Understanding the Effectiveness of Rewarding Recipients on Online Referral Behavior

Online referral programs predominantly focus on incentivizing referrers to make referrals but largely ignore the potential of rewarding recipients to motivate referral behaviors. In this paper, we systematically examine whether, how, and when rewarding recipients could effectively motivate referrers with five experiments across a variety of settings. The results demonstrate that rewarding recipients is effective in motivating referrers to behave prosocially and make referrals. Interestingly, referrers behave prosocially when they are not rewarded, but the effectiveness of rewarding recipients is reduced if referrers are rewarded. We also reveal that referrers’ prosocial behaviors are primarily driven by altruistic motivation, rather than the pursuit of either reputational or collective benefits; notably, offering rewards to referrers dampens their altruistic motivation. Finally, we find that referrers’ prosocial behaviors are inhibited with an increased action cost of their referral behaviors, while their prosocial behaviors persist, even with an increased interpersonal cost associated with the referral behaviors. We conclude by offering theoretical and managerial implications for designing effective referral strategies that leverage the potential of rewarding recipients.