Marketing strategy selection of referral reward under social network: RRWS, RRMS, or dual strategy?

With the arrival of the social media era and the fragmentation of consumer habits, how to develop the optimal marketing strategy for products has become a hot topic. When a consumer purchases a product, the firm provides a link for him/her to share with friends, and doing so can expand demand and increase profits. This paper considers three strategies: the referral reward strategy that does not care whether successful, the referral reward strategy that must be successful, and the dual strategy. To provide firms with advice, this paper adopts literature analysis and survey analysis to examine the three strategies of operation mode, and uses backward induction and optimization method to solve the optimal pricing. Finally, the influence of different network structures on strategy selection is studied by numerical simulation experiments. Results show that the strategy of referral reward under social network is feasible and profitable when the firm faces serious information problems and the reward cost is low. Compared with the basic model without bonuses, the introduction of rewards reduces the price of first‐period consumers and affects their motivation to share information. Among the three strategies, the distribution ratio of the unit bonus has little effect on profit. The second‐period price and profits of the dual strategy are higher than those of the two other strategies. Besides, the structure of social networks has a small impact on profits, so adopting the dual strategy can obtain higher profit than adopting either of the other two strategies. [ABSTRACT FROM AUTHOR]