Referral Programs and Customer Value
Schmitt, P., Skiera, B., & Van den Bulte, C. (2011). Journal of Marketing, 75(1), 46–59.
Plain-English take: Referred customers had higher profits after variable costs, though the margin difference declined over time; their retention advantage persisted. For your marketing: This is a useful model for evaluating referral acquisition beyond raw sign-ups: compare retention, contribution margin and customer value, and inspect segment differences.
Question: Are customers acquired through a referral program more valuable and loyal than other customers?
Design: Longitudinal observational customer analysis. Approximately 10,000 customers of one leading German bank followed for almost three years; customer lifetime value estimates use a six-year horizon described in the paper.
Referred customers had higher contribution margins, though the margin difference declined over time; their retention advantage persisted. Their estimated average value was at least 16% higher than that of nonreferred customers with similar demographics and acquisition timing, but effects varied across segments.