DOI: https://doi.org/10.1509/jm.16.0057 

Abstract: Geographic proximity has become increasingly relevant due to the growing number of marketing services that use consumers’ geographic locations, thus increasing the importance of gaining insights from this information. In five studies (both field and experimental), the authors analyze the effect of geographic proximity on social influence and demonstrate that not only social proximity but also perceived homophily can trigger social influence. They find that this effect holds under alternative representations of geographic distance and is confirmed for a range of different services and even for physical goods. Furthermore, the authors show that geographic proximity has a relative effect because the social influence of a closer sender is stronger than that of a more distant sender, regardless of the absolute distances. They present managerially relevant conditions under which the influence of geographic proximity not only is comparable to other types of information such as age or gender but also provides sufficient informational value for customers to offset differences among alternatives (e.g., due to higher prices) in trade-off decisions.

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Open reference in new window "The Role of Mere Closeness: How Geographic Proximity Affects Social Influence"

DOI: https://doi.org/10.1016/j.ijresmar.2016.11.005 

Abstract: Rewarding existing customers for the recruitment of new ones has become an increasingly popular acquisition tool for companies. However, when a company rewards the recruitment of a new customer, managers are unaware of whether the rewarded referral was actually necessary or whether “reward-scrounging” has occurred because the referral receiver would have converted anyway. As a consequence, companies risk overestimating the effectiveness of their referral programs, which is why gaining insights into how and when reward-scrounging occurs is crucial. In this study, we employ a large data set from the telecommunications industry to analyze the drivers of reward-scrounging. The results indicate that reward-scrounging reduces the effectiveness of referral reward programs over time and that its likelihood depends on both the referral sender's network position and the company's marketing activities. The findings are used to develop managerial means to alleviate the negative effects of reward-scrounging.

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Open reference in new window "Reward-scrounging in customer referral programs"

DOI: https://doi.org/10.1016/j.ijresmar.2015.09.004 

Abstract: Referral programs have become a popular tool to use the customer base for new customer acquisition. We replicate the work of Schmitt et al. (2011) who find that referred customers are more loyal and valuable than customers acquired through other channels. While our results confirm that rewarded referrals indeed reduce the risk of customer churn, we do not find that referred customers are necessarily more valuable. Analysis of the relationship between senders and receivers of referrals demonstrates that demographic similarity drives the referred customer value.

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Open reference in new window "Referral programs, customer value, and the relevance of dyadic characteristics"

DOI: https://doi.org/10.1509/jm.10.0088 

Abstract: Seeding strategies have strong influences on the success of viral marketing campaigns, but previous studies using computer simulations and analytical models have produced conflicting recommendations about the optimal seeding strategy. This study compares four seeding strategies in two complementary small-scale field experiments, as well as in one real-life viral marketing campaign involving more than 200,000 customers of a mobile phone service provider. The empirical results show that the best seeding strategies can be up to eight times more successful than other seeding strategies. Seeding to well-connected people is the most successful approach because these attractive seeding points are more likely to participate in viral marketing campaigns. This finding contradicts a common assumption in other studies. Well-connected people also actively use their greater reach but do not have more influence on their peers than do less well-connected people.

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Open reference in new window "Seeding strategies for viral marketing: An empirical comparison"

DOI: https://doi.org/10.2753/JEC1086-4415140401 

Abstract: Knowledge of consumers' willingness-to-pay (WTP) is critical for marketing managers when designing optimal pricing policies. The large-scale applicability, reliability, and validity of Vickrey auctions as an incentive-compatible method for eliciting WTP in a real-world setting were tested empirically. The results of 6,548 sealed bids in 28 auctions of costly durables on a popular auction Web site show that regular on-line shoppers have little problem understanding and applying the Vickrey auction bidding strategy. As a result, Vickrey auctions can easily produce a reliable and valid distribution of WTP based on several thousand consumers. A comparison of Vickrey auctions with the more commonly used English or eBay auctions shows, both conceptually and empirically, that the latter formats do not fully reflect the complete range of potential customers' WTP and, therefore, lead to systematic overestimation of price-demand functions. In contrast, WTP information elicited through Vickrey auctions is undistorted by strategic behavior such as bid-sniping and incorporates the full range of WTP information, suggesting that it is better suited for estimating realistic price-demand functions for market research purposes.

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Open reference in new window "Vickrey vs. ebay: Why second-price sealed-bid auctions lead to more realistic price-demand functions"