Referral Effect in B2B Competitive Marketing - the Ceiling Effect of Referrals -

Abstract

ABSTRACT In business-to-business (B2B) competitive marketing, less reputable suppliers must find ways to outcompete more reputable ones. As a marketing strategy, suppliers may ask their business partners or affiliates to recommend them to potential customers (supplier-initiated referrals). Referrals may help reduce potential customers’ uncertainty regarding suppliers’ overall capabilities and subsequently influence their supplier selection decisions. Thus, the following question arises: What is the effect of supplier-initiated referrals in B2B competitive marketing environments? To answer this question, we constructed a theoretical framework and conducted a quasi-experimental study. The results indicate that supplier-initiated referrals have a significant positive impact. Interestingly, the overall impact of referrals on a potential customer’s decision is nonlinear. In other words, the marginal effect of referrer credibility on potential customers’ supplier selection decisions decreases at a certain point, creating a ceiling effect.