Digital Red Packets and the Power of Sharing Online
CUHK research study finds that digital red packets are most useful as a tool for companies to gain new and retain existing customers when they are allowed to be shared on social media
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During Chinese New Year, it is customary for people to exchange the traditional greeting Kung Hei Fat Choy (wishing you prosperity) as well as red packets, which contain money that represents good luck and fortune. This festive gift-giving is undergoing something of a revolution, and as payments go digital, red packets have become digitalised and embedded in social media platforms. A recent study looks at companies that use digital red packets as a marketing strategy and finds that this approach is most effective when digital red packets are allowed to be shared among customers’ online social networks.
“Virtual” red packets were first introduced by WeChat, China’s multi-purpose instant messaging app, in 2014 and gained immense popularity during the 2015 China Central Television (CCTV) Spring Festival Gala – the annual variety show to celebrate Chinese New Year. During the show, audience members were given the opportunity to receive random cash rewards, ranging from less than one yuan to thousands of yuan, in the form of virtual red packets. According to the Global Times, this one single showcase of the virtual red packet function led 200 million WeChat users to connect their bank accounts with the app.
Digital red packets have also since been adopted by online businesses, which give them out to customers either directly on their own websites or through instant messaging apps such as WeChat and online shopping platforms such as Taobao. The content of the red packets can be cash vouchers or discount codes.
To test the effectiveness of digital red packets, Lisa Lin, Assistant Professor in the Department of Management at The Chinese University of Hong Kong (CUHK) and her co-authors conducted a study using data from a popular food delivery platform in China. The study “Social Promotion: A Creative Promotional Framework on Consumers’ Social Network Value” aimed to answer a number of questions. Firstly, do social promotions, where companies dole out promotion rewards based on the value of an individual’s social network, benefit consumers? If so, which segments of consumers can benefit most? Secondly, does social promotion motivate consumers to enhance the commercial value of their social networks? Lastly, what characteristics of consumers and their social networks affect social promotion campaigns?
“Stealing” Digital Red Packets