Social Influence and Customer Referral Value

Abstract

Social media, big data and social influence are currently on everyoneʼs lips. But how do they affect customer value? Satisfied customers represent a major source of customer acquisition in many industries. Suppliers can reduce acquisition costs substantially by using "sales activities" of existing clients. However, if customers are dissatisfied, considerable loss of market share may result from negative word-of-mouth referrals. Social network analysis provides the basics to describe these networks, but how can we quantify customer referral value? In this contribution, we propose a method of determining the social influence of existing customers and of quantifying the economic value derived. Subsequently, we suggest a portfolio for identifying the most influential customers, based on the criteria of social influence and customer satisfaction. In a survey, we present empirical evidence of customer referral value being a crucial factor for boosting an enterprise’s profitability.

Keywords

• customer referral value
• customer life time value
• customer segmentation
• social influence
• social networks