Save The Best for Last: Investigating the Effects of Referral Reward Program Structures in the Freemium Game Context through a Long-Term Field Experiment
(A2023-114181)

AUTHORS

Yashar Bashirzadeh, Grenoble Ecole de Management; Charis Li, Grenoble Ecole de Management; Alixandra Barasch, University of Colorado Boulders

ABSTRACT

Businesses frequently use reward programs to incentivize their existing customers to refer new customers. This research investigates the effect of referral reward structures on referral outcomes. Through a long-term large-scale field experiment in a freemium game, we held total rewards to customers constant while varying the reward structure: a Constant Reward condition, where the referrer received 1/3 the total reward every time the referred user crossed an engagement threshold (up to 3 times), and a Progressive Reward condition, where the initial reward to the referrer (after the referred new customer crossed the first engagement threshold) was low, but the reward became progressively higher for the next two thresholds. Our analyses of 14 months of user behavioral data show that, regardless of reward structure, becoming a referrer increases user engagement; however, although the Constant Reward structure resulted in a greater number of referred users than the Progressive Reward structure, it produced lower engagement among referred users. We demonstrate a strategy change by the Constant Reward referrers on what kind of prospective users they refer.