In the present time, businesses use a lot of marketing strategies to acquire customers. Some of them spend heavily on traditional advertising and marketing campaigns. Some of them use a wide range of digital marketing techniques. And some leverage the power of peer recommendations to attract new customers and retain existing ones.
The last type of marketing strategy is known as customer referral. As per various data and studies, referral programs are extremely effective and profitable compared to all other types of marketing strategies. For instance, did you know that a referred customer is 18 percent more loyal compared to a customer acquired by other means?
That’s just the tip of the iceberg. Referred customers bring 25 percent more profit margins, and they’re four times more likely to refer more customers compared to customers acquired from other methods. This blog post discusses the benefits of referral programs and how the right referral program can build brand loyalty. Read on to gain valuable insights.
Benefits of Referral Programs
As Facebook’s founder Mark Zuckerberg rightly said, “Nothing influences people more than a recommendation from a trusted friend.” When it comes to marketing and advertising, nothing comes close to high-quality referrals. Here are some benefits of referral loyalty programs:
1. Increase in Customer Retention Rate
A study found that referred customers have a 37 percent higher retention rate compared to customers acquired by other means. As per another data, 81 percent of customers acquired from referrals are more likely to engage with brands than customers acquired by other means.
2. Starting a Virtuous Cycle
In referral programs, existing customers get rewarded when they recommend new customers and the latter receive incentives on their first purchase. It sets off a virtuous cycle, where more existing customers are motivated to refer new customers and new customers are willing to buy and refer more customers.
3. More Leads and Expanded Network
As per the latest data, referral leads convert 30 percent better than leads generated from other marketing channels. Another stat reveals that four out of every five marketers, sales leaders, and frontlines sales representatives agree that their referral marketing programs yield the best leads. As referral loyalty programs provide access to a wider circle of customers’ friends and family, it enhances the potential of generating better quality leads.
4. Achieve High Customer Lifetime Value
As per a study, customers acquired through referral programs have a 16 percent higher lifetime value. When a majority of customers trust the recommendations from their family or friends and have a positive opinion about a brand, they are more likely to stick with it, make frequent repeat purchases, and have a higher lifetime value.
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5. Enhanced Brand Awareness And Reach
Referral programs can help to spread the word about a business and its products or services. By encouraging customers to share their experiences with friends and family, businesses can quickly build a loyal base of customers and increase brand awareness as well as brand reach.
6. Cost-Effective And High ROI
Did you know that referral programs can offer up to 15 times the return on investment (ROI)? A recent study revealed that some brands had an average incentive of USD 50 per referral and they collectively spent a little more than USD 34,000 to generate revenue of over USD 496,000. The return is almost 14.6 times the investment!
7. Better Social Proof And Social Media Engagement
Referral programs can enhance social media engagement as well as social proof. As per a study conducted by Olapic and Cite Research, more than a third of participants who follow brands on social media said that they like to view the content of people who use the brand. The content can be product demos, reviews, and unboxing videos.
8. Superior Customer Insights
High-quality referral programs can provide valuable customer insights. By monitoring referrals closely, you can know more about your customers and understand what they want from your brand. A sophisticated loyalty platform can provide you with the right analytics and reporting tools to keep an eye on your referral program.
9. Enhanced Customer Service And Customer Satisfaction
By offering rewards for every referral, you can enhance customer service as well as customer satisfaction. It can also help you create a close-knit community of customers and influencers, which can help in boosting customer service.
On The Whole
Referral programs are extremely effective for businesses to get high-quality customers who have a positive brand opinion and are more likely to stick for a long time. Referral programs also offer a lot more benefits to businesses in the form of high ROI, superior customer insights, and enhanced brand awareness and reach, just to name a few.
At LoyaltyXpert, we have created a lot of high-quality referral programs for a wide range of businesses across industries. If you are considering creating sophisticated referral programs, then contact us today to get in touch with our team of loyalty experts and get a free demo.