The latest issue of the Harvard Business Review has an article on how to calculate the value of customer referrals (article not online yet).
They conducted two studies – one in telecom and one in financial services. Some interesting findings from those calculations include:
- People refer way less than they say they do
- The customer referral value is higher than the customer life-cycle value
- The people with the highest customer life-cycle value are not the ones with the highest referral value
The importance of these findings are twofold. First you need to segment your customers along the customer life-cycle value axis, but also along the customer referral value axis. That will enable you to target your incentives to groups to either increase their usage or increase their referrals, or both. Second, this research shows that customers will low customer life-cycle value can in fact have a higher value to your company through referral value than those with high customer life-cycle value.