L09_network - Network-based Marketing: Using Existing...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Network-based Marketing: Using Existing Customers to Help Sell to New Ones Published: January 10, 2007 in Knowledge@Wharton Marketers have long used all sorts of demographic and geographic data to target potential customers -- age, sex, education level, income, zip code. But there's another variable that companies may want to consider: Who is connected to whom? A study, co-authored by Shawndra Hill , Wharton professor of operations and information management, found that consumers are far more apt to buy a company's product if they are "network neighbors" with existing customers. Mining data from "social networks" -- who talks to whom or who emails whom -- could allow companies to pinpoint likely customers who otherwise would be overlooked. Hill, Foster Provost of NYU's Stern School and Chris Volinsky of AT&T Labs Research detail their findings in a paper titled, "Network-Based Marketing: Identifying Likely Adopters via Consumer Networks," published in May 2006 in the J ournal of Statistical Science. "One of the main concerns for any firm is when, how and to whom they should market their products," the authors write. "We provide strong evidence that whether and how well a consumer is linked to existing customers is a powerful characteristic on which to base direct marketing decisions. Our results indicate that a firm can benefit from the use of social networks to predict the likelihood of purchasing." The study examines the influence of social networks by studying a large telecommunications firm that was marketing a new service. '"Network neighbors -- those consumers linked to a prior customer -- adopt the service at a rate three to five times greater than baseline groups selected by the best practices of the firm's marketing team," the study finds. "In addition, analyzing the network allows the firm to acquire new customers who otherwise would have fallen through the cracks, because they would not have been identified based on traditional attributes." While the research focuses on people linked by way of a telecommunications company, the findings can apply to other social networks, such as MySpace and Facebook, according to Hill. "What these networks are enabling you to do is find likely customers who you may not have complete information on. The networks enable you to find potential customers who are linked to your existing customer base." The concept of network marketing -- a recognition that links between consumers help sell a product -- is not new. Often it involves word of mouth. If someone recommends a new restaurant to friends and acquaintances, who then in turn tell others about it, the network effect is at work. A famous person may be able to create a huge network of believers around a given product. Hill's paper offers the example of Oprah's Book Club. The TV star recommends a
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/19/2008 for the course OPIM 101 taught by Professor Lee during the Spring '08 term at UPenn.

Page1 / 3

L09_network - Network-based Marketing: Using Existing...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online