Xiaoning (Gavin) Wang, PhD Candidate, Lynn Wu, Operations, Information and Decisions, and Serguei Netessine, Operations, Information and Decisions, The Wharton School
Abstract: As the number of social platforms has grown dramatically in the past two decades, companies face an increasing number of options to choose among for their social media resource allocation. While many industry practitioners suggest that companies should pay more attention to emerging social platforms and diversify their social media presence, no one has empirically and rigorously analyzed the underlying mechanism why one strategy dominates the other, and academic research in this domain remains sparse. There is an inherent trade-off between “Concentration” (i.e., concentrate engagements and efforts on one or only a few platforms) vs. “Diversification” (i.e., balance or diversify engagements and efforts on multiple platforms) strategies stemming from limited budgets and labor constraints. On the one hand, a diversified social media strategy may broaden information access, increase brand awareness and thereby benefit online retailers’ sales performance. However, it is also plausible that there is a negative effect of diversifying, as different social platforms have different priorities and user types, and each company perhaps needs to focus their efforts on the smaller number of social platforms that fit the best into the overall communication strategy. Diversified social media presence may also cause market cannibalization and reduce returns on advertising investments. In this paper, we plan to explore which strategy, concentration or diversification, benefits e-commerce retailers more in their marketing performances.