Exercise 6: Efficiency of social marketing (5 pt) Imagine you are working for a company that sells
Question:
Exercise 6: Efficiency of social marketing (5 pt)
Imagine you are working for a company that sells online data storage like dropbox, which is cheaper and
has better interface than previous products. You product is already well recognized in a small community
of early adopters, and now you would like it to get known to the most people. You decide to follow a
social recommendation approach:
You start the following promotion: every current active user will be offered 3 invitations that can be
forwarded to Facebook friend. When one invitation is accepted by this friend, and she sign up for the
product, both users receives 2GB of storage for free. After one week, you see a significant increase of the
product adoption through this technique, but it remains moderate. You would like to boost this sale,
especially as the competition is quickly getting up to speed.
Your marketing team proposes to you two strategies:
One called "grass root" in which, in addition, when two invitations get accepted and these users are
friends, the three of you receives an additional 500MB free storage, to recognize you are a promoting
cluster.
One called "forward" in which, in the same situation, the 500MB free storage is only given to the
originator when two invitations are accepted and these people are not friends in Facebook.
1. Using concept seen in class, which policy would you suggest to use? How would you predict
the ranking between "grass root", "forward" and the baseline strategy?
2. Your company is also developing an app for online social reviews and recommendations
on health, housework and babysitting. You would like your product to be known and plan on
offering discount on these products via a similar invitation scheme. Would you provide the same
recommendation for which rewarding strategy to use?
NB: You do not need to provide a very long answer, a short paragraph is sufficient, but it is important
that your answer clearly describes your argument(s) in English without to someone who would not know
the concepts in advance. You are welcome to reuse class readings by citing relevant facts.