nep-mkt New Economics Papers
on Marketing
Issue of 2014‒10‒17
two papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Consumer Learning on Social Networks and Retailer Digital Platform Strategies Access By Zheyin (Jane) Gu; Yunchuan Liu

  1. By: Zheyin (Jane) Gu (University of Connecticut, School of Business, Marketing Department, 2100 Hillside Rd, Unit 1041, Storrs, CT, 06269.); Yunchuan Liu (University of Illinois, Urbana-Champaign, 415 Wohlers Hall, 1206 South Sixth Street, Champaign, IL, 61820, (217) 244-2749)
    Abstract: We model consumer social networks as information collection media and examine two major issues: first, how consumers construct product fit signals based on product feedbacks collected from their social connections to assist with their purchase decisions, and second, how a retailer can benefit from setting up a digital platform and helping consumers collect more product feedbacks on social networks. Our analysis identifies two important structure features of consumer social networks that affect the outcome of consumer social learning: social group inter-connectivity and overall social connectivity. In particular, when the consumer social network is not well-connected, characterized by low social group inter-connectivity and low overall social connectivity, with more product feedbacks collected on social networks consumers are more likely to form informative prior beliefs about which product has a good fit. In contrast, when the consumer social network is well-connected, characterized by either high social group inter-connectivity or high overall social connectivity, more product feedbacks collected on social networks are more likely to constitute uninformative product fit signals and leave consumers uncertain about which product has a good fit. Furthermore, our analysis shows that a retailer's incentive to set up a digital platform and help consumers collect more product feedbacks on social networks depends on the supplier market structure as well as the structure of consumer social networks. In particular, a big retailer that carries horizontally differentiated products offered by competing manufacturers has incentive to facilitate consumer social learning on well-connected social networks and when without retailer assistance consumers still collect product feedbacks from a good number of social connections. The big retailer's activity of facilitating consumer social learning can also enhance total channel surplus. In contrast, a small retailer that carries product(s) offered by a single manufacturer has incentive to facilitate consumer social learning only on social networks that are not well-connected and when without retailer assistance consumers only collect a small number of social feedbacks. And the total channel efficiency suffers when the small retailer withholds from facilitating consumer social learning. Our result highlights the unique motive of big retailers to embrace the digital era when internet, mobile networks, and social media have profoundly changed consumers' shopping habits as well as the unique contribution big retailers bring in channel efficiency through their efforts of facilitating consumer social learning.
    Keywords: Consumer Social Learning, Social Networks, Retailing, Game Theory
    JEL: M31
    Date: 2014–09
  2. By: Ndasi Wilson (Bournemouth University, UK); Lukman Aroean (Bournemouth University, UK); Sid Gosh (Bournemouth University, UK)
    Abstract: The conducting of business profitably whilst also supporting a social cause is of eminent traction in recent years, so much that it is usually a major consideration in a business operational strategy (James Chambers. 2013). An even greater and preponderant drive is the use of the internet to conduct business processes to the extent that doing business online is a business requirement (OFT 2005, Sangeeta 2008). The internet is benefiting millions of people and thousands of Businesses. This paper examines an internet retail cause-marketing model that could empower the community to influence, the direction of social involvement of online businesses serving them. It involves the providing of an internet shopping infrastructure that aligns non-profits with internet businesses so that consumers can reward and patronise businesses inspired by donations made to their chosen charities/non-profits, contingent upon purchases made. A model in which customers can choose a charity/non-profit to benefit from the cash back or rebate triggered by their shopping habits presents a win-win scenario on the table so that businesses can focus on their core operation processes whilst the consumers they serve determine the social causes that benefits from their brand loyalty or patronage, in tandem. Practical issues that undermine this for-profit and non-profit alliance are discussed, and an attempt to proffer possible succinct recommendations to enhance the effectiveness of this model are made.
    Date: 2013–09

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