An Experimental Investigation of Product Competition and Marketing in Social Networks

• Main Authors: CHEN, Cen, Zhiling GUO, CHENG, Shih-Fen, LAU, Hoong Chuin
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2016
• Subjects: Computational Experiment; Price Competition; Word of Mouth; Targeted Marketing; Social Network; Databases and Information Systems; Marketing; Numerical Analysis and Scientific Computing
• Online Access: https://ink.library.smu.edu.sg/sis_research/3427; https://ink.library.smu.edu.sg/context/sis_research/article/4428/viewcontent/ExptInvProdtCompetitionMktSocNetworks_CSWIM2016.pdf
• Institution: Singapore Management University

We conduct computational experiment using Facebook data to evaluate competing firms’ initial market seeding and subsequent targeted marketing strategies that influence consumers’ new product adoption decisions. We find that firms generally overspend their advertising budget in the market seeding phase. In the subsequent market advertising phase, a coupon strategy (equivalent to price discount) generally yields higher market share than the strategy of distributing free product samples. The effect is more significant when both price and product quality are low. We offer managerial insights into firms’ effective competition strategies for new product introduction in the presence of consumers’ word of mouth effects in social networks.