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

Abstract

Red packets have symbolized happiness and good luck in Asian culture for centuries. An emerging number of online merchants in Asia are adopting social red packets as a promotion strategy. Social red packets not only digitalize traditional coupons to be readily transferred within consumer social networks but also can reallocate the promotional rewards based on consumers’ social network value rather than their personal value to the firm. In this study, we conceptualize social red packets as an implementation of the social promotion framework, where consumers with higher social network value receive better promotional rewards. Leveraging a unique dataset from an online retailing platform, our vector auto‐regression (VAR) analysis reveals that: (1) under the social red packet design, consumers with higher social network value (who are connected to more new consumers or frequent consumers) will enjoy better promotional rewards; and (2) in order to receive better promotion rewards, consumers under the social red packet design are encouraged to voluntarily enhance their social network value (e.g., by recruiting more new customers or cultivating more frequent consumers). Moreover, we identify several critical characteristics of focal consumers and their social networks that can moderate the effectiveness of social red packets. Our findings provide important managerial insights for online retailing platforms on how to design effective social promotion strategies.