When are Referral Reward Programs Effective: A Perspective of Regulatory Fit Theory

Abstract

Many firms are now using referral reward programs (RRPs) to harness the power of word of mouth and to increase referrals to acquire new customers. However, a persistent problem is that rewards are not always effective. By applying Regulatory Fit theory, to understand how to sustain goal orientation (promotion or prevention) and stimulate word-of-mouth through a match with the message frame, this study demonstrates that the presentation style marketers adopt influences consumers' perceptions of reward value. One laboratory study demonstrates that fit effects result from the interaction between presentation format of reward (i.e., Gain vs. Loss) and regulatory focus and affect referral likelihood. In turn, the findings demonstrate that RRP efficacy can be enhanced by stimulating regulatory orientations that match the presentation formats of the reward.