The influence of customer value on word of mouth: a study of a financial services company in Brazil

Abstract

Purpose – Our study analyzes the non-linear effect of customer lifetime value (CLV), which accounts for the revenue accumulated over the lifetime of a customer relationship, calculated using a discount rate, on customer referral value (CRV), which accounts for the value created by customers converted to the firm. Design/methodology/approach – We collected data from customers of a financial institution that provides retirement plan products. A random sample of 768 customers provided the full names of individuals to whom they made a recommendation. After these names were elicited, respondents and referrals were identified in the firm’s records, and we calculated the CLV and CRV values. Findings – The results show the existence of a U-shaped effect of CLV on CRV, and a negative linear effect of CLV on recommendation intention. Originality/value – Our study contributes to the body of literature on word of mouth by focusing on a product and business segment with low perceived brand differentiation and low customer involvement. We contribute to the marketing literature by showing a U-shape relationship between CLV and word of mouth activity, represented by CRV.

Keywords

• Word of mouth
• Relationship
• Recommendation
• Customer performance.