The clever method of customer acquisition is a form of world of mouth (WOM) marketing known as a referral program. While some programs have been used for decades by non profit organizations like PBS, similar customer referral programs have also become increasingly popular with companies in a wide range of industries, from financial service and automobiles to newspaper and hotels. Christopher Van den Bulte, a professor of marketing at Wharton, describes customer referral programs as a effective way to attract higher quality customers. “They are an old idea that’s getting more traction these days’” he notes,” and we now have solid evidence of their financial benefits.”

            According to a new study titled, “Referral Programs and Customer Value,” customer referral programs are indeed a financially attractive way of firms to acquire new customers. The study authored by Van den Bulte, Bernd Skiera and Philip Schmitt, a professor and doctoral student, respectively, at Goethe University in Frankfurt, Germany was conducted over a period of three years and followed the customer referral program of a leading German bank (which remained anonymous) that paid customers 25 euro bringing in a new customer.
            Van den Bulte says it is no coincidence that the study was conducted with colleagues based in Frankfurt, a city considered the eurozones’ Financial capital and the home not only of the European Central Bank, the Bundesbank and the Eurex, but also of the headquarters of several large banks, including Deutsche Bank, Commers bank and KFW.
            The objective of Van de Bulte’s study was two-fold, Van den Bulte state, “ There is a lot of talk about word-of-mouth-marketing and making money out of social connections. Their first objective, according to Van den Bulte, was to see if customer referral programms can indeed turn social capital into economic capital. Their second objective was to come up with a methodology to assess the effectiveness of customer referral programs that was easy to implement with data and tools available to many managers”. Using information from a database of about 10,000 customers acquired by the bank in 2006 about half of them through the institution’s referral program and the other half through traditional marketing efforts such as direct mail and advertising the study tackled three question.
-           Do referred customers have higher margins than other customers?
-           Do referred customers stay longer with the firm than other customers?
-           Do referred customers have a higher customer lifetime value (CLV), the next present value of all the profits a customer generates over his or her entire association with the firm?
            The second key findings were about customer retention. Referred customers were about 18% more likely to stay with the bank than other customers, and that gap did not fade over time. This pattern Van den Bulte suggests, is consistent with another mechanism documented in previous studies on employee referral programs. People tend to have a stronger attachment to an organization if their friends or acquaintances share a bond to the same establishment.
            The researchers also concluded that the difference in margin combined with the difference in customer retention amounted to a disparity in long-term customer value of 16% to 25%. “that is not only a sizeable chack of  money”, van den Bulte says,” it also amounts to a 60% Roi (Return on investment) over six years on the 25 enro that the bank paid for every referral”. Many practitioners, including , mangers of the bank who made the data available, fear that referral programs suffer from “moral hazard”, where opportunistic customers bring in “dead bats and other unprofitable new customers just to earn referral fee”, van den Bulte state. However, the study shows that the benefits of a customer referral program can outweigh such negatives, making the programs pay off financially. According to Van den Bulte, this is the first study ever published on the financial evaluation of customer referral programs “we actually have hard financial numbers, not vague feel – good stories or abstract statistical coefficients. Our findings and methodology are something that financial managers can actually understand and apply immediately”, he says.
It helps that the techniques used to conduct the study were simple and straight forward, he adds. “you can basically calculate the value using excel. You don’t need a master’s degree in statistics, a smart intern or decent marketing consultant can do it. We hope our study will actually motivate and help companies to assess how effective their referral programs are”. The margin, customer retention and customer value numbers, he notes, will vary across industries and customer segments, but the procedures used in the study can be put into practice at any company with customer profitability data.
            Van den Bulte says that referral programs featuring a financial pay-out are likely to remain a B2C (Business-to-customer) practice, “because paying referral fees to B2B (Business-to-Business) customers’ employees could be conceived as a bribe. Pharmaceuticals and medical companies sometime get in hot water with the FSA for remunerating opinion leaders to educate fellow physicians about the benefits of new products, so expect that paying someone money just to bring in a new B2B customer or lead will be frowned upon. Of course, the absence of financial pay-outs does not mean that customer referrals are any less important in B2B markets. Companies just have to be more creative in finding proper incentives enabling them to be more creative in finding proper incentives enabling them to capitalize on their existing customers’ networks,”

