Understanding the Quality–Quantity Conundrum of Customer Referral Programs
Understanding the Quality–Quantity Conundrum of Customer Referral Programs: Effects of Contribution Margin, Extraversion, and Opinion Leadership
Firms can substantially profit from customer referrals, but they must understand the different stages of the referral process to determine what drives the number of referrals (first stage), conversion (second stage), and profit per referral (third stage). Applying a framework that integrates perceptual and behavioral drivers, this study uses a financial services company’s customer survey and transaction data to investigate how the effect of contribution margins of referring customers at all three stages depends on their perceived extraversion and opinion leadership. Extreme extraversion and opinion leadership diminish the positive effect of the contribution margins of referring customers on the number of referrals; their effect on the number of successful referrals is insignificant. In terms of the profitability of successful referrals, extraversion has a negative and opinion leadership a positive moderating effect.