Research Article: The value of leading customers in a crowdfunding-based marketing pattern

Date Published: April 15, 2019

Publisher: Public Library of Science

Author(s): Jingjing Zhao, Yongli Li, Yunlong Ding, Chao Liu, Baogui Xin.

http://doi.org/10.1371/journal.pone.0215323

Abstract

Crowdfunding is gradually becoming a modern marketing pattern. By noting that the success of crowdfunding depends on network externalities, our research aims to utilize these network externalities to provide an applicable referral mechanism in a crowdfunding-based marketing pattern. In the context of network externalities, measuring the value of leading customers is chosen as the key to coping with the research problem, as the leading customers are considered to be critical in forming a referral network. Accordingly, two sequential-move game models (i.e., the basic model and the extended model) were established to measure the value of leading customers, and a matrix transformation process was adopted to solve the model by transforming a complicated multisequence game into a simple simultaneous-move game. Based on the defined value of leading customers, a network-based referral mechanism was proposed that explores exactly how many awards should be allocated along the customer sequence to encourage the leading customers to provide a successful recommendation, and this demonstrates two general rules of awarding the referrals in our model setting. Moreover, the proposed solution approach helps to deepen the understanding of the effect of the leading position, which is meaningful for designing a greater number of referral approaches.

Partial Text

With the widespread phenomenon of the sharing economy, crowdfunding is gradually moving beyond its traditional functions, such as funding artistic or creative projects and is becoming a modern marketing mode, with the aim of selling various types of products or services, typically through online platforms [1]. For example, several E-commerce platforms, such as JD (https://z.jd.com/sceneIndex.html) and Taobao (https://izhongchou.taobao.com/index.htm), contain a crowdfunding-based marketing model that is being used to market numerous categories of products and services, such as clothes, fruit, wine, electronic products and even household services. Regarding this new marketing mode, the core problem we consider here is how to provide several marketing strategies in general, and, in particular, how to provide an applicable referral mechanism for crowdfunding-based marketing models.

Unlike the results reported in Ballester et al. [12] and Zhou and Chen [15], the optimal consumption of our model is related to the matrix (g’+g’T)/2 rather than the matrix g or g’. The difference originates from the consideration of the monopolist and the pricing mechanism. Further, the difference will vanish when the matrix g or g’ is symmetric according to their mathematical expressions. Thus, the intuition behind the above finding is that the monopolist’s power of price discrimination is rooted in the asymmetry of the influence matrix. Note that g’−g’T measures the difference in influence between each pair of customers, and then, by following the interpretation provided in Candogan et al. [13], the offered price for one customer is positively affected by how much the customer is influenced by her central peers; whereas the price is meanwhile negatively affected by the influence the customer exerts on central agents. Therefore, if one customer can influence the others much more and be influenced by the others much less, the offered price for the customer will be much more favorable, which can be interpreted as the price compensation for customers who exert influence.

This section aims to utilize the above proven lemmas and results to provide an applicable network-based referral mechanism. Because Lemma 2 has demonstrated that adding or cultivating some leading customers will increase the monopolist’s profit in most cases, we can accordingly define the value of leading customers from the perspective of increased profit. Next, recalling the designed referral network in Eq (1), we can use the defined value of leading customers to reward the leading customers to encourage them to form the referral network. Based on this basic idea, we further explore the properties and present the potential application of the provided network-based referral mechanism.

Currently, crowdfunding is gradually becoming a modern marketing mode via the Internet. Therefore, we aim to provide feasible marketing strategies to promote modern crowdfunding-based crowdfunding models. To this end, we first analyzed the features of modern crowdfunding-based marketing models and find the following three features: monopoly structure, network externalities and customer sequence. Building on the work of Candogan et al. [13], Zhou and Chen [15] and Zhou and Chen [18], we defined the values of leading customers by solving the game models (i.e., basic model and extended model) contained within the above three features. Based on the solution of a basic model comprising only of leaders and followers, the relationship between the simultaneous-move game and sequence-move game is revealed; then, the extended model, whose customer sequence consists of more than two sets, is solved. According to the defined leading customer’s values, we further focus on providing a network-based referral mechanism in the crowdfunding-based market model by exploring how to allocate rewards along the customer sequence according to their leading values and by uncovering the rules and properties of the proposed network-based referral mechanism.

 

Source:

http://doi.org/10.1371/journal.pone.0215323

 

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