Creating Social Contagion Through Firm Mediated Message Design: Evidence from a Randomized Field Experiment
72 Pages Posted: 31 Dec 2014 Last revised: 10 Oct 2019
Date Written: February 5, 2017
We study whether and how a firm can enhance social contagion by simply varying the message shared by customers with their friends. We focus on two key components of information contained in the message – information about the sender’s purchase status prior to referral, and information about the existence of referral rewards – and their impacts on the recipient’s purchase decision and further referral behavior. In collaboration with an online daily deal platform, we design and conduct a large scale randomized field experiment involving more than 75,000 customers to identify the causal effect of different message designs in creating social contagion. We find that small variations in message content can have a significant impact on both recipient’s purchase and referral behaviors. Specifically, we find that i) adding only information about the sender’s purchase status increases the likelihood of recipients’ purchase, but has no impact on follow-up referrals; ii) adding only information about referral reward increases recipients’ follow-up referrals, but has no impact on purchase likelihood; and iii) adding information about both the sender’s purchase as well as information about the referral rewards increases neither the likelihood of purchase nor follow-up referrals. We build a model to analyze the tradeoff between more adoption and more diffusion, and implement the best performing message design in a production system with millions of shared message per year (with projected increase in net profits over one million USD per year). We further exploit the rich heterogeneity in deal, recipient, sender and social tie characteristics and examine the mechanisms underlying the effect of message design. The results suggest that both social learning and social utility are at work, and the attenuation in recipients’ purchase is mainly driven by a decrease in social learning due to credibility concern. The findings of the study provide actionable guidelines to firms for optimal design of messages at the aggregate as well as at a more granular level.
Keywords: Randomized Field Experiment, Social Contagion, Online Word-of-Mouth, Observational Learning, Referrals
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