The Connected Customer

The Changing Nature of Consumer and Business Markets

Stefan H.K. Wuyts, Marnik G. Dekimpe, Els Gijsbrechts, F.G.M.(Rik) Pieters

• Publisher: Routledge
• Year: 2011
• Print ISBN: 9781848728370
• eBook ISBN: 9781135176907
• Topic: Psychology
• Subtopic: Consumer Behaviour
• Index: Psychology

In today's connected consumer environment, customers are better informed and harder to please, but they also leave a more visible evidence trail in the form of improved databases and customer information. Consumers are increasingly interconnected through various sorts of social networks, a trend that is facilitated by recent advances in electronic media and telecommunication (i.e., MySpace, Facebook, Twitter and Cyworld). Consumers are also increasingly connected with brands and seek to play a more participative role in their relationship with companies, stimulating companies to reconsider how to connect with consumers.

This book consists of a collection of chapters by thought-leaders in the field of marketing and beyond that deals with the rich facets of connectivity. This edited volume is a great source of research ideas and fresh theory building for academics and students in marketing and related fields who wish to understand this exciting field. It will be a source of inspiration for practitioners who are eager to take up the challenge and adapt their marketing strategies to the changing nature of consumer and business markets.

1
Introduction

Stefan Wuyts, Marnik G. Dekimpe, Els Gijsbrechts, and Rik Pieters

These are exciting times for marketing practitioners and marketing academics alike: Much of the discipline's received wisdom is undergoing reconsideration as the nature of marketing is changing fundamentally. A key concept in this discussion is the general notion of “connectivity.” Consumers are increasingly interconnected through various sorts of social networks, a trend that is facilitated by recent advances in electronic media and telecommunication. Initiatives on the Internet, for example, have created ample opportunity for consumers to connect with other consumers through social networking sites (MySpace, Facebook, Cyworld), information sharing sites (YouTube), (anti-)brand communities (MyStarbucksIdea.com versus iHateStarbucks.com), and so on. Also among business customers, a trend is apparent toward higher connectivity resulting from externally oriented strategies such as e-business, supply chain integration, and alliance networks. This requires a fresh perspective on analyzing both consumer and business markets, as decision makers no longer function independently of one another. Also, novel perspectives are needed on how customers connect with brands and with products, because customers are becoming more participative in some decision environments (e.g., health care) and more emotionally connected in others (e.g., brand evaluations). One of the clearest examples of how such increased connectivity changes marketing practice is the recent revival of word-of-mouth. The increased connectivity of customers with brands engenders brand communications, and the increased connectivity among customers amplifies the impact of such communications, which has important consequences for the spread of products, ideas, and information. “Buzz marketing” is now a central concept in the marketer's tool kit, and “social contagion” is firmly on top of many marketing scholars' research agenda.

We have now well passed the stage of acknowledging that these are important developments. Having witnessed an explosion of research initiatives in academia and quite some experimentation in marketing practice, we need to both take inventory and look ahead. Exactly how does connectivity change the reality of consumer and business markets? What are the most recent insights regarding vertical connections between customers and channel partners or between customers and brands, and how can (should) marketers leverage such connectivity? What are the boundaries of current marketing thought regarding horizontal connectivity among customers, and how can the marketer exploit such connectivity? These questions are addressed in the chapters of this book, which gathers breakthrough ideas as well as empirical evidence presented by thought leaders in the field.

The marketing community has been alerted to the likely changes brought about by connectivity in the seminal book Networks in Marketing, edited in 1996 by Dawn Iacobucci. In the subsequent decade, connectivity increasingly influenced marketing theory and practice. In 2007, Christophe Van den Bulte and Stefan Wuyts published a monograph that served as a primer on social networks for marketers, providing a tool kit for practitioners and an overview of the foundations of network theory. The objective of the present book is to take the next step in understanding the connected customer. The contributors to this book are internationally renowned scholars who share their thoughts and vision on the impact of the phenomenon of connectivity on marketing thought and marketing practice.

The book is organized along the following three main themes. Section I deals with connectivity and the new reality of markets. In Chapter 2, Christophe Van den Bulte kicks off with a critical reflection on how customer networks affect customer behavior and marketing practice. He devotes attention to both horizontal networks (as in social contagion and brand communities) and vertical networks (as in channel settings), as well as to the challenge of gathering network data. In Chapter 3, Conor Henderson and Robert Palmatier discuss the increased complexity of customers' relational environments and introduce the notion of “relational ecosystems,” consisting of different objects (brands, boundary spanners, social in-groups, marketplace network) and the channels that bind them. They argue that studying ecosystems allows capturing the complexity, dynamics, and multiple subnetworks that define a customer's environment and, hence, is indispensible to fully understand customer decision making. In Chapter 4, Stefan Wuyts focuses on connectivity, control, and constraint in business markets. He discusses the effectiveness of alternative network control mechanisms but also shows that social networks can constrain economic optimality in business markets.

