Harvard Business School recently published a working paper titled Do Friends Influence Purchases in a Social Network.
And I read it, of course. So I’ll save you some time and give you a simple overview on what they learned, and what I learned from them.
- First, I had to get back to my Trigonometry and Calculus classes to get my head around all the equations they have in the document to define their findings. Very interesting. Very amazing. Very intelligent. And I am not pretending to really understand what all of it was. Ha.
- Second, the paper is a working paper, so a bit of duplicate content to get through. Unless they were just trying to really drive the point home.
- Third, I found it odd that a paper from 2009 would use data mined in 2004. Sure seems like behaviors could change over this 4+ year span.
Ok, so this is what I gained from it:
Of course, the answer is YES, friends do influence the purchase of other friends in social networks. Big surprise, right?
Well, here’s where I think it gets interesting. There are 3 levels of influence:
- Good.
- Indifferent.
- Bad.
The paper breaks these users out like this (out of 208 users):
- Good – 40% bought products based on their social network. So from a revenue standpoint, there was an increase of revenue produced by this group. They call it “Keeping up with the Jones.” Which we are all familiar with. This group interacts often with other users in the social network, but are not seen as the leaders. These are the followers, naturally.
- Indifferent – 48% were actually unaffected by their social network. This is also the group that interacts with other users the least. So just like real life, people who don’t talk to people would naturally be unaffected by…other people. Weird coincidence.
- Bad – I loved this one and where I think the most new knowledge is gained. These users are the highest level users with the most respect/followers. This group, 12%, have their purchase behavior negatively impacted by their social network. Meaning if their neighbor bought it, they didn’t. Weird, right? Not really. This group is looking to differentiate themselves from everyone else by being the leader, not by being one of them. If they buy the same thing, they are a follower. So super users don’t want something average…they buy a Mercedes vs a Chevy. Or a Mac vs a PC (sorry, had to throw that in there). They want to be the first to have something, not go along with everyone else.
So, knowing this, I conclude that in order to connect with super users in the social network like Mindscape at Hanon McKendry recommends clients do, this reaffirms what we’ve also been telling clients: what’s being offered MUST be unique and more “first to market” to truly grab their attention. If others have it or others are talking about it, it’s of little interest to them. And this is the group you want to get in with. Because if they do it, it has an effect on 40% of their network.
What are your thoughts? Let me know.
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Tags: LinkedIn, social media, social networks, web marketing
Great topic Paul!
It is fascinating how much the environment shapes consumer, and inevitably, businesses behavior.
I wonder what the results would be from any research conducted on possible shifts of consumer behavior? Namely, has the recent economic recession prompted consumers to be behave in a more ‘value conscious’ manner. Possibly causing a shift in demand from discretionary products (often differentiated) that once distanced the consumer from their peers, to that of products or services that are a necessity? Or perhaps an increase in demand of less-transparent discounted products, such as hardcore discount shopping (Aldi, dollar stores, etc). These products would still offer a degree of utility for the consumer, while still maintaining the image of ‘keeping up with the Jones’.
Nevertheless, a standard argument would be the more differentiated your clients products/services are, the more they are able to distance themselves from dreadful equilibrium pricing. Effectively moving them from ‘price-takers’ to becoming ‘price-makers’. Which, if done correctly, could generate further profit margins. As I am sure your business knows!
This is a very nice article – thanks for sharing.. definitely going to bookmark!
I always enjoy reading intelligent articles by an author who is obviously knowledgeable on their chosen subject. I’ll be following this post with much interest. Keep up the good work, till next time