            A service is any act or performance that one party can offer to another that is essentially and does not result in the ownership of anything (Kotler & Keller, 2006). The insight of service marketing focuses on selling the services in the best interest of users/ customer. It is fretful with a scientific and planned management of services which makes possible a fair management of the interests of providers a well as the users. Services are vital segments of all economies and they become increasingly more everyday life as economies develop. The size of service sector is increasing day by day generally in all types of economies in the world and in particular developing economies. This is an exhilarating time for services developing, since new technologies are transforming the services worldwide. These elementary and speedy changes being practiced by services markets throughout the world are brought about among other factors primarily by the technological improvements and by competition oriented reform policies. This creates different anticipation on customers’ awareness towards the products or service of the company.
            In the era of globalization and borderless markets, respond sieves, quality and productivity are essential for the survival and growth of any organization (pot huri & magnate, 2011).
            Despite this transformation and improvement in the service sector and particularly banking sector in Nigeria, it still remains a fact that less than 20%
Gronroos (2000) defined service as, “a process consisting of a series of more or lee intangible activities that normally, but not necessarily always, take place in interactions between the customer and service employees and/or physical resources or goods and/or systems of service provider, which are provided as solutions to customer problems”. Frolic (2006) defined the term service quality as “a global judgment or attitude relating to particular service; the customer’s overall impression of the relative inferiority or superiority of the organization and its services”. 

            Interactions between customers and employees are a decisive component of service quality. This is principally factual for service exemplified by a high degree of person-to-person interaction and by the absence of exchange of tangible goods. The client comes away from service interaction with feelings of contentment or annoyance. Service encounter is an interpersonal association between the firm’s staff and customers (Potluri and Mangnale, 2011).
            Research has indicated that service quality has been increasingly recognized as a critical factor in the success of any business (Parasuraman et al., 1998), and the banking industry in this case is not exceptional (Hossain and Leo, 2009).
Service quality has been widely used to evaluate the performance of banking services (Cowling and Newman, 1995). The banks understand that customers will be loyal if they provide greater value (quality services) than their competitors (Dawes and Swailes, 1999), and on other hand, banks can only earn high profits if they are able to position themselves better than competitor within specific market (Davies et al., 1995). Consequently,banks need to focus on service quality as a core competitive strategy (Chaoprasert and Elsey, 2004).

            Service quality involves a comparison of expectations with performance. According to Lewis and Booms (1983), service quality is a measure of how well a delivered service matches the customers’ expectations. Generally, the customer is requesting a service at the service interface where the service encounter is being realized; then the service is being provided by the provider and in the same time delivered to or consumed by the customer.
            The main reason to focus on quality is to meet customer needs while remaining economically competitive in the same time. This means satisfying customer needs is very important for the enterprises to survive. The outcome of using quality practices is
-           Understanding and improving of operational processes.
-           Identifying problems quickly and systematically.
-           Establishing valid and reliable service performance measures.
-           Measuring customer satisfaction and other performance outcome.
            Organizations are increasingly interested in retaining existing customers while targeting non-customers and customers of competitions; measuring customer satisfaction provides an indication of how successful the organization is at providing products and/or services to the market place. According to Rose and Hudgins (2008), a bank is a financial intermediary that offers the widest range of financial services especially credit, savings, and payment services and performs the widest range of financial functions of any business form in the economy. The functions of a bank according to Reed and Gill (1989), include creating money, payments mechanism, pooling of savings, extension of credit, facilities for the financing of foreign trade, trust services, safe keeping of valuables and brokerage services. Universal banks offer the full range of banking services, together with non banking financial services, under one legal entity. In addition, the banks have direct links between banking and commerce through cross shareholders and shared directorships. Their financial activities normally include intermediation and liquidity via deposits and loans as well as trading of financial instruments (e.g. bond, equity, currency) and associated derivative, stock broking, corporate advisory services, including mergers and acquisitions, investment management and insurance (Heffernan, 2005).
            Zenith Bank Plc provides a wide range of products and services for the benefit of its customers. From the traditional products of the current/savings accounts, Zenith Bank Plc now offers specialized products and services including corporate and investment banking, commercial and consumer banking, personal and private banking, trade services and foreign exchange, treasury and cash management services, other non bank financial services mainly through subsidiaries. There are also investment products like treasury bills as well as fixed and call deposits. These are cut to suit the individual needs of customers. In addition, Zenith Bank has taken advantage of an enhanced information technology system, to introduce internet banking viz Local Money Transfer, Western Union Money Transfer, ATM Locator, Zenith Direct, ZECA (Zenith Children’s Account), Global PAY, Zenith POS, Eazymoney, Internet Banking, Online Bills Payment, Cards, Alerts.
            However, a bank like Zenith Bank Plc recognizes that customer satisfaction (CS) plays a key role in a successful business strategy. What is unclear is the exact nature of that role, how precisely satisfaction should be managed, and whether managerial efforts aimed at increasing satisfaction lead to higher scores in sales. Today managers in the banking sector especially at Zenith Bank Plc, undertake substantial efforts to conduct it surveys. Yet it appear that in most cases the data are used to simply monitor specific attributes, and especially overall satisfaction over time. Unless the impact of customer satisfaction on revenues is assessed, managers have little basis for allocation of resources.
            The concept of customer care is concerned with customer satisfaction, putting the customer first, anticipating needs and problems, tailoring the products and services to meet needs and being nice to customer. It also includes service to the customer, delivery operation, employee relationship with customer and internal relationship between employees and management. In improving customer care strategies and programs, financial services organizations are managing products and services, delivery systems, environment and people so as to provide an efficient and caring service, getting things right the first time and maintaining standards (Naveed, 2009). In services industries, the subject of service quality globally remains a critical one as service providers strive to maintain a comparative advantage in market place. Financial services in general, particularly banks, compete in the market place with generally undifferentiated services and products. Thereby service quality becomes a key competitive weapon (Staffor, 1996). A banking organization like Zenith Bank Plc can only differentiate itself from competitors by providing high quality services. It is true that structural changes have resulted in banks to perform a greater range of activities, and enabling them to become more competitive with non-bank financial institutions (Angur et al., 1999). Presently, technological advancements are causing banks to revise their strategies for services offered to both individual and commercial customers.

