From Social to Purchase : Customer Selection in Social Group Buying

Social scope group buying has become an increasingly popular marketing strategy and has served as a new customer acquisition tool. In the service industry, companies use social group buying (SGB) to recruit new customers and promote full-price products. Through SGB activities, customers can trade their social capital to form buying groups and experience SGB-offered sample products, further resolving uncertainty toward an expensive full-price product and making a final purchase. We investigate this new SGB phenomenon by examining customers’ decisions during the ``experience-conversion” processes in relation to social attributes of the SGB, such as social cost and social learning. In collaboration with a leading online educational platform, we study customers' grouping behavior during SGB activities and analyze their subsequent purchases. Interestingly, our analysis identifies a distinctive pattern whereby nongrouped customers make a higher percentage of full-price product purchases than grouped customers. Based on a Bayesian learning framework, we model customers' three-stage discrete-choice decision-making processes and identify the social cost generated through forming the buying group as one influencing factor of the pattern. Meanwhile, our study investigates the impact of group-level social learning on customers' purchase decisions. Specifically, we discuss how the first customer of a buying group influences other group members' decisions and identify the types of customers with a high purchase potential for the full-price product. We provide actionable insights into recognizing customers with different levels of social costs and implications for the SGB design. Through analyzing the social attributes of SGB, our study sheds light on customer targeting and management in similar businesses