How Effective Are Reactivation Referral Programs? Evidence from a Major Social Media Platform

Abstract

Reactivation referral programs aim to engage less-active users by leveraging active users' social network. To examine its effectiveness, we leveraged a large-scale field experiment on a major social media platform, where randomly selected users could earn monetary rewards for encouraging their less-active friends to become more active. This treatment not only increased the engagement of referral receivers, as intended, but also enhanced the engagement of referral senders, resulting in a 32-fold return on investment. Notably, the program’s overall benefit from senders was 14 times greater as they represent a larger share of the user base. One potential mechanism for senders' engagement increase appears to be their effort to expand their social networks to gain new referral opportunities. Specifically, senders with medium-sized social networks and a limited number of less-active friends exert the greatest efforts to form new friendships and exhibit the largest boost in app usage. Furthermore, senders shifted toward activities facilitating new friend formation, deviating from the typical changes in engagement patterns seen with general increases in platform activity. In addition, senders successfully made new social connections, potentially driving further referrals. Our findings highlight the importance of considering senders' contributions when evaluating the effectiveness of reactivation referral programs on social media platforms.

Keywords: reactivation referral programs, social media platforms, social network, customer retention, customer engagement