Armstrong^6 have argued that the most effective information sources
for consumers are personal ones; commercial sources normally
inform the buyer but personal sources legitimize or evaluate prod-
ucts for the customer. The legitimacy aspect of referrals makes the
step of converting prospects into customers on the relationship mar-
keting ladder of loyalty much easier.
Non-customer referrals (third party and staff referrals)
In addition to an organization’s customers, many other parties have
the potential to act as a referral source for a business. Referrals may
be made informally when an individual’s experiences of an organi-
zation and its general reputation cause them to recommend the use
of that organization to others. In some circumstances a more formal
system of referrals may be set up. For example, an accounting firm
will develop formal (and informal) relationships with law firms,
banks and other accounting firms with the aim of receiving referrals
from these organizations. On other occasions referrals may be gen-
erated from an organization’s current or former staff.
A consideration of the wide range of non-customer referrals sug-
gests they can be divided into a number of groups. These are now
examined in greater detail and include:
1 general referrals
2 reciprocal referrals
3 incentive-based referrals
4 staff referrals.
General referrals
A broad range of referrals that result in the generation of business
for an organization can be termed general referrals. These can be
further divided into four subgroups.
1 Professional referrals.This type of referral includes those where one par-
ticular professional may recommend the services of another. Often
these are inter-industry, or at least within the same broad sector, such
as health care. For example, a general medical practitioner may refer a
patient to a specialist consultant; or a solicitor may refer a client to a
barrister. In the case of the general practitioner and solicitor, the refer-
rals are typically one-way.The specialist consultant and barrister usually
228 Relationship Marketing