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This paper examines a unique selling strategy, Group Buying, under which consumers enjoy a discounted group price if they are willing and able to achieve a required group size and coordinate their transaction time. We argue that Group Buying allows a seller to gain from facilitating consumer social interaction, i.e., using a group discount to motivate informed customers to work as \"sales agents\" to acquire less-informed customers through interpersonal information/knowledge sharing. We formally model such an information-sharing effect and examine if and when Group Buying is more profitable than (1) traditional individual-selling strategies, and (2) another popular social interaction scheme, Referral Rewards programs. We show that Group Buying dominates traditional individual-selling strategies when the information/knowledge gap between expert and novice consumers is neither too high nor too low (e.g., for products in the midstage of their life cycle) and when interpersonal information sharing is very efficient (e.g., in cultures that emphasize trust and group conformity, or when implemented through existing online social networks). We also show that, unlike Referral Rewards programs, Group Buying requires information sharing before any transaction takes place, thereby increasing the scale of social interaction but also incurring a higher cost. As a result, Group Buying is optimal when interpersonal communication is very efficient or when the product valuation of the less-informed consumer segment is high. This paper was accepted by Preyas Desai, marketing.

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.

•We explore the effect of message tone (more vs. less assertive tone) on referral behavior among existing customers.•Assertive tone discourages consumers from sending referral messages.•Assertive tone makes senders metaperceive that their recipients will experience great psychological reactance, thereby impairing senders’ referral behavior.•This effect diminishes when the referred product provides important benefits to recipients.•This effect disappears when the referral promotion is constrained by time. Brands and retailers are increasingly adopting referral reward programs (RRPs) as a customer acquisition strategy. RRPs provide existing customers with referral messages and incentivize them to share those messages with other potential customers. Despite their growing popularity, there is a limited understanding of how to effectively promote RRPs, especially with regard to message tone assertiveness. In a large-scale field experiment (N = 61,401, Study 1), we discovered that consumers (i.e., senders) are less inclined to participate in referral programs when they are provided with a pregenerated referral message with a more assertive tone than when they are provided with less assertive alternatives. We found that an assertive message leads senders to anticipate greater psychological reactance from their recipients, a metaperception that diminishes their willingness to engage in RRPs (Studies 2A and 2B). Additionally, we identified two significant moderators: the detrimental effect of an assertive tone is mitigated when the product offers important benefits to recipients (Study 3) or when the referral promotion is time limited (Study 4). [Display omitted]

Purpose This paper aims to examine the psychological consequences of a customer engagement initiative through referral reward programs (RRPs) in online versus offline environments. Design/methodology/approach The authors conducted a qualitative study followed by a scenario-based experimental study. Findings The authors show that recommenders’ concern about how they are viewed by recommendation recipients (i.e. their metaperception) mediates the effects of incentives on referral likelihood in both offline and online environments. However, metaperception has a stronger effect offline where recommenders show higher impression management concerns compared to online. Furthermore, tie-strength and communication environment moderate the effect of incentives on metaperception. When referrals are made to weak-ties, incentives decrease metaperception favorability offline more than online. For strong-ties, this effect is lower, and it is similar in offline and online environments. Research limitations/implications The study focused on an online versus offline dyadic communication and did not consider the differences among social media. Furthermore, the authors did not consider how other forms of positive metaperception, like being seen as helpful or knowledgeable, could be increased in an online incentivized referral context. It is possible that a recommender thinks others see him as more helpful or knowledgeable online because a lot more useful information and other resources could be offered here compared to offline communications. Practical implications The authors recommend managers to design both online and offline RRPs that minimize metaperception concerns; target strong ties in any communication environment as metaperception concerns are low; and target weak ties online where metaperception concerns are muted. Originality/value This work is the first to examine how recommenders’ psychological responses differ offline and online.

The popularity of social media has provided great convenience for firms to conduct online referral marketing by using referral reward programs. We contribute to the existing works by examining the profitability of the two referral reward programs, namely reward in cash and reward in discount coupons, and measuring the instant product sales and the informative utility output from consumer referrals. We established two-period optimization models and found that referral reward programs are effective only if the unit referral cost of customers is low and if the repurchase rate of consumers is high enough. To redeem the reward instantly or not (in cash or discount coupon) interacts with the pricing strategy: the cash reward is fixed in combination with a high price followed by a low price strategy, and the coupon reward is fixed in combination with a low price followed by a high price strategy. With the increase in the unit referral cost, a firm will be more inclined to use the joint strategy of coupon reward and a low price followed by a high price strategy. Under the conditions that the referral reward program is ineffective, the pricing strategy with a high price followed by a low price is optimal.

