Exploring the Persuasive Effect of Member-Get-Member Referral Programs

Marketers use both financial and nonfinancial incentives to create word-of-mouth (WOM) communication but few empirical researchers have explored how these different types of incentives might affect the design of referral programs and new customer responses to them. In this study we adopted an experimental design and established hypotheses to investigate the persuasive effect of different referral reward programs, such as a member-get-member setup. Our findings show that low-involvement products offer financial rewards to new members. This means that managers can stimulate exogenous WOM by encouraging enterprise. Additional managerial implications and limitations are discussed.