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How to make a referral program work.

Lee Chilcote | July 28, 2011

For years, Kevin Igoe has offered customers a free month’s service in exchange for providing a referral. It sounded good; the problem was, however, it wasn’t working. 

“People just didn’t see the value, and the incentive got lost in everyday bills,” says Igoe, who is co-owner of Your Green Team (YGT), a lawn and landscape company in Plant City, Fla. “We needed to find something that meant more to people.”

That’s when Igoe and his partner, Shane Karlson, came up with the idea of giving people a prepaid credit card that came with $40 on it. “It’s about the price of a family dinner,” says Igoe. “They buy something and think of us when doing it.”

Since launching the program a few years ago, Igoe has been pleasantly surprised by its success. “It really works,” he says. “It’s not as effective with regular customers, who generally refer people to us anyway. But it works well for teaming up with vendors, such as realtors or sod companies we work with. They get paid to refer people to you.”

Here’s how YGT’s program works. When a new customer is referred by someone that has a relationship with YGT, the company mails a $40 gift card to the referrer the next day. The permanent card is emblazoned with YGT’s log and personalized with the recipient’s name, and the user can track the balance online. If that individual provides another referral, then an additional $40 can be added with a keystroke.

Igoe hands out cards with a zero balance every time that he meets a new salesperson with one of his vendors. That way, “it’s in the back of their head that their card could have $40 on it, which really forces them to market for us,” he says.

This approach beats past referral programs hands-down, says Igoe. One problem with these efforts was that YGT didn’t market them heavily, he says.

He cautions that referral programs only work if you have excellent service to back them up. “I tell people, ‘Once you see the results, then you can refer me,’” says Igoe. “You’ve got to have the product in place, and don’t push your program until you do.”

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