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Whether it’s looking for a new hair stylist in a new city, finding someone to properly grout your tiles, or finding someone to help grow your business, referrals count.

Why? Well do you trust every advertisement or average Joe who tells you to hire them? referrals

Pictures can be photoshopped, and people can talk the talk.

It is our friends, coworkers, and general trustworthy acquaintances and online communities we listen to. Advertising is undoubtedly an important part of business growth and customer acquiring. However, it is referrals that help you find the most loyal and reliable customers.

According to a Nielson survey of 58 different countries, 84% said they trust the recommendations of people they know. Moreover, 68% percent said they would even trust referrals from online sources. With the increasing presence of online forum communities, the circles of people we trust are expanding, opening up many more opportunities for quality referrals. Regardless of who gives the recommendations, we are more likely to double check with the people we trust to verify advertisements we might see.

Referrals are the key to finding customers who will not only choose your business, but will continue to invest and afford you longer future returns. How do we know this? According to a study of a German bank’s customer base, conducted by the American Marketing Association’s Journal of Marketing, referred customers were:

  1. 25% more profitable for the bank
  1. 18% more likely to stay with the bank
  1. 16% higher lifetime value.

The customers acquired through traditional marketing means were less likely to pan out as quality customers. When it’s something we care about we are likely to not only make sure we make the right choice, but when we do, we often trust our choice more. The trust we place in our choice, means that we are trusting in our partner.

The Journal of Marketing calls these customers a “superior match.” The study explains that “superior matches” (customers acquired through referrals) are generally better informed because whoever referred them discussed and explained your company. Additionally, existing customers know what people or communities would be interested in your business. Since businesses spend a lot of time and money trying to find their appropriate customer base and creating informative content, referrals inherently help alleviate some of the costs of funnel marketing and outreach.

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