Promotional Tactics for Online Viral Marketing Campaigns: How Scarcity and Personalization Affect Seed Stage Referrals

• We examine the effect of scarcity and personalization on consumer referrals.
• Demand-based scarcity has a positive causal effect on consumers' referral propensity.
• Personalization also has a positive causal effect on consumers' referral propensity.
• Offer value and consumer gratitude act as partial mediators for the cues' effects.
• When deployed together, personalization's effects are overridden by scarcity.

Against the backdrop of consumers being deluged with traditional online advertising, which is increasingly manifesting in inefficient conversion outcomes, viral marketing has become a pivotal component of marketing strategy. However, despite a robust understanding about the impact of viral marketing as well as of factors that drive consumer referral engagement, we know very little about the effect of traditional promotional tactics on consumer referral decisions. Drawing on a randomized field experiment in the context of an online fashion service named StyleCrowd, we investigate the effects of scarcity and personalization, two classical promotional cues that have become ubiquitous on the web and have received only minimal attention hitherto, on actual referral behavior. Our analysis reveals that using these cues in promotional campaigns is a balancing act: While scarcity cues affect referral propensity regardless of whether a campaign is personalized or not, personalization cues are particularly effective when scarcity is absent, yet are cancelled out when scarcity is prevalent. We demonstrate that consumers' perceptions of offer value drive the impact of scarcity on referral likelihood, while consumer gratitude vis-à-vis the marketer is the underlying mechanism for personalization's influence on referral decisions.