Viral Marketing : Identifying Likely Adopters Via Consumer Networks

We investigate the hypothesis: those consumers who have communicated with a customer of aparticular service have increased likelihood of adopting the service. We survey the diverseliterature on such quot;viral marketing,quot; providing a categorization of the specific research questionsasked, the data analyzed, and the statistical methods used. We highlight a striking gap in theliterature: no prior study has had both of the two key types of data necessary to provide directsupport for the hypothesis: data on communications between consumers, and data on productadoption. We suggest a type of service for which both types of data are available telecommunicationsservices. Then, for a particular telecommunication service, we show supportfor the hypothesis. Specifically, we show three main results. 1) there is such a quot;viralquot; effect and itis statistically significant, resulting in take rates 3-5 times greater than a baseline group; 2)attributes constructed from the consumer network can improve models for ranking of targetedcustomers by likelihood of adoption, and 3) observing the network allows the firm to target newcustomers that would have fallen through the cracks, because they would not have been identifiedbased solely on the traditional set of attributes used for marketing by the firm. We close with adiscussion of challenges and opportunities for research in this area. For example, can onedetermine whether the reason for the viral effect is customer advocacy (e.g., via quot;word of mouthquot;)versus network-identified homophily?