By Ben Tengelsen
Like most companies, IntelyCare loves customer referrals. We’re a 2-sided, gig-style marketplace matching nursing professionals with open shifts at nursing homes. As such, we have a round-the-clock recruiting operation in over 30 states. IntelyPros (the nursing professionals that work for us) come to our platform from a variety of sources, but those who come via referrals tend to stay on our platform for longer and maintain a higher level of engagement.
Many months ago, we ran a large-scale experiment aimed at increasing our referral volume. It was the fall of 2020, and due to Covid recruiting nursing talent was brutal. While we had a way for IntelyPros to share a referral link with friends, we had never attached financial incentives.
The details of our experiment were motivated by concepts in behavioral science, specifically something called present bias. People exhibit present bias when they prefer small, immediate rewards over larger rewards in the future. In academic settings, this is often measured by questions such as, “Would you prefer $6 today or $7 tomorrow?” or, “Would you rather eat one marshmallow now or two marshmallows in 20 minutes?” Those who choose immediate, smaller rewards have some measure of present bias.
Our question was whether present bias was sufficiently strong among our IntelyPros such that a small, immediate reward for a referral would outperform a standard referral-incentive program where payouts are larger but also slower in coming. To answer this question, we randomly assigned about 6,000 IntelyPros into one of the following offerings:
- An IntelyPro earns an extra $1/hour on their next shift when a referral starts a job application. (Easy. This can be done in minutes.)
- An IntelyPro earns $100 when their referral completes their first shift. (Hard. The median time between starting an application and completing a shift is 2 months)
We ran the experiment for several months and communicated the details of the experiment to IntelyPros via emails and text messages. Many of us expected the $100 offer to perform best ($100 just sounds bigger than $1/hr). To our surprise, the $1/hr offer delivered larger incremental gains compared to our control group, and at a much lower cost.
| $100 Offer | $1/hr Offer | |
| Increase in referrals (relative to control group) |
65% | 81% |
| Cost per new working IntelyPro | $257 | $110 |
The $100 offer led to a 65% increase in referrals compared to our control group. This is huge! Our marketing team likes this promotion because it’s easy to explain and implement. Our executives and finance people like it because we’re only handing out rewards when a referral is successful. There is a lot to like about this promotion.
The $1/hr offer, however, is even better. Referrals increased by 81% compared to our control group. And even though the rewards were paid out earlier, referrals from these IntelyPros still went on to start working for us at about the same rate as the $100 group. True, many IntelyPros earned rewards for referrals that failed to cross the finish line, but the payoff was small enough our preferred cost metric, total cost per new working IntelyPro, was less than half of the $100 group’s cost.
Why did it work?
When we share these results with colleagues, many are surprised. A $100 bonus seems so much bigger than a $1/hr bonus. How could a $1/hr bonus be more effective? Present bias! If you spin a wheel and get a reward right away, you’ll spin the wheel again. If you need to wait a long time before receiving a reward, then spinning the wheel is not so appealing anymore. When it comes to incentives, timing and presentation often matter more than the amount of the bonus.
Of course, present bias is not the only thing that matters in generating referrals. Recent studies tout the benefits of “prosocial” incentives that go to both the person referred and the person referring. Companies differ in the content of the reward itself, whether it’s cash, gift cards, or credits for their products. There are many dimensions to consider when creating a referral-incentive program and timing is often overlooked.
How can you find an incentive scheme that works for your business and your customers? There are many approaches to try, and your customers may not respond to incentives in the same way as ours. In our experience, there is nothing better than testing out a few ideas and comparing the results.
This article was edited by Andreas Aristidou.
