Referrals · Analytical model of referral incentives
Optimal Referral Bonuses with Asymmetric Information: Firm-Offered and Interpersonal Incentives
Marketing Science · 2010
Summary
When consumers place greater weight on recipients' outcomes, the optimal bonus tends to be higher unless price is a more efficient way to motivate recommendations.
For your marketing
Possible founder application
Helps frame referral incentives as a joint decision about product price, bonus design, and the recipient's benefit. Use the model to generate hypotheses, then test program economics locally.
Reported result
What the study found
When consumers place greater weight on recipients' outcomes, the optimal bonus tends to be higher unless price is a more efficient way to motivate recommendations. In some cases, the optimal bonus is zero and the product price is lower.
Research question
What the authors investigated
How should firms set referral bonuses when customers differ in information and care about the people they refer?
Design
Analytical model of firm-offered and interpersonal incentives under asymmetric information.
Sample and setting
Theory paper; no empirical sample.
Scope and transfer
Limitations to keep in view
Results depend on the model's assumptions about consumer information, interpersonal concern, and incentive response; they are not estimates of an average referral-program lift.
Research sources
INFORMS publisher abstract retrieved with Firecrawl; summary is explicitly theoretical.