Section II deals with leveraging vertical connectivity between customers and channel partners or brands. In Chapter 5, Nuno Camacho, Vardit Landsman, and Stefan Stremersch observe a fundamental shift in the role of the patient in medical decision making. They propose a customer-centered marketing approach to leverage the increased participation of the patient. In Chapter 6, Baba Shiv questions conventional wisdom that analytical decision making is superior to emotional decision making. On the basis of a detailed overview and critique of the concept of “customer value propositions,” he argues that to truly connect a customer, a firm must acknowledge the power of brand emotion. In Chapter 7, Aric Rindfleisch, Nancy Wong, and James Burroughs examine the influence of religiosity on connections that customers form with brands. Their empirical studies, conducted in the United States and Singapore, demonstrate that fundamentalism and spirituality strongly bear on brand loyalty and self-brand connections across multiple product categories, which opens up new opportunities for target marketing. Chapter 8 concludes Section II. Rajendra Srivastava and Thorsten Wiesel underscore the strategic importance of customer connections in managing profitability, growth, and risk. They advocate that marketers should think in terms of brand platforms, much similar to product platforms, to develop sustainable long-term connections with customers.

Section III collects new insights on how to leverage horizontal connectivity among customers. In Chapter 9, Ronald Burt discusses socialization and social comparison, the main network mechanisms that lie beneath the popular metaphors about contagion. Rather than arguing for one or the other, he examines how both mechanisms combine in a predictable way as they generate contagion in different network settings. In Chapter 10, Ralf van der Lans and Gerrit van Bruggen distinguish the key components that determine the spread of viral marketing campaigns (number of seeded customers, seeding acceptance, forward rate, viral acceptance, and response time). They illustrate the practical relevance of these drivers on the basis of two real-life viral marketing campaigns. In Chapter 11, Jacob Goldenberg, Sangman Han, and Donald Lehmann discuss the critical role of “social hubs” in social systems (i.e., individuals with an exceptionally large number of social ties). They point to the importance of identifying such social hubs for accelerating the diffusion of products. Finally, in Chapter 12, Andre Bonfrer discusses the origins and impact of negative word-of-mouth. He elaborates on how marketers can manage and control this dark side of the word-of-mouth phenomenon.

We are truly excited about the chapters that are collected in this book, and we are grateful to the contributors for enthusiastically sharing their ideas and vision about the connected customer. The chapters not only explore and extend the boundaries of marketing thought but also translate these new insights into recommendations for marketing practice. We are highly indebted to all contributors for the time and energy they have put in their respective contributions. We are convinced that marketing academics and practitioners will find inspiration in the book for more effectively addressing the phenomenon of increased connectivity in consumer and business markets.

REFERENCES

Iacobucci, D. (1996). Networks in marketing. Thousand Oaks, CA: Sage. Van den Bulte, C., & Wuyts, S. (2007). Social networks and marketing (Relevant Knowledge series). Boston, MA: Marketing Science Institute.

Section I
Connectivity and the New Reality of Markets

2
Opportunities and Challenges in Studying Customer Networks

Christophe Van den Bulte

In this chapter, I approach the theme of the connected customer from a network perspective. That is, I look at the issue by explicitly considering the structure of connections or ties among customers. In a few instances, I also consider the structure of connections with other market participants, such as suppliers or intermediaries.

Social networks among customers are receiving much attention from managers and researchers nowadays. Yet, current practice does not capitalize on existing network theory and research developed outside marketing. Conversely, some developments in customer networking are ahead of empirical research, and a few seem ahead even of accepted theory. In this chapter, I describe some research opportunities and challenges in developing a richer understanding of how customer networks affect customer behavior and can affect managerial practice. The objective is to raise questions of substantive interest, in the hope that they will generate research that provides answers to them. I also touch on some issues of obtaining network data but steer clear of technical issues involved in analyzing such data (e.g., Carrington, Scott, & Wasserman, 2005).

I first focus on social influence or social contagion dynamics among customers. This seems to be the network phenomenon of greatest interest among marketing researchers and practitioners today. I then turn to brand communities and network valuation, two areas where hardly any research has been conducted so far from a network perspective. Next, I discuss some possible applications of network research involving both horizontal customer-to-customer networks and vertical networks involving both customers and parties upstream in the value chain. Finally, I offer some reflections on strengths and weaknesses of different ways to obtain network data.

SOCIAL CONTAGION

The network phenomenon that enjoys the most attention from marketing researchers and practitioners today is how connections among customers affect word of mouth, i.e., information sharing and influence about products and brands. Because this process is akin to the spread of a virus within a population, some researchers refer to it as social contagion. Here, I offer a few ideas about how we might learn more about this important phenomenon.

