Money Talks: Field Experiment Evidence Regarding Online Referral Propensities

Abstract

This paper investigates the impact of various motivational tactics - tangible or intangible and selfish or altruistic - on online referral rates, utilizing a unique dataset matching a large-scale survey with an online field experiment. The authors develop an economic model of referral and derive a tobit model for estimation. Overall, the empirical results of the model indicate that money talks - that is, referral rates are higher when tangible rewards are conferred, particularly tangible and selfish tactics, particularly for Internet Opinion Leaders, and particularly for males. However, for target segments with higher education levels, when intangible or psychological benefits are emphasized, tactics more altruistic in nature are more effective than tactics that are more selfish in nature. Importantly, the authors demonstrate how our model and analysis can help managers design optimal WOM campaigns, depending on their consumer profile.