Referral equity and referral management: the supplier firm's perspective

Abstract

From the supplier firm's perspective, a referral is a recommendation from A (the referrer) to B (the potential customer) that B should, or should not, purchase from C (the supplier firm). Thus, as referrals are for a specific supplier firm, they should be viewed as part of the supplier firm's marketing and sales activities. We recognize three types of referralscustomer-to-potential customer referrals, horizontal referrals, and supplier-initiated referrals -that have critical roles in a potential customer's purchase decision. We develop the concept of referral equity to capture the net effect of all referrals for a supplier firm in the market. We argue that supplier firms should view referral equity as a resource that has financial value to the firm as it affects the firm's cash flows and profits. We offer strategies firms can use to manage referrals and build their referral equity and suggest a research agenda.

Failure to deliver? Linking online order fulfillment glitches with future purchase behavior

“…This is an important area for investigation given extant research that researchers suggests customers assign more importance to negative information than to positive acknowledgements (Fiske and Taylor, 1991). Additionally, given that negative referrals have stronger influence on customer behavior relative to positive referrals (Hada et al, 2009) these operations failures can have major effects on both current and prospective customers. Arguably then, operations failures resulting in unfulfilled order fulfillment promises (i.e., glitches) have the potential to be damaging to online retailers, especially given the ease with which potential customers can access reviews of online retailers.…”

Specialist Competitor Referrals: How Salespeople can Use Competitor Referrals for Nonfocal Products to Increase Focal Product Sales

“…Consumers search for information to reduce their price uncertainty (Mehta, Rajiv, and Srinivasan 2003), and referrals are important sources of information. A referral occurs if source A makes a recommendation to recipient B to purchase from source C (Hada, Grewal, and Lilien 2010; Spurr 1987). Most of the research to date investigates consumer-to-consumer referrals, often in the form of word of mouth, to understand a source's motivations for granting the referral (Anderson 1998; Berger and Schwartz 2011) and how the information influences the recipient's perceptions and behaviors (Chevalier and Mayzlin 2006; Villanueva, Yoo, and Hanssens 2008).…”

“…Not all referrals are provided by consumers, however; the source A and the beneficiary C also could be sellers. Further, in such horizontal referrals (Hada, Grewal, and Lilien 2010), the two sellers are not necessarily competitors. Hada, Grewal, and Lilien (2010) note the example of a contract lawyer who refers a client to another lawyer who specializes in personal injury law.…”

Who Benefits from the Uniformity of Contingent Fee Rates?

“…Furthermore, while paid-for referrals yield lower net fees for the handling lawyer, there are also considerable costs involved in attracting direct clients. To build the type of reputation that would attract clients other than by referrals, high-ranking firms have to employ marketing techniques such as holding press conferences on important cases, writing editorials, nurturing amicable relationships with former clients, and so forth (Parikh, 2001:165-166; on customer's referrals as a marketing technique, see generally Hada et al, 2010). The costs involved in such activities may be rather substantial.…”