Purpose Empirical research presents conflicting findings with regards to the effectiveness of referral reward programs (RRPs) and supports two alternative and conflicting views on the effectiveness of incentivizing recommendations. They are, first, a positive effect via perceived attractiveness of the incentive, and second, a negative effect via metaperception of the recommendation. The purpose of this paper is to examine these two opposing psychological mechanisms to reconcile the conflicting findings. Design/methodology/approach The authors conducted three experiments. Study 1 tests the base model. Studies 2 and 3 add moderators to test whether each mediating variable operates exclusively on its intended relationship. Findings Incentive size enhanced the attractiveness of an incentive, but reduced the metaperception favorability of the recommendation. These two opposing mechanisms operated in parallel, independently and fully mediated the effects of incentive size to likelihood of making a recommendation. Thus, the net impact of incentives on recommendation behavior depended on the relative strengths of these two opposing forces. Practical implications The study recommends managers to design RRPs with incentives that recommenders perceive as highly useful (i.e. to increase attractiveness) but have a low face value (i.e. to reduce metaperception concerns) and to target RRPs to strong rather than weak ties. Originality/value Our work offers an integrated theoretical account of consumers’ responses to incentivized recommendations and provides managerially relevant guidelines for the design of effective RRPs.

PurposeThe purpose of this paper is to investigate how the effects of referral rewards in referral reward programs (RRPs) are moderated through perceived social risk of a recommender.Design/methodology/approachA total of 717 consumers are accessed through Amazon's Mechanical Turk worker panel. The authors use t-test and analysis of variance to test the proposed hypotheses.FindingsThe findings show that consumers with high perceived social risk balance financial rewards with social risks, while low social risk consumers largely ignore these social risk elements surrounding a referral decision.Originality/valueThe inclusion of perceived social risk provides the opportunity to fully understand how a consumer goes about balancing social risk and referral rewards in making referral decisions. The concept of social risk has not been previously applied to this context.

PurposeThis study highlights the effect of an inductee's altruism on referral reward programs (RRPs) on an online shopping guide platform to determine the optimal RRP and referral reward allocation under a Cashback and Referral RRP.Design/methodology/approachThe authors consider a Stackelberg game with a platform, seller, inductor and inductee, where the inductee's altruism plays a vital role in determining the optimal RRP in equilibrium.FindingsThe authors show that the conditions under which it is optimal to reward the inductor only or reward both inductor and inductee are equal or unequal depending on the degree of the inductee's altruism. Suppose the platform is unable to dynamically decide the commission fee. In that case, the platform may not always be involved in RRPs and will gradually reduce the rewards for inductees as the altruism increases.Research limitations/implicationsThis study focuses on a free-to-consumers model where sellers pay membership fees. Thus, this study has limitations regarding other pricing schemes such as a model in which consumers pay a fee while sellers do not or a model in which both types of users pay fees.Practical implicationsThis analytical work can help platforms optimize referral reward strategies and referral reward allocation considering the influence of an inductee's altruism.Originality/valueIn a Cashback and Referral RRP on a shopping guide platform, the authors provide applicable conditions for the platform to involve in the RRPs when rewarding an equal bonus for the inductor and inductee first. Further, the authors show the optimal referral reward strategy and referral reward allocation when giving the different bonuses to the inductor and inductee.

Interpersonal referrals can effectively promote purchases. In view of the low sales of green products, this study introduces the referral reward program into green marketing and investigates the impact of reward type on customers’ referral likelihood for green product. Through a lab experiment with 302 participants in China involved, this study reveals the differential effects of monetary versus donation rewards on existing customers’ referral likelihood. Specifically, compared with monetary rewards, donation rewards are more effective in promoting recommendations. It is also indicated that the perceived fit between the reward and green products partially mediates the relationship between the reward type and referral likelihood. In addition, the relationship between the reward type and perceived fit is moderated by consumers’ green product knowledge. This research not only extends the literature on green marketing and referral reward programs, but also provides feasible suggestions for government and enterprises to promote green products and to improve social wellbeing.

Purpose Referral reward programs (RRPs) incentivize existing customers (inductors) to refer new customers (inductees). The effectiveness of RRPs is not well understood as previous studies either focused on referral intent and/or ignored inductee responses. However, an RRP is only effective if inductors recommend and inductees respond with buying the service. The purpose of this paper is to examine the drivers of existing customers’ successful referral behavior. Design/methodology/approach This study combines a bank’s customer relationship management (CRM) data which were used to identify successful inductors and non-inductors. Then, observed behavioral and customer background data from the CRM database (including successful referrals, deposits in euros, number of products held, relationship duration, income, age, and gender) were combined with survey data capturing attitudinal variables (i.e. perceived relationship quality, reward attractiveness, referral metaperception, opportunism, and involvement). This approach allowed for the simultaneous testing of all hypothesized drivers of successful referral behavior. Findings Metaperception (i.e. the process by which individuals determine the impressions other might form of them and their behavior) was the strongest and most significant driver of successful RRP participation, followed by attractiveness of the reward. That is, inductors recommended successfully when they believed that their incentivized referral did not look bad (or even looked good) and incentives were perceived as attractive. This finding is important as metaperception so far has only been examined in theoretical and experimental studies with intent as dependent variables. Second, latent class analysis (LCA) revealed that there were two segments of inductors of which one was opportunistic. Opportunism as a driver of referral behavior has not been shown in past research using more traditional analyses, whereas LCA uncovered it as a driver for one-third of all respondents. Practical implications The findings offer managers a better understanding of the key determinants of successful referral behavior with important RRP design implications that counter frequent practice (e.g. designing RRPs with high face value but then reducing its usefulness through terms and conditions). Furthermore, managers may consider segment-specific reward structures to improve the effectiveness of their RRPs. Originality/value This study is the first to examine inductor determinants of successful referral behavior and identify inductor segments.