            Quality measurement is separated in subjective and objective processes, at which mostly the customers’ satisfaction is being measured. Measuring the customers’ satisfaction is an indirect way to measure quality.
Objective processes are subdivided into primary and secondary processes:
-           During primary processes, test buyings from silent shoppers are being made or normal customers are being watched.
-           During secondary processes, quantifiable enterprise numbers like amount of complaints or the amount of given back goods are being analyzed, and with this information conclusions to quality can be drawn.
            Subjective process are being subdivided into characteristic orientated, incident orientated and problem orientated processes.
-           To the characteristic focused processes counts the SERVQUAL method.
-           To the incident focused processes counts the Critical Incident Theory.
-           To the problem focused processes counts the Frequenz Relevanz Analyze (German).
            The most important and most used process to measure quality is the SERVQUAL method.
            However, the Nigerian Banking Industry has witnessed any developments in terms of innovative products and services. This current state of affairs has brought tremendous transformation in the way business is done in the banking industry. The deregulation of the sector and subsequent introduction of a universal banking license for banks to engage in all banking transactions ranging from merchant banking, commercial and investment banking to development activities has been a catalyst in the direction. The 21st century is considered as the service industry century. Service industry is growing at a rapid pace across developed and developing countries. Services are deeds, processes and performances (Zeithaml and Bitner, 2003). Broadly speaking, services include all economic activities whose output is not a physical product or construction is generally consumed at a time it is produced, and provides added value in forms (convenience, amusement, timeliness, comfort or health) that are essentially intangible concerns of its first purchaser (Quinn and Paquette, 1987). Service has been entering every part of life from the most essential demands (such as eating, sleeping) to other entertainment needs such as banking, sport, traveling, cooking and telecommunication. Customer service improvement has led to the introduction of innovative products of banks as acknowledged by Kock and MacDonald (2006) can be financial or technical. For example such emerging financial products as personal housing mortgage loans, personal consumption loans, sales and trusteeship of funds have not only satisfied people’s diversified financial demand to some extent but also expanded banks’ operational space and their profit-making channels.

