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Unintended reward costs: the effectiveness of customer referral reward programs for innovative products and services

Author

Listed:
  • David B. Dose

    (Aston Business School)

  • Gianfranco Walsh

    (Friedrich-Schiller-University Jena)

  • Sharon E. Beatty

    (University of Alabama)

  • Ralf Elsner

    (Rhenania BuchVersand Koblenz and Steinbeis-University Berlin)

Abstract

To encourage customers’ referral behavior and expand their customer base, providers of innovative products and services often use customer referral reward programs (CRPs), though not all CRPs deliver on their initial promise. With one field experiment and four online experiments, this research investigates the effectiveness of rewarded referrals for recruiting new customers for more innovative (versus less innovative) offerings and outlines the conditions in which public referral rewards have unintended ramifications and decrease customers’ referral likelihood. In addition to establishing these effects for more innovative offerings, this research identifies some moderating consequences, such that the detrimental effect of referral rewards on referral behavior can be attenuated by not disclosing referral rewards (for recommenders) to referral recipients, increasing the referral reward size, and rewarding both recommenders and referral recipients. These findings have theoretical and managerial implications.

Suggested Citation

  • David B. Dose & Gianfranco Walsh & Sharon E. Beatty & Ralf Elsner, 2019. "Unintended reward costs: the effectiveness of customer referral reward programs for innovative products and services," Journal of the Academy of Marketing Science, Springer, vol. 47(3), pages 438-459, May.
  • Handle: RePEc:spr:joamsc:v:47:y:2019:i:3:d:10.1007_s11747-019-00635-z
    DOI: 10.1007/s11747-019-00635-z
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    Cited by:

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    2. Emílio José Montero Arruda Filho & Cristiana Fernandes De Muylder & Airton Cardoso Cançado & Ruby Roy Dholakia & Angela Paladino, 2019. "Technology Perspectives and Innovative Scenarios Applied in the Amazon Region," RAC - Revista de Administração Contemporânea (Journal of Contemporary Administration), ANPAD - Associação Nacional de Pós-Graduação e Pesquisa em Administração, vol. 23(5), pages 607-618.
    3. Di Kuang & Xiao-Fei Li & Wen-Wen Bi, 2021. "How to Effectively Design Referral Rewards to Increase the Referral Likelihood for Green Products," Sustainability, MDPI, vol. 13(13), pages 1-16, June.
    4. Ana Babić Rosario & Kristine Valck & Francesca Sotgiu, 2020. "Conceptualizing the electronic word-of-mouth process: What we know and need to know about eWOM creation, exposure, and evaluation," Journal of the Academy of Marketing Science, Springer, vol. 48(3), pages 422-448, May.
    5. Lili Wang & Zoey Chen, 2022. "The effect of incentive structure on referral: the determining role of self-construal," Journal of the Academy of Marketing Science, Springer, vol. 50(5), pages 1091-1110, September.
    6. Zhan, Mengmeng & Huang, Minxue & Li, Aoqi & Yang, Yvmeng, 2023. "The role of impulsive behaviour and meta-perception in referral reward programs," Journal of Retailing and Consumer Services, Elsevier, vol. 75(C).
    7. Wang, Xia & Ding, Ying, 2022. "The impact of monetary rewards on product sales in referral programs: The role of product image aesthetics," Journal of Business Research, Elsevier, vol. 145(C), pages 828-842.
    8. Hyeon Jo & Youngsok Bang, 2024. "RETRACTED ARTICLE: From storefront to screen: an in-depth analysis of the dynamics of online for offline retailing," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-15, December.

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