Research Reveals Referrals to be Key Driver of Customer Loyalty

Research Reveals Referrals to be Key Driver of Customer Loyalty

Eighty-two percent of Americans participating in customer loyalty programs have actively referred friends and family to their favorite loyalty programs, according to Parago’s 2004/2005 Customer Loyalty Research Report. The findings indicate that customers actively refer others to their favorite programs, especially high-income earners who tend to be more involved in loyalty and rewards programs. 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.

In total, 82 percent of Americans in loyalty programs have referred one or more individuals to their favorite program. Forty-three percent have told four or more individuals about the rewards, perks and/or benefits of their favorite loyalty program.

Referrals are consistently strong from American adults (over the age of 18) and about equal among men and women. Higher-income households ($125,000+) are more likely to make referrals to a loyalty program.

Over 90 percent of high income members refer one or more people to a program, while 64 percent of high income members have referred four or more people to a program.

According to Parago, a small number of Fortune 500 companies have only recently begun to take advantage of the growth that effective customer referral programs can deliver. For generations, research has shown the correlation between highly satisfied customers and referrals; however, most companies do not actively track or reward referrals, thinking word-of-mouth is a phenomenon that only occurs naturally. The key to successful referrals is identifying the customers most likely to be advocates, then creating a focused referral program to track and reward their participation and subsequent impact.

The survey was based on a nationwide online poll of 1,150 adult participants (641 males, 509 females) from across the United States. The research survey was a cross-section of the U.S. population with a sampling error of +/-3%.

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