Referrals are A Double-Edged Sword: A Relative Theory of Referral Effects

Abstract

ABSTRACT Purpose To investigate the internal mechanism by which comprehensive positive referrals in B to B marketing generate multiple effects. Methodology/Approach Author conducted 2 preliminary explorations. Practitioner note 1 analyzed the influence of ERV and IB on referral effect. Practitioner note 2 analyzed the influence of the interaction between them on referral effect. The data came from a questionnaire survey of 112 purchasing staffers from 40 fresh food supermarket chains operating in China. Findings Referrals whose effective referral value (ERV) is lower than a certain level are more likely to produce negative effect, and vice versa. The boundary condition depends on the initial belief (IB) of potential customers on the comprehensive performance level of the referred suppliers. The author calls this mechanism the relative theory of referral effect. Research Implications First, this practitioner note makes a theoretical contribution to the research literature related to WOM and referral effect. This is the first literature to introduce IB into the referral multiple effects analysis framework, and the first to reveal the mechanism of multiple effects from the perspective of the relative level of ERV and IB. Second, this paper contributes to the research on WOM. Rocklage and Fazio (2020) analyzed the mechanism of negative effects of positive emotions in positive WOM (PWOM) due to product categories, but it should be noted that the independent variable was positive emotions rather than the positive information content itself. In this sense, this practitioner note is the first to analyze the negative effects of positive information, which enriches the literature related to WOM. Practical Implications the preliminary findings of this practitioner note have guiding significance for marketing practice. That it is unlikely that the referrer will have a positive impact on high-reputation suppliers. For suppliers with low and medium reputation levels, the referrer is a double-edged sword. Therefore, it is not recommended that high-reputation suppliers implement supplier-selected-referral programs, and low and medium-reputation suppliers should be cautious in selecting referrers, for the referrer may have negative effects. Originality/Value/Contribution The author makes up for this deficiency in the existing research by building a multiple effect analysis framework including ERV and IB, thus promoting the development of research theory related to WOM and referral effects.