How Customer Referral Programs Turn Social Capital into Economic Capital

For your marketing

Possible founder application

Measure both referrer and referred-customer behavior. Referral quality may reflect who refers and the continuing relationship between the pair, not only the acquisition source label.

Reported result

What the study found

Referrer and referral pairs shared unobserved contribution-margin characteristics. More experienced referrers brought higher-margin referrals, though this association weakened over the referral's lifetime. Referrals churned less only while their referrer remained a customer.

Research question

What the authors investigated

Why can referred customers have higher value, and how do referrer characteristics relate to referred customers' margins and retention?

Design

The authors study customer-referrer dyads in a referral program and test mechanisms of better customer matching and social enrichment using contribution margin and churn outcomes.

Sample and setting

Customers and referrals in one firm's customer referral program; the publisher abstract does not state a sample size.

Scope and transfer

Limitations to keep in view

One firm's program and customer base; the paper's mechanism estimates are not automatically causal outside that context. The abstract's targeting recommendation reflects that firm's data and program.

Research sources

Journal of Marketing Research abstract; all findings and the dyadic mechanisms are reported there.