Reward Customers Recommend: Reward Type Recommended Possibility

The value of word of mouth (WOM) is increasingly recognized by firms, and some scholars have proposed it as a new marketing mix. In recent years, some firms have introduced formal client referral programs and provide rewards to existing customers to encourage them to make recommendations to others. As reward programs allow firms to influence and control consumers'word of mouth, more and more firms try to use this method to leverage existing customers'network to promote firms'products and services and attract new customers. Many well established companies, including P & G, ABN AMRO, DBS, BMW, Canon and ChinaUnicom, and some small and medium enterprises have already introduced such programs.However, although marketers strongly promoted referral reward programs, academic research seems comparatively scarce in this arena. The purpose of this research is to explore how different reward types influences customers' referral likelihood and their psychological effect after recommendation. At the same time, we examine the moderating effect of brand strength (strong vs. weak) and tie strength (strong tie vs. weak tie).Through a 2×2×2 between subjects experimental design, we found that: first, reward type has significant influence toward social cost although we did not find its direct effect toward referral likelihood. Customers'perceived social cost is significantly higher when reward is money rather than gift. Second, brand strength is an extremely important variable that would impact consumers'referral. Consumers are more likely to recommend a strong brand, and after recommending a strong brand versus a weak brand, consumers'social cost is lower and social benefit is higher. Third, tie strength has significant effect toward social cost and referral likelihood. Consumers are more likely to recommend strong tie and perceive lower social cost. Moreover, there exists an interactive effect of reward type and brand strength toward referral likelihood. For weak brands versus strong brands, referral likelihood will be significantly higher when the reward is gift rather than money. At the same time, the effect of reward type toward social cost is moderated by tie strength. Money reward leads to higher social cost compared with gift reward.This paper discusses theoretical contributions and managerial implications in the end and concludes with research limitations and future research directions.