Influentials, early adopters, or random targets? Optimal seeding strategies under vertical differentiations

Abstract

Product seeding, defined as the act by which firms send products to selected customers and encourage them to spread word of mouth, is a critical decision support strategy for the success of new products. Using multiple agent-based simulation techniques, we investigated the relative importance of three widely adopted seeding strategies (seeding influentials, early adopters, and random targets) in a competitive market in which products are vertically differentiated in terms of quality and brand strength. We found robust evidence that the finding of an optimal seeding strategy depends on consumers' propensity to spread negative WOM. When negative WOM propensity is low, seeding influentials outperform seeding early adopters or random targets. When negative WOM propensity is high, decision-making about an optimal seeding strategy relies on the relative quality and brand strength of the product and the focal firm's objective. In particular, if a product's relative quality is low, seeding early adopters is the optimal seeding strategy in terms of both market share (MS) and net present value (NPV); if the product's relative quality is equal, seeding early adopters is most effective for increasing MS, while seeding influentials is the best for increasing NPV; and if the product's relative quality is high, seeding influentials is the optimal strategy, except that for products with strong brand strength and firm aims at maximizing the MS growth. We conclude the paper by discussing its theoretical contributions and managerial relevance for decision support.