When giving money does not work: The differential effects of monetary versus in-kind rewards in referral reward programs

Liyin Jin and Yunhui Huang

International Journal of Research in Marketing, 2014, vol. 31, issue 1, 107-116

Abstract: Customer referral reward programs have recently gained popularity as beneficial customer acquisition tools. This research aims to explore the impact of reward type, specifically with regard to the differential effects of monetary versus in-kind rewards, on referral success. We find that although consumers prefer monetary rewards to in-kind rewards because of the greater economic value of monetary rewards, the higher social costs associated with money offset this benefit and even render money an inferior incentive when the recommendation is not well justified. Through four experiments, we demonstrate that monetary rewards (vs. in-kind rewards) lead to less referral generation and acceptance, especially when the recommended brands are weak (Studies 1 and 4), and that perceived social costs mediate the interactive effect of reward type and brand strength (Studies 1 and 3). Moreover, by increasing the economic benefit or decreasing the social costs associated with monetary rewards, we restore the effectiveness of monetary rewards as incentives. Compared with in-kind rewards, monetary rewards perform equally well when the reward is sufficiently large (Study 2), and they perform even better when both the recommender and the receiver are rewarded (Study 3). This research extends the literature on the psychological consequences of money and provides novel insights into the customer referral process.

Keywords: Referral reward program; Customer acquisition; Monetary reward; In-kind reward; Psychological cost (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167811613000906
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ijrema:v:31:y:2014:i:1:p:107-116

DOI: 10.1016/j.ijresmar.2013.08.005

Access Statistics for this article

International Journal of Research in Marketing is currently edited by Roland Rust

More articles in International Journal of Research in Marketing from Elsevier
Bibliographic data for series maintained by Catherine Liu ().