Referral programs have become a popular way to acquire customers. Yet there is no evidence to date that customers acquired through such programs are more valuable than other customers. The authors address this gap and investigate the extent to which referred customers are more profitable and more loyal. Tracking approximately 10,000 customers of a leading German bank for almost three years, the authors find that referred customers (1) have a higher contribution margin, though this difference erodes over time;(2) have a higher retention rate, and this difference persists over time; and (3) are more valuable in both the short and the long run. The average value of a referred customer is at least 16% higher than that of a nonreferred customer with similar demographics and time of acquisition. However, the size of the value differential varies across customer segments; therefore, firms should use a selective approach for their referral programs. , and the anonymous JM reviewers for providing comments on previous drafts of this article.
Referral programs have become a popular way to acquire customers. Yet there is no evidence to date that customers acquired through such programs are more valuable than other customers. The authors address this gap and investigate the extent to which referred customers are more profitable and more loyal. Tracking approximately 10,000 customers of a leading German bank for almost three years, the authors find that referred customers (1) have a higher contribution margin, though this difference erodes over time; (2) have a higher retention rate, and this difference persists over time; and (3) are more valuable in both the short and the long run. The average value of a referred customer is at least 16% higher than that of a nonreferred customer with similar demographics and time of acquisition. However, the size of the value differential varies across customer segments; therefore, firms should use a selective approach for their referral programs.
PurposeThe paper aims to refine existing customer‐based brand equity models for the team sport industry and examine the importance of brand equity in the professional German soccer league Bundesliga.Design/methodology/approachAfter assessing brand equity on the basis of actual consumer responses, we relate the brand equity measure on an aggregate level to objective means of economic success. Online sampling with a total database of 1,594 usable questionnaires is utilized for analysis. Exploratory and confirmatory factor analyses (including multi‐group analysis) as well as structural equation modeling and regression analysis are applied.FindingsResults highlight the adequacy of a parsimonious brand equity model in team sport (BETS) model and the importance of the brand in team sport for economic success.Research limitations/implicationsThe main limitations of this research are sample constraints; test persons are highly involved in and knowledgeable about the product category under research. Future research should address a more diverse population.Practical implicationsTeams and their management have to realize the relevance of their brand in economic success. They have to recognize the significance of the stadium visit and the individual spectators in the stadium.Originality/valueFirst, a parsimonious BETS model is presented. Second, it was found that special attention should be devoted to the brand equity‐component “brand awareness” when researching brand equity. Third, this is one of the few studies that uses actual economic data to show the impact of brand equity based on direct consumer responses on company success.
Customers acquired through a referral program have been observed to exhibit higher margins and lower churn than customers acquired through other means. Theory suggests two likely mechanisms for this phenomenon: (1) better matching between referred customers and the firm and (2) social enrichment by the referrer. The present study is the first to provide evidence of these two mechanisms in a customer referral program. Consistent with the theory that better matching affects contribution margins, (1) referrer–referral dyads exhibit shared unobservables in customer contribution margins, (2) referrers with more extensive experience bring in higher-margin referrals, and (3) this association between the referrer's experience and margin gap becomes smaller over the referral's lifetime. Consistent with the theory that social enrichment affects retention, referrals exhibit lower churn only as long as their referrer has not churned. These findings indicate that better matching and social enrichment are two mechanisms through which firms can leverage their customers' networks to gain new customers with higher customer lifetime value and convert social capital into economic capital. One recommendation for the managers of the firm studied is to recruit referrers among their customers who have been acquired at least six months ago, exhibit high margins, and are unlikely to churn.
Organisational learning (OL) that enhances efficiency and the continuous improvement of processes is a key objective of lean product development and has become an important principle of new product development (NPD). Therefore, it is critical for an organisation to capture individuals' and groups' knowledge and learning about processes, institutionalise it, and deploy it organisation-wide. Since OL is more likely to occur if it is supported systematically, NPD scholars and practitioners recognise the importance of investigating facilitators' effect on OL. However, there is no shared understanding of OL among existing studies. This disparity makes it hard to assess, compare, and integrate prior findings into studies. Our article addresses this gap. We investigate how value stream mapping (VSM) and its implementation in NPD affect OL in development processes. Therefore, we operationalise OL on the basis of Crossan et al.'s 4I framework, which is comprehensive and widely recognised (Crossan, M., Lane, H. and White, R., 1999. An organizational learning framework: from intuition to institution. The Academy of Management Review, 24(3), 522-537). We analysed the approach to VSM and its implementation in four longitudinal, comparative case studies in the German-speaking car supplier industry. Using the 4I framework, we captured VSM's effects on the various OL dimensions. We provide valuable insights for R&D managers who seek to improve their processes and want to implement VSM.
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