How Scarcity and Personalization Affect Seed Stage Referrals


Admit it: you all have spent hours at those rotating displays when looking for a key ring/mug/magnet with your name on it. Personalization is not new, but the digital age is changing the way how this phenomenon is practiced. Koch & Benlian (2015) studied the implementation of scarcity and personalization in viral videos.  Previous research on viral marketing focused on firm level outcomes (e.g. sales) and individual level outcomes (decision making). Also factors that stimulate virality, such as content characteristics, have been studied in the past. The goal of this paper was to find out how ‘traditional promotional tactics’ as scarcity and personalization (in video advertisements) influence consumers’ referral decisions.

Hmm interesting. But how did they measure it?

The authors based their study on an online service called ‘StyleCrowd’, which gives its users style recommendations based on body characteristics. Users of this service can directly shop these recommendations at significant discounts. They used a 2 x 3 design, which implied that there were two conditions for personalization (presence/absence) and three conditions for scarcity (non/low/high). The participants (n=119) were randomly assigned to one of the six groups. The participants watched a video about StyleCrowd and after that, a message was shown.

scarcity-personalization

Sounds cool, what did they found out?

  • It was found that scarcity has indeed a significant positive effect on the likelihood that a consumer engages in referrals.
  • The same effect was found for personalization, especially when there was a pre-existing relationship between customer and company.
  • They also looked at the interaction between personalization and scarcity, there outcome was that personalization is particularly effective when scarcity cues are absent.

That sounds almost too good to be true

Well, it’s indeed a nice study, viral marketing is a relatively new research area. They did a good job by including personalization in this study, especially as this phenomenon is getting more important (Tam & Ho, 2006). They also used a new platform which means less biased participants as they see it for the first time. But it’s not clear from their study how scarce a product should be in order to increase clicks. In other words: scarcity can’t be measured as a nominal variable (no/low/high). It would be better if they included more than three conditions. Another option is to randomize the number of available spots (e.g. between 15 and 100) to see if an increasing scarcity correlates with higher clicks. For future research I suggest that it would be interesting to look at other product groups, as online fashion is more appealing for women.

Good for them, but what are the practical implications?

For companies, it can be useful to include scarcity cues in their videos/advertisements. When there is a pre-existing relationship between marketer and consumer, personalization should be included in videos. It is not recommended to use both scarcity and personalization at the same time, as it reduces referrals. An example of a company which ‘nails’ scarcity is KLM: when you want to book a flight, a message is shown when there are ‘only a few spots left’. Nike is a company which successfully implemented personalized videos. They sent 100.000 personalized videos to Nike+ users which included their progress over the past year. The videos were fun to watch and they eventually went viral.

Sources:

Koch, O., F., Benlian, A. (2015) ‘Promotional Tactics for Online Viral marketing Campaigns: How Scarcity and Personalization Affect Seed Stage Referrals’, Journal of Interactive Marketing, 32: pp. 37-52.

Tam, K., Y., Ho, S., Y. (2006) ‘Understanding the Impact of Web Personalization on User Information Processing and Decision Outcomes’, MIS Quarterly, 30, 4: pp. 865-890.

http://www.marketingfacts.nl/berichten/de-psychologie-van-het-overtuigen-schaarste

http://www.business2community.com/video-marketing/check-brands-nailing-personalized-video-01300041#HYyMci4cep3DrPQl.97

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s