The effect of incentive structure on referral: the determining role of self-construal

Incentivized referrals are frequently used by firms to recruit new customers. Currently, most companies use two-sided incentive plans that reward both the referrer and the target. This is sensible and likely popular since both parties (the existing customer and target of the referral) are rewarded, potentially increasing the likelihood of successful referral conversion. That said, a small number of firms use one-sided incentives that reward only the referrer or only the target, which tend to be of lower cost. In the current paper, we examine how to effectively use one-sided incentives from a cross-cultural perspective. Specifically, we posit that reward-target incentives are more effective than reward-referrer plans among consumers who are high (instead of low) in interdependence because reward-target plans can appease social concerns, which are more important to those high (vs. low) in interdependence. Across a series of studies, we confirm these predictions and show that managerially relevant variables that influence social concerns (e.g., opaqueness of the referral information, product-liking risk) moderate our effect.