Product diffusion using advance selling strategies: An online social network perspective

Abstract

This study analyzes the diffusion of two product types using an advance selling strategy from a social network perspective. We extended the susceptible-infected-removed (SIR) model by adding a buyer component (SIRB) to the model and conducted an in-depth analysis of transmission probability and purchase probability when using an advance selling strategy. Agent-based simulation indicates that cost reduction and promotional effort have positive effects on profits, while lead time negatively affects them. Statistical analyses indicate that lead time has a U-shaped relationship with profits for non-durable products, but an inverted U-shaped relationship with those for durable products. For both products types, promotional effort has an inverted U-shaped relationship with profits under the condition of low-quality products and an inverted U-shaped relationship in the case of high-quality products. The reasons underlying these results are discussed, followed by implications for firms adopting advance selling strategies.