There are many strategies and customer loyalty programs designed to strengthen and increase your business base by luring in additional clientele. In turn, they will improve your bottom line. But which type of customer loyalty programs will bring in the type of customers that will be most valuable to your business? What works for one type of business may not work for another. However, one tried-and-true fact is that customers who come to your business by customer referrals are valuable assets.
There are a few attributes of referred customers that make them worth pursuing, such as:
● They tend to be higher quality customers who stay longer.
● Referrals bring like-minded friends and colleagues to your business.
● Churn rate is statistically lower with referred clients.
In general, you want good-quality customers who will not only bring value to your business but will stay with you for the long haul. Once you get into a good pattern with a few referrals, you can count on them to bring their own referrals to you. Hopefully, you will begin to see close friends, colleagues, neighbors and family members as new referrals.
The question is, how do you begin getting those initial customer referrals in your door? Just knowing that referred customers can be highly valuable is not enough. It’s important to make referrals a high priority in your customer loyalty program.
Types of Referral Marketing to Widen Your Business Base
Seeking out and obtaining customers through referrals is a mix of both organic and inorganic marketing tools. We think that using a subtle inorganic approach to attracting customers to refer their friends is a good initial approach. This step needs careful design and preparation, but only after in-depth research into the type of customers who will produce worthy referrals.
A well laid-out plan will help the customers weigh the value in bringing in their friends, colleagues and family members to your business. It should appeal to the high-value clients but hopefully detract those who are opportunists wanting to take short-term advantage of what you have to offer. This inorganic lure is a key component of your customer loyalty program.
After the first round of customers begins to make customer referrals, more will come organically. That’s the beauty of customer loyalty schemes!
Hidden Value of Customer Referrals
When the organic step of the referral plan takes effect, you’ll see the results begin to roll in. Clients who have come in through your loyalty program want to share your business with others. It usually stands to reason that if your customers are a good match for your business, their friends and colleagues will be too. So when they make customer referrals, there’s a high probability these new customers will be as valuable as the ones who referred them.
Along with that comes a feeling of obligation on the part of those new customers. If you have given your customers something of value in return for their business, they will feel more obligated to stay with your company. This type of reward for referrals can be a part of your loyalty program. According to a recent study in the AMA Journal of Marketing, the customers who come to you through referral-based marketing will have higher lifetime values, stay loyal customers and contribute higher profits each year than other clients.
Increasing Your Bottom Line with Customer Referrals
It stands to reason that if your referral marketing strategy pulls in new business from high-quality referrals, your business will grow and you will see a higher bottom line. Studies point out that customers gained through referrals are 25% more profitable each year. Even if that difference evens out after two-and-a-half years, you will still realize higher profits. And on top of that, the referred customer’s lifetime value can add up to around 25%. That percentage remains the same even after you consider the costs you incurred in reaching out to these customers.
As a bonus, their churn rate is 18% lower than that of other customers. Once they decide your business appeals to them, they are less likely to jump ship after the initial introductory period. From there, the referral tree only continues to branch out and grow. With a good program in place, you can count on your initial base of loyal customers to spread the good word for you. The first round of customers will not only stay with you longer, but they’ll refer their own friends and family.
Take action now to include customer referrals in your customer loyalty program and watch your profits grow! For expert assistance to make that happen, get in touch with our team at Incentive Solutions now.