Why Referral Marketing Is Your Best Customer Acquisition Strategy

Gaining new customers is how businesses grow and generate more revenue. When it comes to developing your customer acquisition strategy, you must include a referral marketing program. Based on Talkable’s internal database and additional sources, there is significant data that proves referred customers share more, generate higher profit margins, are more loyal, and have a higher customer lifetime value (CLV).

Group of co-workers in a conference room determining their business strategy

Less Likely to Churn & More Loyal than Anyone

Acquiring customers through a referral marketing program results in gaining more loyal customers than traditional marketing channels that are even less likely to churn.

In a study conducted by Wharton Business School, they found that customers who received a reward had lower turnover than customers who did not receive a reward. In addition, the referral churn rate was 18% lower than non-referral customers. The referral retention rate was not only higher but also did not diminish over time. Furthermore, after 33 months, referred customers had an 82% probability of remaining continually active customers.

Referred friends were also found to have a much stronger commitment to a brand within a shorter time period. The State of Referral Marketing found that 78% of surveyed respondents suggested that referred customers are more loyal than customers acquired from other marketing channels. This means you get more bang for your marketing buck with a referral program than any other marketing channel.

Ultimately, referred customers are superior to customers captured through different mediums because they are less likely to churn and are some of the most loyal customers out there.

Referred Customers Share More than Anyone

We’ve also found that referred customers are better advocates. By running a referral program and evergreen or seasonal campaigns, you will leverage your referred customers and increase revenue as a result.

Talkable referred customers make wonderful advocates because they share two times more than other existing customers. Our referred customers share 26.21% in comparison to non-referred customers who share 12.03% of the time.

Referred Friends Buy More than Anyone

When our clients’ customers refer their friends, they are 2.5 times more likely to make a purchase than other customers.


stacked horizontal bar chart depicting how many more times Talkable advocates are more likely to purchase.

Friends are more than 50 times likely to share with their network too.


stacked horizontal bar graph showing Talkable referred friends are more likely to share offers.

Our data around Advocates’ friends provide evidence that referred customers are better advocates due to their higher share rate. In addition, this information suggests that marketers should run referral campaigns for referred customers because their friends are even more likely to make a purchase.

Referred Customers Drive More Profits & ROI than Anyone

Another factor that makes referred friends superior is they tend to generate higher profit margins. In the same Wharton study mentioned earlier, researchers found if you consider the initial reward that over a six-year span that referral marketing customers have a 60% increase in return on investment (ROI).

The study also found that the referred customers on average were 4.5 cents per day more profitable than any other customers. In addition, the customer acquisition cost (CAC) for these customers was $23.12 less than non-referred customers.

Another survey discovered that businesses utilizing referral marketing programs saw 86% more revenue growth over two years. Overall, referred customers are 25% more valuable than non-referred customers, because they continue to buy from your business longer, cost less to acquire, and deliver a higher ROI.

Referred Customers have a Longer LTV than Anyone

Referred customers have longer lifetime value (LTVs) because they are less likely to churn. To be exact, referred friends have a 16% longer lifetime value. As you grow your referred customer base, your company is more likely to see greater profits year-over-year.

Fact: customers obtained through referral marketing are better customers. Referred customers are more likely to share and generate new customers.

In addition, customers driven by referral marketing programs are less likely to churn and are more loyal. Most importantly, referred customers are more profitable and drive a higher ROI. They also have a lower CAC and LTVs.

Referral customers cost less to obtain and generate more profits for your business. As a result, referral marketing customers are more popular, because only 30% of companies are utilizing referral marketing programs. If you want to enrich your customer acquisition strategy, you must use referral marketing. Learn more about a Talkable referral program today.

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About Talkable

Talkable is a SaaS platform that allows companies to profit from the science behind referrals, while increasing sales revenue and preventing fraud.

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