Abstract
Referral reward design is the core component of customer referral programs, which are often applied to recruit new customers. This research investigates the effectiveness of utilitarian vs. hedonic rewards in terms of referral generation. Through one field study and two laboratory studies, we demonstrate a reward–product congruency effect; that is, utilitarian rewards, compared with hedonic rewards, yield a higher referral likelihood for utilitarian products, while the opposite holds true for hedonic products. However, such a congruency effect would be crippled by gender segmentation. When males make referral decisions toward hedonic products, the effectiveness of utilitarian rewards is at least equal to that of hedonic rewards. When females make referral decisions toward utilitarian products, there is no difference in effectiveness between utilitarian and hedonic rewards. These findings provide novel insights into referral reward design.
Highlights
Firms often offer rewards, such as cash, coupons, or gifts, to existing customers and encourage these customers to refer new customers
Through one field experiment and two laboratory experiments, we demonstrated a reward–product congruency effect existing in customer referral programs (CRPs)
Considering that the effect of BCF would not collapse completely, we propose the following hypothesis: TABLE 1 | Preferred reward type based on benefit congruency framework (BCF) and gender-specific preference (GSP)
Summary
Firms often offer rewards, such as cash, coupons, or gifts, to existing customers and encourage these customers to refer new customers. Such customer referral programs (CRPs) have long been considered an effective means of new customer acquisition because people often trust the referrals of friends during the buying process (Ryu and Feick, 2007; Dose et al, 2019). Existing customers often respond to CRPs not as actively as firms expect for a variety of reasons (Ryu and Feick, 2007; Wirtz et al, 2013).
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