Why People Refer

Subscribe Now!

Stay on top of all the latest news and trends in banking industry.


There’s a popular tweet making the rounds that goes something like this:

I refer your brand, not because I like your brand, but because I like my friends.

It’s a pithy statement, for sure. But it’s not very accurate.

The reason why people make referrals is, on one level, very simple, and on another level, a bit more complicated.

The simple reason why people refer is that they’re motivated to. What’s more complex is understanding why they’re motivated to do so, and what motivates them to do so.

Water boils at 212 degrees Farenheit. Think of that as the boiling threshold. People have a referral threshold. It’s the point at which they’re motivated to make a referral.

When you put water in a pot to boil, it starts off at a certain temperature. The higher the starting temperature, the faster the water will get to the boiling point.

We all start at different starting points for reaching the referral threshold. Much of the research I’ve seen indicates that younger consumers are more likely to refer products to their family and friends than older consumers are. Perhaps that’s a function of age, or maybe it’s a fundamental difference between the generations.

What’s important is understanding why someone is more likely to provide a referral. It has to do with their intrinsic motivation for referring. As the quoted tweet implies, that motivation might be because someone “likes their friends.” But their are other reasons — someone might wish to be seen as an expert in a given area (food, technology, etc.) and provide referrals to satisfy that motivation.

People with a high need to be helpful, or be seen as an expert, start off at a higher point towards reaching the referral threshold.

I say “start off” because, in addition to an intrinsic motivation, there’s a second dimension impacting referrals: Experiential motivation.

Experience is the trigger that either takes someone to the referral threshold or leaves them short of that threshold. Experiential motivation also comes in different flavors:

  • Economic. If you offer to pay me to give you a referral, I might just do so, depending on how much you’re willing to pay me, even if I hate you. This is the reason I’m soooo unimpressed when firms brag about the number of Facebook followers they have after running a contest and offering a prize to people who “like” them on Facebook.
  • Single experience. When the quality of a single experience exceeds expectations by some amount (which differs by person, of course), people are often motivated to provide a referral.
  • Cumulative experience. Often, a single experience isn’t special enough to warrant a referral. But consistent, repeated superior interactions might be differentiating enough to motivate someone to refer a brand. For example, a restaurant that consistently offers good food with good service at reasonable prices is a rarity where I live. No one meal might trigger a referral, but consistency over time might do so.

People refer not simply because they like their friends, but because they see it as a way of saying thank you to the brand for exceeding their expectations, and/or because they have a need to express themselves, and/or have a desire to be perceived in a certain way.

So what’s the big “so what?” about all this?

Referrals are clues. Clues to the stories that customers tell. The comment itself — positive or negative — is important, of course, but is just one piece of the puzzle of understanding why that person left a comment, or made a referral in the first place.

It’s our job as marketers to look at the trends in the referrals to sense not just what our customers are saying about us, but why. And then to respond in the appropriate way.

People with a high intrinsic motivation to refer because they want to be seen as an expert should be treated differently from people who refer because they’ve had superior cumulative experience. The latter are loyal customers, who probably deserve a free appetizer or dessert at the next meal. A freebie is an insult to the wannabe experts.

Let’s give a little more thought to all this before simply buying into pithy tweets. 

This article was originally published on . All content © 2023 by The Financial Brand and may not be reproduced by any means without permission.