Designing Effective Social Media E-WOM Referral Programs

Word-of-Mouth (WOM) communications in social networking sites (SNSs) allows consumers to conduct active work as opinion leaders. The use of social media as a promotional tool is continuing to evolve (Turcotte, York, Irving, Scholl, & Pingree, 2015). Previous research has investigated the influence of electronic Word-of-Mouth (e-WOM) on consumer behavior, including product judgment (Lee & Youn, 2009), product sales (Chevalier & Mayzlin 2006; Goldsmith & Horowitz 2006), and purchasing decisions (Cheung, Lee, & Rabjohn, 2008; Chih, Wang, Hsu, & Huang, 2013). Lately, firms have actively utilized e-WOM via social media to encourage customers to be exposed to and get involved in promotions. For instance, referral reward programs such as “refer-a-friend” promotion via social media have become common marketing tools to attract customers. This study examines how and under what conditions offering a reward for referral impacts receivers’ responses to the referral request. Drawing on self-presentation theory, this study proposes that receivers’ responses toward the rewards adversely affect responses because people consider how other people think about themselves. Using experiments and surveys, we find support for this hypothesis to show the effects are significant between reward types (monetary vs. non-monetary) and disclosure of the reward (disclosure vs. non-disclosure). The purpose of this study is to investigate the effect that disclosed and non-disclosed monetary and non-monetary rewards have on the referral provider and referral receiver. The study will help marketers better understand and use social networks as a referral medium.