Can Friends Also Become Customers? The Impact of Employee Referral Programs on Referral Likelihood

Abstract

Customer referral programs, which encourage existing customers to recommend a firm’s services in their social network, have become a popular marketing tool. This research focuses on another social group that may also issue recommendations, namely a firm’s own employees. Drawing on social identity research, the authors find that employees are more likely to promote their firm’s services when their employee identity is highly salient. Moreover, this effect is moderated by relational norms, such that employees are only willing to refer their friends when they feel that this is an appropriate behavior in a friendship. Specifically, the results reveal that identity salience only affects referral likelihood when referrals are framed in terms of communal sharing rather than market pricing (Study 1) and when referral rewards are assigned to the friends rather than to the employees (Study 2). Finally, Study 3 shows that relational framing is only effective in increasing referrals when employees feel that there is little risk that their firm’s services will not perform as expected. Thus, managers interested in increasing employee referrals of friends may not only need to link referrals to employees’ organizational identity but may also need to convince employees that referrals do not violate relational norms.