Social Promotion: A Creative Promotional Framework on Consumers’ Social Network Value

1 Jul 2020

Operations Research and Operations Management

Haibing Gao, Huazhong Zhao, Yinliang (Ricky) Tan, Ya (Lisa) Lin, Lai Wei

Published in Production and Operations Management, December 2020

Red packets have symbolized happiness and good luck in East Asian and Southeast Asian societies for hundreds of years. Recently, online retailing platforms have adapted and modernized this ancient tradition by introducing the social red packet. This new form of red packet contains digital coupons that can be shared through consumers’ social networks. 

Inspired by this reinvention, Dr Huazhong Zhao, Assistant Professor in the Department of Marketing and co-authors conceptualize social promotion as a promotion customization framework under which consumers with higher social network value receive better promotional rewards. 

To test the effectiveness of social promotion, Zhao and his co-authors conduct an empirical study at a leading online food delivery platform in China. They aim to answer the following research questions: (1) Does the social promotion strategy benefit consumers? If so, which segments of consumers can benefit most? (2) Does social promotion motivate consumers to enhance the commercial value of their social networks? (3) What characteristics of focal consumers and their social networks moderate the above effects in social promotion campaigns? 

The study shows that social promotions can benefit both consumers and the platform. The vector autoregression (VAR) analysis reveals that under social red packet promotions, consumers with higher social network value enjoy larger promotional rewards due to the socially shareable design. Social promotion can benefit the platform as well: Larger promotional rewards motivate consumers to increase the value of their social networks by voluntarily recruiting new consumers or cultivating frequent consumers, which in turn helps the retailing platform reach its promotional goals. 

This research provides important conceptual and practical implications. Conceptually, social promotion is proposed as a new framework of promotion customization. To the best of the authors’ knowledge, this study is the first attempt to explore customized promotion strategies based on consumers’ social network value. Like price discrimination, in which sellers manipulate prices based on consumers’ willingness to pay, promotion customization aims to manipulate promotional rewards based on consumers’ value to the sellers. Social promotion aims to customize promotional rewards based on a consumer’s social network value.

Practically, this study offers novel insights into the emerging social commerce research by identifying a segment of price sensitive but socially active consumers. Such consumers are considered to have low personal value among traditional promotion strategies targeting customer lifetime value, but they possess high value to the firm due to their social network connections. By identifying this promising segment, we offer new insights on how to improve effectiveness of social promotion by targeting consumers with specific characteristics.