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  • Writer's pictureJuan Grassie

The Imperative of Implementing a Referral Program in Local Businesses

Understanding the value of customer loyalty and retention is a critical component for any thriving business. An often-overlooked strategy for improving client retention and promoting business growth is the implementation of an effective referral program. Local businesses, in particular, can significantly benefit from this strategy. This article explains why referral programs are essential, backed by compelling statistics on customer retention.


Only a modest 18% of businesses focus on customer retention compared to the larger 44% that concentrate on customer acquisition. This study highlights a disproportionately low emphasis on fighting for customer loyalty. However, accurate business focus should aim for an equilibrium between

referal program marketing funnel

acquiring new customers and retaining existing ones.


Customer retention plays a vital role in fostering sustainable growth, with 89% of companies agreeing that excellent customer service is pivotal to customer retention. Investment in building solid customer relationships provides a basis for a successful referral program. In fact, existing customers are 50% more likely to try new products, and even more compellingly, they are 31% more likely to spend more on their average order value.


Further strengthening the case for customer retention, the probability of selling an item to an existing customer lies between 60% and 70%, substantially higher than the meager 5% to 20%

CLV is a goog metric for a Referral program

Clearly, leveraging the power of your already established customer base through a referral program can have significant impacts on your sales figures.


Crunching down the numbers, loyal customers spend 67% more with a brand in their 31st to 36th month than in their initial six months. With this in mind, referral programs that reward customer loyalty are an excellent investment.


Building brand loyalty is manifestly significant, with 55% of millennials affirm that they are more brand-loyal now as compared to 39% of consumers aged 35 and beyond. Even more, nearly half, 44%, of millennials claim they are loyal to their favorite brands. By targeting this young and brand-loyal demographic with referral incentives, local businesses can harness a powerful and blossoming customer base.


Implementation of a robust referral program complements the quality of your product or service - as 77% of consumers contend that high-quality products incite brand loyalty. However, the introduction of a referral program incentivizes customers to disseminate word-of-mouth about your quality offerings.


In conclusion, while a staggering 76% of companies consider customer lifetime value as crucial, only 42% can accurately measure this. Instituting a referral program is one of the best ways to assess, boost, and leverage customer lifetime value. Local businesses stand to gain immensely from referral programs. In an era dominated by online reviews and peer recommendations, word-of-mouth has never been more influential. Start taking your local business to the next level by incorporating a dynamic referral program into your customer retention strategy.

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