Money Talks, But Will Consumers Listen? Referral Reward Programs and the Likelihood of Recommendation Acceptance

Abstract

This article studies the impact of firm instituted referral reward programs on consumers’ acceptance of word of mouth recommendations. Across a series of three experiments, we show that recommendation acceptance is dependent upon the nature of the referral reward and the interpersonal tie-strength between the recommender and recipient. Results demonstrate that when a strong tie exists between the recommender and recipient, consumers are just as likely to take a recommendation when a referral reward is present as when a referral reward is absent. However, when a weak tie exists, consumers are more likely to take a recommendation when a referral reward is absent than when a referral reward is present. Finally, we examine the role that different referral reward designs play in influencing recommendation acceptance and show that the design of a referral reward program is critical.