This paper studies the impact of the ‘virus’ marketing strategy on the classical
newsvendor problem. In the market, the relationships between all consumers form
a so called ‘small-world’ social network. Therefore, the firm proposes to
startup a virus marketing practice on this social network. Besides, to find a
source node to diffuse word-of-mouth, the firm also needs to make decision on
the order quantity to maximize the profit. The simulation results show that the
solution based on mathematics analysis overestimates the demand and leads to a serious
loss of profit. More importantly, the results reveal that the firm could benefit
efficiently from tighter relationships, better acceptance among consumers, and the
decrease in unsold cost of unit product. In addition, closeness centrality by
social network analysis is a better method to choose a source node for virus
marketing on small-world network.
