The effect of word-of-mouth in flash-sale promotion: From mechanism design perspective

Abstract

Flash sale is a popular promotion tool in an expectation to increase customer awareness and boost product diffusion. Given the fact that the deep discount used flash sales cannot guarantee business success and may even damage brand reputation, this study seeks to explore the effect of flash-sale mechanism and pays a particular attention on the effect of word-of-mouth (WOM) design in flash-sale mechanism. Results of our online experiment indicate that WOM-based design of flash sales can not only enhance customers' participation rate and lower their average arriving time, but also increase their perceived satisfaction of the flash-sale promotion and their intention to spread positive WOM about the product. This study enhances our understanding for the effect of WOM in flash sales and provides practical implications for retailers who are seeking guidance for their flash-sale promotion.