Some Skeptical Questions About Social Contagion

Marketers are increasingly experimenting with various forms of network marketing for new products. The rationale of many such strategies rests on three key assumptions: (a) Social contagion among customers is at work, (b) some customers' adoptions and opinions have a disproportionate influence on others' adoptions, and (c) firms are able to identify and target those influentials or opinion leaders. These assumptions are quite reasonable, as the first two are consistent with several sociological and marketing theories, and all three have been supported in at least some studies (e.g., Godes & Mayzlin, 2009; Goldenberg, Lehmann, Shidlovski, & Barak, 2006; Rogers, 2003; Valente, Hoffman, Ritt-Olson, Lichtman, & Johnson, 2003; Weimann, 1994).

Managers would be remiss, however, to simply take those three assumptions for granted. For instance, Van den Bulte and Lilien (1997, 2001) showed that contagion need not be as important as reported in prior studies, Becker (1970) and Watts and Dodds (2007) raised doubts on the importance of opinion leaders in speeding up the acceptance of new products, and Rogers and Cartano (1962) noted already long ago a disagreement on whether to identify opinion leaders based on self-reports or based on their centrality in social networks. More recent research by Coulter, Feick, and Price (2002) and Godes and Mayzlin (2009) provides conflicting answers to the question whether heavy users are more influential than light users, an issue of obvious relevance to the identification and targeting of likely influentials.

Marketers would benefit from studies critically assessing each of the three assumptions fundamental to many “viral” or “word-of-mouth” network marketing efforts. First, when can one expect social contagion to be operating over social ties and affect customer behavior over and above the effect of traditional marketing efforts? Standard diffusion theory suggests some answers, but they are not always nuanced. For instance, one would expect potential customers to turn to others for guidance when they do not feel comfortable with their own judgment. But if the perceived risk is very high, people may prefer not to think about purchasing the product altogether. This line of reasoning implies some nonlinear relationship between perceived risk and the importance of social influence, and it might explain some puzzling research findings. More generally, there is plenty of opportunity to go beyond accepted diffusion theory as codified by Rogers (2003) and to combine more fundamental theories from sociology and other social sciences with rich multicountry or multiproduct data sources that are becoming more readily available to generate richer insights on when can one expect social contagion to be operating in new product diffusion (e.g., Steenkamp & Gielens, 2003; Van den Bulte & Stremersch, 2004).

Second, is it really true that some customers' adoptions and opinions have a disproportionate influence on others' adoptions? And to what extent can one profile those influentials, influencers, or opinion leaders? Although several authors provide answers to these questions (e.g., Rogers, 2003), I am afraid the situation is less rosy than often described. For instance, quite a bit of research on opinion leadership uses self-reported measures. Are people who claim to be opinion leaders really influential? I doubt it, given the prevalence of the better-than-average effect or Lake Wobegon syndrome where people overestimate their own achievements and capabilities (Lake Wobegon is a fictional place invented by writer Garrison Keillor where “all the women are strong, all the men are good looking, and all the children are above average”). To what extent is someone's self-reported leadership correlated with the number of others who report seeking information or guidance from that person? Oddly enough, we do not know, apart from a recent study of physicians in three cities reporting correlations of about 0.30, which is quite low (Iyengar, Valente, and Van den Bulte, 2008). Another issue, distinct from measurement and profiling, is the degree to which opinion leaders exert their influence across the board or not. In spite of claims to the contrary by some peddlers of commercial services, there is no evidence of such a thing as a generalized opinion leader whose influence spans a wide variety of product categories (for a review, see Weimann, 1994). Who exerts influence, even within a category, is likely to depend on what people seek from those they turn to. However, little is known about how the identity of influentials changes depending on, say, whether the perceived risk that consumers try to manage is functional, financial, or social. We also know very little about how the identity of influentials changes depending on whether consumers seek general-technical versus use-situational information. Recent work by Goldenberg and his associates (2006) suggests that considerations of general expertise (“this person knows a lot about the product's features and performance”) and representativeness (“this person is like me, and so his advice will be more relevant to me”) may lead people to seek advice from different sources. Marketers would benefit from more research into what type of person is influential when and for whom.

The third key question that we would like to know the answer to before designing network marketing campaigns is whether marketers are able to identify and target those influentials or opinion leaders. As noted previously, using self-reports may not be very attractive for that purpose. Using general demographic profiles is not very useful either, research clearly indicates (Weimann, 1994). That would leave one with sociometric methods, something that several pharmaceutical companies are working with and is also taken into account by Tremor and Vocalpoint, the two word-of-mouth marketing services operated by Procter & Gamble. Doubts on marketers' ability to effectively identify influentials using sociometric methods, however, have arisen recently following a simulation study by Watts and Dodds (2007) showing that the customers critical in generating a sudden burst in the speed of diffusion need not necessarily be the best co...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Foreword
• Preface
• Editors' Bios
• Contributors
• 1: Introduction
• Section I: Connectivity and the New Reality of Markets
• Section II: Leveraging Vertical Connectivity With Channel Partners and Brands
• Section III: Leveraging Horizontal Connectivity Among Customers