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A Double Dividend from Word of Mouth

A second implication is that word of mouth provides more bang for the buck than was previously realized: Not only will referrals lead to more new customers for a business, but they also can provide additional financial returns from the existing customer base.

The third implication: When firms offer a referral reward program to strengthen ties with their existing customers, they should target newer, more impressionable customers.

Bottom Line:
When customers recommend a product or service, it increases their loyalty, meaning word of mouth is effective at both gaining and keeping customers. The effect is strongest in customers who have little experience with the product or service, making new customers perfect targets for marketers’ referral programs.

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