Creating Social Contagion through Firm-Mediated Message Design: Evidence from a Randomized Field Experiment

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 messages – information about 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 to identify the effect of each message component, as well as the interaction effect between them, in creating social contagion. We find small variations in message content can have a significant impact on both recipient’s purchase and referral behavior. 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; and ii) adding only information about referral reward increases recipients’ follow-up referrals, but has no impact on purchase likelihood; iii) adding information about both the sender’s purchase as well as information about the referral rewards increases neither the likelihood of purchase or follow-up referrals. We further examine the underlying mechanism driving social contagion, by exploiting the rich heterogeneity in product, sender, recipient and social tie characteristics. The findings of the study provide valuable guidelines for optimal design of messages at the aggregate as well as the individual level. 1 Tianshu Sun is a doctoral student and Siva Viswanathan is an Associate Professor at the Robert.H.Smith School of Business, University of Maryland. Elena Zheleva is at LivingSocial Inc.