Dollar or percentage? The effect of reward presentation on referral likelihood

Abstract

Purpose

Addressing the significant differences between referral programs and traditional promotional marketing, this paper aims to investigate and examine the impact of how reward-related information is presented within referral programs and how it interacts with reward size and reward allocation.

Design/methodology/approach

This study adopts framing effect and equity theory to build the relationship between reward presentation, reward size and reward allocation. Then, two scenario-based experimental studies are designed and conducted on Amazon Mechanical Turk.

Findings

The results show that there is no direct impact of reward presentation on referral likelihood, while the effect relies on reward size. As the levels of reward size increase, the referral likelihood gradually shifts from percentage form to dollar form as perceived size mediates the interaction effect on referral likelihood. Further, adding information about reward allocation also indicate the different impacts of equity and inequity on influencing the above findings.

Originality/value

The study contributes to the literature by introducing reward presentation and emphasizes its impact on individual’s behavior decisions in the context of referral programs. This study extends and broadens the scope and effectiveness of the framing effect on traditional promotional marketing strategies, while also bridging the gap in the literature by examining the combined role of information about rewards.