Academic journal article Social Behavior and Personality: an international journal

Why Friends Pay More: An Alternative Explanation Based on Self-Expansion Motives

Academic journal article Social Behavior and Personality: an international journal

Why Friends Pay More: An Alternative Explanation Based on Self-Expansion Motives

Article excerpt

Friendships developed prior to engagement in business transactions play an important role in business practice. For example, employee referral programs, in which a firm explicitly encourages its employees to refer their friends as new customers, have been found to be effective (Wentzel, Tomczak, & Henkel, 2014). Network marketing, which is the most prevalent form of direct selling in the US, generates more than $34.5 billion in annual sales across the country (Direct Selling Association, 2015). Furthermore, small businesses in the early stages of establishment rely heavily on purchases and referrals by friends, which can be pivotal to the company's survival. In China, the number of small-scale sellers on the country's largest social media networking platform, WeChat (Li, 2015), who sold exclusively to friends exceeded 10 million in 2014, which was the first year that microbusinesses were allowed to trade on this social networking site (Li, 2015).

Businesses benefit from friend-customers because of their greater willingness to pay more and introduce more referrals compared to other customers. In their studies on consumer behavior, Halpern (1994) and Ho (2012) paid special attention to preexisting friendships between sellers and buyers, and reported that friends are willing to pay more out of an altruism motive of caring for their relationship partner's needs, whereby they expect to benefit the partner (see also Johnson & Ross, 2014). However, per the relationship-norm framework, conflict could occur between friendship orientation and business relationship instrumentality, which would consequently hurt both the business and the friendship (Grayson, 2007). Regardless, businesses are increasingly benefiting from friendships, especially in social network marketing contexts.

We designed the present study to address how the interests of the two parties in a friendship are allied-rather than in competition-with each other during a business transaction. As such, we used a novel form of motivation-based analysis that was based on the self-expansion model in social psychology, to explore the mechanism behind the effects of friendship on valuation. The self-expansion model (Aron, Lewandowski, Mashek, & Aron, 2013), in which the focus is on the fundamental motivations driving human behavior in close relationships, may account for central aspects of the mechanism underlying business friendships, and has, to the best of our knowledge, not been previously considered in the business-friendship literature.

We also investigated the effects of friendship on perceived product quality under the self-expansion model framework. Perceived quality accounts for the intrinsic value of products and comprises the basic information used for valuation (Teas & Agarwal, 2000). Thus, we believed that exploring the role of perceived quality was crucial when investigating the relationship between friendship and valuation. Our aim was to not only demonstrate the effects of friendship on perceived product quality and valuation, but also shed light on why and how these effects occur.

Theoretical Background and Development of Hypotheses

Preexisting Friendship and Business Exchanges

Friendship is defined as "a voluntary, personal relationship, typically providing intimacy and assistance, in which the two parties like one another and seek each other's company" (Price & Arnould, 1999, p. 39). Preexisting friendship, which is social in nature, refers to the kind of friendship that develops prior to engagement in business transactions. In this paper, the word friendship used alone refers to a preexisting friendship, unless specifically noted otherwise. Researchers of socially embedded exchanges have paid special attention to the reasons that friends are willing to pay more than are strangers (Jones, Taylor, & Bansal, 2008). This stream of research has been largely focused upon relationship norms to examine the effects of preexisting friendship on product valuation. …

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