If consumers are given tangible rewards for online referrals, not unpredictably, they pass along the information to their networks more than without these payments.
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However, the surprising behavior highlighted in the recently published article “Money Talks to Online Opinion Leaders.” in the Journal of Advertising Research is that the segment of consumers who can be characterized as being “opinion leaders” are much more motivated by tangible rewards then consumers who aren’t in that segment.
“At first you might conclude that of course consumers would talk more about products of they were paid to do so,” wrote Dr. Andrea Wojnicki in an email when I asked her about the recently published paper she co-authored with Professor Mengze Shi. Yet, she wrote, it’s more complicated than that. “Think about it, would you really want your friends to know you received a payment or reward for recommending a product? It’s almost like there is a consumer code-of-conduct . That’s what makes consumer referrals so valuable– they are valid because they are personalized, honest and sincere.”
Consumer motivations for referring products are typically described as either “intrinsic” or “extrinsic.”
- Intrinsically motivated means a consumer may be looking for entertainment, a way to improve skills, demonstrate expertise and thus gain social status or just a feeling that she’d like to help others. The academics call this improving “social status.”
- Extrinsically motivated indicates that a consumer is being compensated with cash, discounts or free goods.
Shi and Wojnicki cleverly used a combination of field experimental data and survey data. They worked with a particular manufacturer, described as a “Fortune 500 manufacturer of durable, male-skewed products.” The survey was open to all individuals registered in the firm’s online panel and as part of it, they included questions that would measure participants on a well established opinion leader metric. Each participant was given an opinion leadership score that ranged from a minimum of 6 to a maximum of 30.
Wojnicki explained the mechanics of how they ran the research. “Since we had an opinion leadership score for each participant, we could match their individual referral behaviors on the website with their opinion leadership scores from the survey, then drawn inferences about those participants who rated higher on the opinion leadership scale versus those who rated lower on the scale.”
Overall, they showed that
- With only intrinsic rewards, there was a low referral rate from opinion leaders and everyone else.
- With extrinsic rewards, the higher the “Opinion Leader Score” the higher the referral rate rose: for a score of 6, 2% made referrals, but with a score of 30, 6% made referrals.
So why are opinion leaders different than everyone else? Wojnicki thinks opinion leaders seem to be exempt from the “code-of-conduct” for normal consumers because “they have built up social capital (or a reputation) as an expert that shields them from any ill-will that may result if they receive a tangible reward for their referrals.”
Overall, marketers practical take-away from the research: In running a referral campaign, seriously consider offering “valued, tangible rewards to opinion leaders” particularly since opinion leaders seem to be most likely to respond to such tactics.