This study compares the effects of word-of-mouth (WOM) referrals to paid marketing in an Internet social networking site, finding that WOM referrals have substantially longer-lasting effects. The study reveals that the long-run elasticity of WOM on site signups is significantly higher than that of traditional marketing actions. Additionally, the monetary value of a WOM referral is estimated to be about $0.75 per year, providing valuable insights for managers to benchmark metrics, test changes in referral content, and determine appropriate financial incentives for stimulating WOM.
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Trusov, Michael, Randolph E. Bucklin, and Koen Pauwels. "Do You Want to Be My “Friend”? Monetary Value of Word-of-Mouth Marketing in Online Communities." NIM Marketing Intelligence Review 2.1 (2010): 26-33.
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