I Will Get a Reward, Too: When Disclosing the Referrer Reward Increases Referring

Abstract

Incentivized customer referral programs (e.g., “Refer a friend, reward yourself!”) are prevalent, yet they usually have low referring rates. One reason, the authors suggest, is that existing customers (referrers) view incentivized referring as an exchange activity that feels incompatible with their communal relationship with friends (referees), resulting in a psychological barrier (i.e., negative feelings such as discomfort, conflict, guilt, etc.). In seven studies (five preregistered, two in the field; N = 2,060) and one preregistered supplemental study (N = 176), the authors propose and find that disclosing the referrer reward in the invitation message—a not yet widely adopted method—can promote referring by making the referring action seem more compatible with communal norms and reducing the experienced psychological barrier. They also document the potential of disclosing the referrer reward on increasing acceptance, conversion, and sales. The authors further identify three theoretically and practically relevant boundary conditions: (1) the relative reward amount (whether the referrer reward is greater than, equal to, or less than the referee reward), (2) the stated source of the referrer reward (the company or the referee's spending), and (3) the framing of the referral opportunity (whether it is already framed as a communal activity). The authors conclude by discussing the theoretical and practical implications.