Analysis of Referral Networks in Marketing: Methods and Illustration

Though many marketers—particularly those in the service sector—depend on word of mouth (WOM) for referrals, the traditional sample survey methodology used in previous WOM research does not explicate the interpersonal nature of informal communication. The authors propose network analysis as an alternative method for research on referral behavior. The sampling, data-gathering, and analytic aspects of referral network analysis are described in general terms and illustrated with a case study which, in addition to yielding interesting descriptive information about a service marketer's referral network, affords a test of the strength-of-ties hypothesis in influencing referral flows.