DISCUSSION

How can word-of-mouth marketing feel less transactional?

April 2, 2021Written by Tom Ryan

Photo: @5byseven via Twenty20

A university study finds marketing perks (i.e., gifts, benefits and rewards) can foster word-of-mouth (WOM) without being used as explicit incentives, although it depends on how they’re framed and perceived. Researchers from Arizona State University, New York University and Northwestern University explored the concept of "contractuality", or the degree to which a perk is perceived to be given to consumers in exchange for engaging in specific behaviors, such as filling out a survey or making a certain number of purchases. The study showed that the exact same perk, such as a free coffee, can be perceived as more or less contractual based on the way it is “conferred, structured or framed.” Furthermore, low-contractuality perks can be more effective than high-contractuality perks at fostering WOM based on how they’re framed. Some WOM campaigns driven by high-contractuality perks can also backfire. Examples of low-contractuality perks include:

Giving consumers a free item after a set number of purchases, but not making the number required purchases obvious to the consumer.
Sending a thank you note along with a perk as opposed to a note that spells out all the effort a customer had to put in to earn the perk.

"Our findings suggest that marketers could nudge consumers to generate positive WOM by providing them with perks that have fewer strings attached. Of note, this could be achieved at a similar cost to perks that come across as highly contractual," said co-author Andrea Bonezzi. Professors at Temple University, University of Minnesota and University of Southern California in 2019 found in a similar manner that word-of-mouth referrals were much more likely to occur when “framing the call-to-action” toward intrinsic motivations such as sharing a benefit with a friend rather than focusing on the financial benefit. Ravi Bapna, a co-author and professor at the University of Minnesota, wrote in a column at Knowledge@wharton, “It turns out that using extrinsic (financial) incentives (referral rewards) to accelerate what is inherently an intrinsically motivated organic process (WOM) is akin to mixing oil and water.”

Discussion Thread0