation between referrals and loyalty. Referred customers are 16 to 24 percent more loyal on average than non-referrals.

Even more, referrals often end up being an independent agent’s best customer. They tend to stick around for the long haul and buy more policies. In many cases, they’ll deliver referrals themselves, creating a virtuous cycle where more and more leads are generated.

When someone buys insurance coverage based on a referral, they’re more likely to tell others about their positive experience. And that positive feedback can encourage the referrer to do so again. So procuring new customers by way of contractor referrals often leads to results that are more meaningful over time than when acquiring non-referred customers. There are potentially long-term implications, which can help you grow your business exponentially.

How to Steer a Contractor’s Business Toward You

We’ve now established the immense benefits of developing relationships with local contractors and builders. But how do you steer a contractor’s business toward you? And how do you provide them with the motivation to send their customers your way?

Fill Them in on Your Offerings

A big part of meeting the needs of each customer is creating a personalized experience and simplifying the insurance buying process.

To ensure each customer receives the right coverage, you need to be on the same page with a contractor and the customers they serve. Let both your referring partner and their customers know the type of policies you carry and your recommendations for homeowners in that particular area.

American Family Insurance gives the example of offering informative webinars in exchange for promoting your business. In the case of an independent agent, the information session would include the best coverage for local homeowners and the specific types of insurance policies to consider buying depending on their individual circumstances.

For instance, most homeowners insurance policies offer a minimum of $100,000 worth of liability coverage, which may be sufficient for the bulk of a contractor’s customers. However, higher amounts of up to $500,000 are available, which may be better for customers with larger investments. Or if customers are located in a flood zone your webinar could include a look at exactly what coverage flood insurance offers.

The information sessions are a chance to establish a connection with potential customers, and by providing detailed information, a level of trust is immediately established.

The bottom line is there should be a clear connection and logical sequence as a homeowner transitions from dealing with the contractor to your insurance company, American Family Insurance adds. So take the time to discuss your offerings with the builder or contractor, and figure out how you can work together on cross-promotions.

Provide an Amazing Customer Experience

A contractor needs to know they can trust you. Put yourself in their shoes for a second. They’ve just wrapped up a housing project and have worked diligently to build a relationship with a customer. Besides investing time and energy into the actual process of building or renovating a home, they’ve put effort into building relationships as well.

If they refer a customer to you for homeowners insurance and you fail to deliver, it’s a poor reflection on them. It could hurt their reputation and even cost them business.

Delivering “jaw-dropping” customer service is essential for boosting referrals. You need to go the extra mile and exceed customer expectations, especially for referrals. If you can do this on a consistent basis, contractors should be more willing to send leads your way.

Show Your Appreciation

Finally, you need to put in the effort required to maintain these relationships. It’s not a one-off meeting with a contractor and that’s it. It’s an organic process where both parties help one another. This includes recognizing and thanking builders for their referrals.

“This could be with a simple phone call, email, or even better, a handwritten note,” says marketing strategist Mary Flaherty. “The important thing is to express your appreciation. You’ll also encourage additional referrals this way.”

You don’t need to be over the top about it, but you should definitely show your gratitude.

Send Relevant Leads to Contractors

This type of relationship is a two-way street. You can’t expect a contact to send you referrals without returning the favor. It’s vital to have a well laid out plan of action so you’ll know how exactly how to best serve your referral partners.

Layton Turner adds that one of the best ways to do this and boost referrals is to get in the habit of referring business to others. It’s just a matter of looking for opportunities during your customer interactions. Say for example, one of your customers encounters extensive water damage in their home due to a burst pipe and need to have their home repaired as quickly as possible. You could help your customer out by recommending the general contractor with whom you have a referral agreement.