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today we're speaking with Wharton
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marketing professor Raghu iyengar about
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his research that looks at the impact of
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referral coupons on customer behavior
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and firm revenues thanks for joining us
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Raghu thank you very much d for having
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me can you give us a brief overview of
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your research sure so this research was
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a field experiment that we conducted in
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collaboration with an international
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beauty company so this company like many
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other companies was taking inspiration
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from a lot of interesting things that
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are going on in the couponing world so
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if you look at what's really hot these
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days it's about referrals many companies
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are doing it especially tech companies
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Airbnb does it uber does it draw bak was
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doing it you know PayPal was doing it
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many companies do it so this company
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decided that they wanted route referral
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coupons and the idea of reference who
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pawns is the following let's say I send
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you Steve as a customer a coupon if you
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can use it yourself that's great but
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wouldn't it be great if you can share
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that coupon with your friends that's
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what we're calling referral coupon a
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coupon that is redeemed by the person
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who receives it but also can be shared
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with other customers so on the surface
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you might imagine referal coupons are
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better than typical coupons or the
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traditional ones which cannot be shared
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what did we find well in fact they were
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not that better in fact they were worse
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so does that was very surprised and what
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were the key takeaways from the research
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so the big takeaway I think for us is
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while referrals clearly are a practice
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which is very mainstream one should take
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a little pause it might not be the case
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that referrals are always good in fact
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it is the case that customers who come
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from referrals one of my colleagues at
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Wharton christoph vanden bolter has
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found that customers were coming from
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referrals are better than other
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customers / / about the sender's the
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sender's who have to make those
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referrals they are not that easy to do
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you have to think about who is going to
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be better off from getting this referral
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so a big takeaway was that don't ask for
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referrals from all of your customers in
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fact what we found was customers who are
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high Lowell T customers these are people
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who are committed to the brand these are
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people who bought from you quite a lot
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these people turn into brand ambassadors
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they not only redeem a lot on their own
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they share that coupon with many other
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people but what happens for the low
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loyalty customers these are customers
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who occasionally buy from you they're
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not frequent purchases they in fact are
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not very happy getting that coupon
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why because in some sense you're asking
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them to do the job for you they might be
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skeptical as to why is this firm wanting
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us to do the job for them and why do
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they want my network so what do we find
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these low loyalty customers in fact
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redeem a lot less when they're given
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refuge upon as a course to standard good
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and did any of these findings are
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surprised here I think you know when you
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think about referrals it's a big
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practice you know the typical notion is
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that referals work I think what we found
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was it doesn't work for everyone even a
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practice like sending out raffle coupons
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should be customized I think that was a
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bit surprising to us because on the
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surface it looks like something that
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shouldn't change people's behavior
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whether they get a referral coupon or a
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regular coupon but what we found time
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and again and we did a bunch of field
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experiments in this paper we found time
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and again it's a very robust finding in
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fact exposing people to referral coupons
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even if they don't share themselves it
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actually changes their own behavior so
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you mentioned customization so what are
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the key for practical implications for
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marketers so I think customization of
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the bat is very important you know what
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it looks like is many practices which
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might seem as it might work in mass you
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send everyone a coupon that's not to be
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the case I think you should even think
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about customization right tail another
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thing that we found which was also
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managed really interesting as part of
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the study was in one of the conditions
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we sent a referent coupon along with a
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value of how important the customer is
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for example I'll send referral coupon to
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Steve and say well Steve here's a coupon
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for you that you can share with your
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friends but also note to see that you're
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a very important customer for us just a
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very fact that the company is being
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transparent they be upfront about how
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important you are actually change people
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to become even better brand ambassadors
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they redeemed a lot more they shared it
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with their friends a lot more they
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shared it with friends who bought a lot
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more custom lot more products from the
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comfortable and what sets your research
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apart from other research in this area
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so much work typically in referrals
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first of all it's quite limited and what
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is present there is typically based on
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secondary data this is data based on
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historical purchases so what we wanted
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to do was to work closely with the
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company with a forward-looking approach
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in the sense why don't we do a field
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experiment
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which can help us asli look at the
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impact of ruffle coupons on future
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behavior so if the most important part
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of the research is looking at causal
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impact doing a field experiment is a
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gold standard so I think what sets this
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research apart is the ability to
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collaborate closely with the company and
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doing a field experiment and what do you
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think you're going to look at next so I
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think I really enjoy the idea of doing
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field experiments together with big data
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I think to me that alliance or that
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Nexus is going to be very fruitful later
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on so one of the things that I'm very
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interested in this idea of Internet of
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Things of course there are many
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companies out there there are you know
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coming up with different products for
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example home automation products home
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monitoring products do these really help
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how much do they help what what do
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consumers learn from these products so
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we are working very closely with a
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company in Austin that is doing a lot of
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these internet of things in terms of
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electricity savings they are actually
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doing a lot of experiments informing
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people how much electricity they are
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using sending out text messages using
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smart thermostats to see whether they're
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able to regulate their usage that's the
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next thing great thanks so much for
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joining us today thank you very much
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Steve
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you