            Word-of-mouth (WOM) marketing has recently attracted a great deal of attention among practitioners. For example, several books tout WOM as a viable alternative to traditional marketing communication tools. One calls it the world’s most effective, yet least understood marketing strategy (Misner 1999).
            Marketers are particularly interested in better understanding WOM because traditional forms of communication appear to be losing effectiveness (Nail 2005). For example, one survey shows that consumer attitudes toward advertising plummeted between September 2002 and June 2004. Nail (2005) reports that 40% fewer people agree that advertisements are a good way to learn about new product, 59% fewer people report that they buy products because of their advertisements, and 49% fewer people find that advertisement are entertaining.
            Word-of-mouth communication strategies are appealing because they combine the prospect of overcoming consumer resistance with significantly lower costs and fast delivery especially through technology, such as the internet. Unfortunately, empirical evidence is currently scant regarding the relative effectiveness of WOM marketing in increasing firm performance overtime. This raises the need to study how firms can measure the effects of WOM communications and how WOM compares with other forms of marketing communication.
            Word -of - mouth marketing is a particularly prominent feature in the internet. The internet provides numerous venues for consumer to share their views, preferences, or experiences with others, as well as opportunities for firms to take advantage of WOM marketing. As one commentator stated, “instead of tossing away millions of dollars on super bowl advertisements, fledging dotcom companies are trying to catch attention through much cheaper marketing strategies such as such as blogging and WOM campaign” (Whitman 2006, p. B3A). Thus, it is important to understand whether WOM is truly effective and if so, how it’s impact compares with traditional marketing activities.
            Word – of – mouth has been frequently addressed in the business literature especially in service literature. Classically, it has been viewed as an element in the framework that constructed from satisfaction – profit relationship. Satisfactions has been assumed to effect word-of-mouth, which consequently affects the profitability of the firms, the ultimate goals that companies are looking to increase (s Derlund & Rosengren, 2007). The behaviour that forms the word-of-mouth is considered as the informal sharing of any purchase or consumption related information among customers. Word-of-mouth is considered to consist of two general types: negative and positive word-of-mouth.
            There has not been agreement over the content of the information in word –of-mouth that people transfer to each other; conceptualizations and operationalizations of the word-of-mouth construct, some authors emphasize explicit recommendations (Fullerton & Taylor, 2002; Gremler & Brown, 1999; Hartline & J, 1996; maru, et al; 1994). The latter phase is principally prevailing in researches on satisfaction – related. Moreover, in these kinds of research, it seems as common behavior to bulge together measurement elements that might reflect the word-of-mouth senders along with the element indicating other different purposes.
This approach, which is called cocktail, does not persuade such full appraisal of predecessor of word-of-mouth and outcomes of word-of-mouth; and it might be fairly accountable for the lack of theoroes in detail about the role that word-of-mouth plays in its homological net.
There is no general accordance between scholars on the nature and contents of the information that is being shared among customers. When authors want to operationalize the concept of word-of-mouth, some believed on unambiguous recommendation (Gremler & Brown, 1999). While other authors believed that word-of-mouth is an activity that comprises thoughts, ideas, and information being shared among customers from their personal incidents (Mikkehsen, et al; 2003).
East, Hammond, and Lomax (2008) defined word-of-mouth as an informal adviser that are being transferred among customers. Authors saw word-of-mouth as interactive, rapid, and deficient in business – related predisposition. word-of-mouth is considered as a very powerful effect on the behavior that customers show regarding the decisions they are willing to take.
Positive word-of-mouth is considered to be encouraging a choice like brand choice, while negative word-of-mouth is considered to be discouraging a brand choice. word-of-mouth is believed to be influential in adopting new groupings and the brand selection in adult classifications with regards to antecedents to transmitting word-of-mouth many scholars focus on global evaluations such as satisfaction (Ranaweera & Prabhu, 2003; westbrook, 1987), perceived service quality (Danaher & Rust, 1996; fullerton & Taylor, 2002; Hartline & J., 1996) and perceived value (Sweeney, soutar, & Johns, 1999).

            The earliest study on the effectiveness of word-of-mouth is survey-based (Katz and Lazarsfeld 1955) and was followed by more than 70 marketing studies, most of them also inferring word-of-mouth from self-reports in surveys (Godes and mayzlin 2004; money, gilly, and graham 1998).
            Researches have examined the conditions under which consumers are likely to rely on other’s opinions to make a purchase decision, the motivations for different people to spread the word about a product, and the variation in strength of people’s influence on their peers in word-of-mouth communications moreover, customers who self-report being acquired through word-of-mouth add more long-term value to the firm than customers acquired through traditional marketing channels (Villanuteva, yoo, and Hanssens 2008).
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