Word of mouth has typically been a brand’s best friend. And it’s no different when it comes to loyalty programs.
In fact, 82% of Americans participating in customer loyalty programs have actively referred friends and family to their favorite programs, according to Parago’s 2004/2005 Customer Loyalty Research Report.
On average, active members refer about three friends or family members to their favorite programs, compared to stand-alone referral programs, which result in about two referrals per active member. High-income earners—household incomes of $125,000 or higher—tend to be the most active in referrals since they are typically more involved in loyalty and rewards programs, the study found.
And the news gets better.
Some 43% of participants have told four or more individuals about favorite rewards, perks and benefits. Those doing the referring are about equally split between men and women.
Of the high-income earners, more than 90% referred one or more people and 64% have referred four or more.
“These results are very compelling,” Chris Moloney, VP-loyalty and retention marketing at Parago, Inc. said in a statement. “Consumers are using referral and word-of-mouth more than we ever expected. It’s clear customers want to be loyal.”
Only a small number of Fortune 500 companies have only recently begun to take advantage of the growth that effective customer referral programs can deliver, the company said.
“It’s surprising how few companies take advantage of this huge opportunity,” Maloney said. “With the cost of acquiring customers via traditional marketing efforts continuing to increase, one can begin to imagine the dramatic effect referrals can have on a company’s bottom line.”
Parago, Dallas, TX, designs, develops and manages marketing programs to acquire new customers and build long-term loyalty.