Topic: Unpacking the Incentive Conditions of Referral Programs: Evidence from a Large-Scale Field Experiment

Speaker: Assistant Professor Mengzhou Zhuang, HKU Business School, The University of Hong Kong

Moderator: Associate Professor Mengran Xu

Time: Thursday, May 7, 2026, 3:00-4:30 p.m.

Venue: Guoshun Campus, Siyuan Faculty Building, Room 624

Abstract:

Referral programs are a powerful tool for user acquisition, yet the optimal design of reward schemes remains underexplored. This research empirically investigates how referral reward schemes - conditional referral incentive (CRI), in which rewards depend on conversion, and unconditional referral incentive (URI), in which rewards are guaranteed for sharing - and reward value (high versus low) jointly affect the behavior of both existing users (inviters) and the new users they acquire (invitees). Through a large-scale field experiment with a mobile gaming company, we tracked the referral activities and in-game behavior of 66,427 inviters and 97,181 invitees over a 60-day period.

Our results reveal a critical trade-off between referral quantity and referral quality for inviters. In the high-reward condition, inviters under the CRI scheme sent 77.4% fewer referrals than their counterparts under the URI scheme, but achieved a per-referral acceptance rate that was more than 11 times higher. Despite this greater efficiency in conversion, CRI also generates negative spillover effects on the subsequent engagement of invitees. Newly acquired users under CRI schemes consistently demonstrated lower engagement; in the high-reward condition, these invitees spent 30.3% less time and 76.6% less in expenditure than invitees acquired under URI schemes. We find that these contrasting outcomes can be explained by inviters' persuasive efforts. Inviters in CRI conditions contacted potential invitees 222.9% more frequently, suggesting that reward-motivated social pressure may increase adoption while undermining invitees' post-adoption engagement.

These findings reveal an important contrast between the two prevailing referral reward schemes: while the CRI scheme is effective in generating immediate conversions, the URI scheme fosters greater long-term value by cultivating higher-quality invitees. This suggests that managers should carefully weigh the trade-off between the long-term benefits of healthier user acquisition dynamics and short-term conversion metrics.

Bio:

Mengzhou Zhuang received his PhD from the University of Illinois Urbana-Champaign and is currently Assistant Professor at HKU Business School, The University of Hong Kong. His research focuses on the design and optimization of firms' advertising, pricing, and sales strategies in new media environments, new scenarios, new channel structures, and new social settings. He has participated in multiple consulting projects with well-known companies in China and abroad, including Coca-Cola, Taobao, Suning, NetEase Games, and Baidu. In his research, he primarily uses econometric models, field experiments, nonparametric estimation, and machine learning methods to analyze firm-level and consumer-level data, with the aim of generating insights of value to firms, consumers, and policymakers. His work has been published in leading journals in business administration, including Journal of Marketing Research, Journal of Marketing, and Information Systems Research.