00:00:01
today we're speaking with Wharton marketing professor Raghu iyengar about his research that looks at the impact of
00:00:07
referral coupons on customer behavior and firm revenues thanks for joining us Raghu thank you very much d for having
00:00:13
me can you give us a brief overview of your research sure so this research was a field experiment that we conducted in
00:00:19
collaboration with an international beauty company so this company like many other companies was taking inspiration
00:00:24
from a lot of interesting things that are going on in the couponing world so if you look at what's really hot these
00:00:29
days it's about referrals many companies are doing it especially tech companies
00:00:33
Airbnb does it uber does it draw bak was doing it you know PayPal was doing it many companies do it so this company
00:00:41
decided that they wanted route referral coupons and the idea of reference who pawns is the following let's say I send
00:00:46
you Steve as a customer a coupon if you can use it yourself that's great but
00:00:50
wouldn't it be great if you can share that coupon with your friends that's
00:00:54
what we're calling referral coupon a coupon that is redeemed by the person who receives it but also can be shared
00:00:59
with other customers so on the surface you might imagine referal coupons are better than typical coupons or the
00:01:04
traditional ones which cannot be shared what did we find well in fact they were not that better in fact they were worse
00:01:10
so does that was very surprised and what were the key takeaways from the research
00:01:15
so the big takeaway I think for us is while referrals clearly are a practice which is very mainstream one should take
00:01:22
a little pause it might not be the case that referrals are always good in fact it is the case that customers who come
00:01:28
from referrals one of my colleagues at Wharton christoph vanden bolter has found that customers were coming from
00:01:34
referrals are better than other customers / / about the sender's the sender's who have to make those
00:01:39
referrals they are not that easy to do you have to think about who is going to be better off from getting this referral
00:01:44
so a big takeaway was that don't ask for referrals from all of your customers in
00:01:49
fact what we found was customers who are high Lowell T customers these are people
00:01:54
who are committed to the brand these are people who bought from you quite a lot these people turn into brand ambassadors
00:02:00
they not only redeem a lot on their own they share that coupon with many other people but what happens for the low
00:02:07
loyalty customers these are customers who occasionally buy from you they're not frequent purchases they in fact are
00:02:12
not very happy getting that coupon why because in some sense you're asking them to do the job for you they might be
00:02:19
skeptical as to why is this firm wanting us to do the job for them and why do they want my network so what do we find
00:02:25
these low loyalty customers in fact redeem a lot less when they're given refuge upon as a course to standard good
00:02:32
and did any of these findings are surprised here I think you know when you think about referrals it's a big
00:02:38
practice you know the typical notion is that referals work I think what we found
00:02:43
was it doesn't work for everyone even a practice like sending out raffle coupons
00:02:47
should be customized I think that was a bit surprising to us because on the surface it looks like something that
00:02:52
shouldn't change people's behavior whether they get a referral coupon or a
00:02:56
regular coupon but what we found time and again and we did a bunch of field experiments in this paper we found time
00:03:01
and again it's a very robust finding in fact exposing people to referral coupons
00:03:05
even if they don't share themselves it actually changes their own behavior so
00:03:09
you mentioned customization so what are the key for practical implications for marketers so I think customization of
00:03:16
the bat is very important you know what it looks like is many practices which might seem as it might work in mass you
00:03:24
send everyone a coupon that's not to be the case I think you should even think
00:03:28
about customization right tail another thing that we found which was also managed really interesting as part of
00:03:32
the study was in one of the conditions we sent a referent coupon along with a value of how important the customer is
00:03:39
for example I'll send referral coupon to Steve and say well Steve here's a coupon
00:03:44
for you that you can share with your friends but also note to see that you're
00:03:47
a very important customer for us just a very fact that the company is being transparent they be upfront about how
00:03:54
important you are actually change people to become even better brand ambassadors
00:03:58
they redeemed a lot more they shared it with their friends a lot more they shared it with friends who bought a lot
00:04:04
more custom lot more products from the comfortable and what sets your research apart from other research in this area
00:04:10
so much work typically in referrals first of all it's quite limited and what
00:04:15
is present there is typically based on secondary data this is data based on historical purchases so what we wanted
00:04:22
to do was to work closely with the company with a forward-looking approach in the sense why don't we do a field
00:04:27
experiment which can help us asli look at the impact of ruffle coupons on future
00:04:32
behavior so if the most important part of the research is looking at causal impact doing a field experiment is a
00:04:40
gold standard so I think what sets this research apart is the ability to collaborate closely with the company and
00:04:46
doing a field experiment and what do you think you're going to look at next so I
00:04:51
think I really enjoy the idea of doing field experiments together with big data I think to me that alliance or that
00:04:58
Nexus is going to be very fruitful later on so one of the things that I'm very
00:05:02
interested in this idea of Internet of Things of course there are many companies out there there are you know
00:05:07
coming up with different products for example home automation products home monitoring products do these really help
00:05:13
how much do they help what what do consumers learn from these products so we are working very closely with a
00:05:19
company in Austin that is doing a lot of these internet of things in terms of electricity savings they are actually
00:05:25
doing a lot of experiments informing people how much electricity they are using sending out text messages using
00:05:31
smart thermostats to see whether they're able to regulate their usage that's the
00:05:37
next thing great thanks so much for joining us today thank you very much Steve you