Referral marketing: Harnessing the power of your customers
Section snippets
Getting to know customer referral programs
Customer referral programs are marketer-directed, word-of-mouth initiatives that entice existing customers to attract friends, family members, and business contacts to become new customers (Kumar, Petersen, & Leone, 2010). Unlike pure word-of-mouth programs, which are customer initiated, referral programs are marketer directed. Marketers often prefer using customer referral programs as opposed to pure word of mouth due to the ability to use incentives to stimulate referrals and to have greater
Demonstrating the value of referral programs
Based on two studies—Schmitt, Skiera, and Van den Bulte (2011) and Trusov, Bucklin, and Pauwels (2009)—this section evaluates the effectiveness of referral programs in terms of criteria such as customer acquisition costs, new customer longevity, and sales and profit impact. The first study examined the impact of a referral program at a major German bank that acquired 5,181 customers between January 2006 and September 2008. As part of this bank's referral program, every existing customer
Planning, implementing, and evaluating the success of referral programs
This section details an eight-step process that plans, implements, and evaluates the success of a referral program: (1) organizing referral programs, (2) planning budgets, (3) identifying a base of customers as referrers, (4) selecting promotional media and message content, (5) determining appropriate rewards, (6) specifying program conditions, (7) choosing program software, and (8) evaluating program success or failure (see Figure 1). This section is useful to firms that are initially planning
Summary and conclusion
Firms seeking to develop referral programs need to understand the significant differences between referral and traditional marketing programs. Unlike traditional marketing programs, which focus on consumers, referral programs target both referrers and referred consumers. Referral programs also rely heavily on databases—to identify referrers and to record purchases by referred consumers—and on social media.
Referral marketing programs are not equally effective for all firms. Referral programs are
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How valuable is word of mouth?
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Driving profitability by encouraging customer referrals: Who, when, and how
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Expanding and Strengthening Your Referral Network
2023, Dermatologic ClinicsReferral campaigns for software startups: The impact of network characteristics on product adoption
2022, Journal of Business ResearchCitation Excerpt :This paper sets out to analyze the effect of referral campaigns as trust building go-to-market strategies for startups launching Internet enabled software. Referral campaigns aim at getting current customers to bring in new ones (Smith et al. 2017; Berman 2016; Haenlein and Libai 2017; Van den Bulte et al. 2018) and have shown to send trustworthy signals, given that invitations to try a product that originate from within a social network are considered particularly credible (Muller and Peres 2019). Also, referral campaigns can be launched with limited financial resources (Van den Bulte et al. 2018).
The relative impact of advertising and referral reward programs on the post-consumption evaluations in the context of service failure
2022, Journal of Retailing and Consumer ServicesCitation Excerpt :Among the customer acquisition methods, advertising and the referral reward programs are two widely used but different marketing methods. The referral reward programs (RRPs) refer to a method that encourages existing customers to introduce potential customers by providing rewards to existing customers (Berman, 2016). RRPs are an indirect marketing activity and take advantage of existing customers and their social relationships to extend sales (Feick, 2007; Van Den Bulte et al., 2018).
Real-time information sharing, customer orientation, and the exploration of intra-service industry differences: Malaysia as an emerging market
2021, Technological Forecasting and Social Change