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-   -   How's this for a referral program? (http://www.gopherforum.com/showthread.php?t=10786)

markty 01-30-2010 03:36 PM

How's this for a referral program?
 
Refer one new customer to and receive a 20% discount on your lawn mowing services for the remainder of the calendar year.*

Refer a Second new customer to and receive an additional 20% (40% Total) discount on your lawn care for the remainder of the calendar year.*

Refer a Third new customer to and receive an additional 20% (60% Total) discount for the remainder of the calendar year.*

And so on up to Free Lawn Care

* New referrals must sign up for yearly service. If they cancel the discount is voided.

There may be an easier way to word this.

SuperiorPower 01-30-2010 05:02 PM

Quote:

Originally Posted by markty (Post 63872)
Refer one new customer to and receive a 20% discount on your lawn mowing services for the remainder of the calendar year.*

Refer a Second new customer to and receive an additional 20% (40% Total) discount on your lawn care for the remainder of the calendar year.*

Refer a Third new customer to and receive an additional 20% (60% Total) discount for the remainder of the calendar year.*

And so on up to Free Lawn Care

* New referrals must sign up for yearly service. If they cancel the discount is voided.

There may be an easier way to word this.

Personally, I think that is by far too much of a discount. Lets do the math:

Average total yearly contract: $750 (wild guess)

Customer A: Refers 5 new yearly contracts, Customer A1, Customer A2, Customer A3, Customer A4, and Customer A5. Now you have given him $750 out of YOUR pocket. Out of these 6 yearly contracts have a value of $4500 but you are only bring in $3750 for the entire year from these 6 contracts. Now you will have to make a lot of profit from these 5 to get to actually make and true profit.

Customer A1-A5: Lets go out on a limb, all 5 of the referred customers from "Customer A" all bring you 5 customers of their own. You are now cutting 26 yards and only getting paid for 19. You are now giving away $4,500 through out the entire year. Your net income (not net profit) is $15,000 rather than the value of the contracts, $19,500.

Now, lets take a look at your expenses:
Trimmer: $300
Mower: $4500
Blower: $500
Truck: $10,000
Trailer: $1,000
Fuel (for truck, mower, and trimmer): $1000

The above costs are purely a guess and may be way out of line but its a general idea. Sure, all of the equipment should last you several years and you may already have the machines. But consider that that is a LOT OF MOOLAH to give away. I guess I have to ask, are you making more than $150 PROFIT from each customer? If so, how much more? Because essentially, you are paying the referrer $150 per yearly contract. Can you live off the $600 per year net income after you have paid the business related bills?

If you want to do something like that, consider using a smaller % like 5% per contract or 10% per 3 contracts, etc. That would still be $37.50 per referral. I would also make sure that the discount does not carry on for year after year at full value. Truth of the matter is, if you do a good job, your customers will already refer their friends. Another thought is to apply the discounts only to additional work like fall cleanups, mulch jobs, etc. But even then, you need to be cautious of the value of the discount. I would rather go with a $$ amount rather than a %. Example, "Get $25 off your fall cleanup for every yearly lawn service contract you refer, up to a free fall cleanup."

This is just my thoughts, from an outside point of view.

Let us know what you decide,
Eli

markty 01-30-2010 05:23 PM

So what is a referral program that actually WORKS?
 
Thanks for your reply. Let me qualify by saying that I am a NEW start up. One man show. Small to medium residential lawns. I will not have a truck or a 4500.00 mower to start with, sorry to say. Not everyone can go out and get a ton of gear to start with.

I got this from another lawn care company website located elsewhere in North America. So if that is too much, what is a referral program that works?

Steve 01-30-2010 10:04 PM

Well you could experiment with something simple at first. Each referral will get you a $10 or $20 gift card?

Or something like that.

Try it out, see what kind of response you get. You can always scale it up or down as you need to.

SuperiorPower 01-30-2010 10:28 PM

Quote:

Originally Posted by Steve (Post 63904)
Well you could experiment with something simple at first. Each referral will get you a $10 or $20 gift card?

Or something like that.

Try it out, see what kind of response you get. You can always scale it up or down as you need to.

I agree. I think starting out small is a great idea. This will give you the opportunity to make sure you aren't killing your profits.

justin_time 01-30-2010 11:01 PM

How about if they get you 5 referrals, they get $25 gift card, if they get you 10, they get a $50 gift card

Steve 01-30-2010 11:08 PM

We are all consumers.

Ask yourself, when was the last time you took part in any referral program.

I can't think of the last time I did because I just feel that no matter what, there will be too many hoops to jump through and I will never get what ever it is they are offering.

The more complicated the process seems, the less inclined anyone is to use it and the less effective it is for you.

When you are crafting such a referral program, think for a moment if it would inspire you to take part.

markty 01-31-2010 06:55 AM

Gotcha. You know I can't even think of ANY referral programs period.

So keep it simple.

Being a new start up I am trying to be creative in attracting new clients and set myself apart from competitors.

Surely some of the experienced and successful business owners on this forum have had success with a simple referral plan.

Thanks,

Mark

markty 01-31-2010 08:17 AM

In further researching referral/reward programs that work it is suggested that rewards to customers for referring more customers should be a gift. Gift cards, gas cards, movie cards, etc. These are tax deductible. Discounts on your services are not.

Also, the program should be explainable in one sentence.
"Refer a friend, get a gift". Yes you may then list the gifts.
1st referral= movie gift card
2nd referral= dinner gift card
and so on

As much as some of us guys may not like to admit this, the woman of the house is responsible for most of the purchases/spending that a household makes.(come on guys, you know it's true), So gifts should be sent to her so that she talks to her friends(other females) who will be more likely to make a positive purchasing decision in regards to obtaining your services.

justin_time 01-31-2010 12:12 PM

Quote:

Originally Posted by markty (Post 63949)

As much as some of us guys may not like to admit this, the woman of the house is responsible for most of the purchases/spending that a household makes.(come on guys, you know it's true), So gifts should be sent to her so that she talks to her friends(other females) who will be more likely to make a positive purchasing decision in regards to obtaining your services.

I can't really say much, i'm a single man ! lol


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