Now this phenomenon has been shown in some recent research published in the Journal of Marketing Research (How Customer Referral Programs Turn Social Capital into Economic Capital, by Christopher Van den Bulte).

The study found two very interesting facts:

1. The more profitable the client, the more profitable the referral, perhaps a combination of referrers screening their referrers for fit and also like-for-like similarities in socio-economic factors, and
2. A referred client was 40% more likely to leave if the person that referred them left, suggesting that social ties play a role in retention.

The implication of the study is that firms should not just focus on seeking referrals from existing clients, but that they should focus in particular on their most profitable clients. Once they’ve received the referral firms should not forget the social ties that bind these new clients with the existing ones.

Also, if a profitable client is lost, it is worth spending some time identifying which other clients were referred by them and then following up with them to make sure their loyalty is intact.

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