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Customer Referral Programs

Are Customer Referrals Important?

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What is a customer referral? A referral occurs when one customer recommends a business to another person, who then becomes a new customer. Studies have shown that personal recommendations are one of the primary driving factors in consumer purchases. This is applicable to small, family owned businesses in rural towns and large corporations in major metropolitan areas. Personal recommendations are so powerful because of several factors. The first of these is trust. When someone asks a friend for a recommendation on a business, they know that friend will give them an honest answer due to the history of their relationship. The friend making the recommendation bears a portion of the responsibility for the outcome of that suggestion as they will certainly hear about it, particularly if something goes wrong. A stranger offering a referral bears no such onus. With a friend, there is an expectation of honesty. The second component of a personal recommendation is a previously proven outcome. A person making a suggestion for a business or service usually does so because they’ve engaged that business’ service to a positive end. This single success implies a desirable level of consistent outcomes. Referred customers have proven to be a valuable commodity for any business. In a study conducted by the Goethe University Frankfurt and the University of Pennsylvania, referred customers were shown to be both more profitable and more loyal than normal customers. These customers were proven to stick around longer and spend more money in both the short and long-term. Referred customers are important contributors to the success of any business. A solid referral program will help drive consumers to recommend a company to their friends, in addition to consistent quality service. Consider exploring a planned referral program as an option to drive business for now and in the future.

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