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| Author: | Biyalogorsky, E. Gerstner, E. Libai, B. |
| Title: | Customer Referral Management: Optimal Reward Programs |
| Journal: | Marketing Science
2001 : VOL. 20:1, p. 82-95 |
| Index terms: | CUSTOMERS MANAGEMENT PRICES |
| Language: | eng |
| Abstract: | The authors investigate when referral rewards should be offered to motivate referrals and derive the optimal combination of reward and price that will lead to the most profitable referrals. The authors define a delighted customer as one who obtains a positive level of surplus above a threshold level and, consequently, recommends the product to another customer. The authors show that the use of referral rewards depends on how demanding consumers are before they are willing to recommend. The authors' analysis highlights the differences between lowering price and offering rewards as tools to motivate referrals. The authors' theory highlights the advantage of using referral rewards in addition to lowering price to motivate referrals. |
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