Hotel Viral Marketing via Social Networks: A Strategic Pricing Lesson from Group Buying

Viral marketing is the business approach that uses peer-to-peer communications to increase product awareness and adoptions through widespread social networks of receivers. Benefiting from the unprecedented fast growth of online social networks, this marketing maneuver merits a deeper understanding in how to promote from receivers’ intention to their actual purchases. A strategic pricing lesson from the recent group buying trend was applied to a hotel booking situation. By identifying and testing three pre-determined discount-network pricing schedules in a simulated hotel booking website, the authors observed booking revenue performance. It was found that the price scheme with steepest slope achieves both the smallest booking volume and the lowest revenue within the study period. Theoretical and practical implications were also provided.