Good customers: The value of customers by mode of acquisition

Are referred customers more valuable than customers recruited through advertising/promotion? This question is answered using data accumulated from surveys covering the satisfaction, recommendation, retention, spending and mode of acquisition of customers. The database comprises 6578 records and covers 15 product/service category groupings. Overall, referral customers are somewhat more satisfied, recommend their brand more, and have superior retention when compared to customers recruited through advertising/promotion. These findings suggest that referral customers are more profitable than advertising customers but, unexpectedly, their superiority over advertising customers rests mainly on their greater retention rather than their higher level of recommendation. On this evidence, referral customers bring somewhat more benefit to a firm than those recruited through advertising/promotion. Projections for a 7-year period illustrate the magnitude of these benefits. Also discussed and illustrated is a possible secondary outcome - social amplification. (C) 2013 Australian and New Zealand Marketing Academy. Published by Elsevier Ltd. All rights reserved.