The impact of social distance on customer rewarded referral program

Rewarded referral programs is a popular way to stimulate word of mouth, its effect depends on not only the economic benefits, but also the social interaction. Based on the social distance theory, in this study analyze the process of the customer rewarded referral program to find how the economic interaction and social interaction interact each other, and how it influences customer referral. In the paper, we use natural field experiment and choose the bank customers as the object. Finally, the result suggested that the social distance moderates the relationship between the recommendation rewards and willingness to recommend. The reward plays a greater role in improving the possibility to recommend in far social distance than close social distance. To reward the referrer will be more effective than to reward the referred customer, when the social distance is far. In contract, when social distance is close, to reward the referred customer will be more effective than to reward the referrer.