A Multi-Stage Model of Word of Mouth Through Electronic Referrals

Authors: Arnaud DeBruyn and Gary Lilien

With the growth and evolution of the internet, electronic peer-to-peer referrals have become an important phenomenon, and marketers have tried to harvest their potential through electronic referral marketing (ERM) campaigns. At the same time, spam, email-based viruses and the like have cluttered electronic communications, making ERM campaigns problematic and challenging to deploy. The key driver in ERM is the effectiveness of unsolicited, electronic referrals to create awareness, trigger interest and generate sales or adoption. Yet, despite an abundant literature, little is known about how this electronic, or, indeed, any word of mouth process influences consumers’ behaviors offline, much less in a cluttered online environment. In this paper, we propose a model to help identify the role word of mouth plays during each stage of an electronic-referral recipients’ decision-making process. We then present an innovative methodology to feed the model with data collected unobtrusively and in real time. We empirically test the model and methodology via a field study, where we observed the reactions of 1,100 recipients after they received an unsolicited email referral from one of their acquaintances. We found that characteristics of the social tie influenced recipients’ behaviors, but had different effects at different stages: tie strength exclusively facilitated awareness, perceptual affinity triggered recipients’ interest, and demographic similarity had a negative influence on each stage of the decision-making process. We conclude with a discussion of the theoretical and methodological contributions of our work and of managerial implications of these findings for online marketers interested in strategies for leveraging peer-to-peer referral networks.