It's not all about reach (number of people an influencer can activate a channel to) but affinity - representing the impact an influencer can make through strong interpersonal ties.

An article on understanding the role of social influence in consumer behavior by Jon Christiansen on Quirk’s Marketing Research Review raises some important implications for financial services marketing. This summarizes some of the important marketing issues and concerns of the role of social influence in consumer behavior

Consumers Not Handcuffed by Information Asymmetries

While we are becoming increasingly aware that today’s consumers are more demanding, resourceful and better prepared, one of the eye openers in current consumer research is the extent of the influence of social media. According to one of the most respected product adoption models, the Bass model:

 The average coefficient of the social influence and contagion parameter is nearly 13 times greater than that of the function of advertising.

In other words, the informal roles of generating awareness and subsequent adoption have an exponentially greater impact than that of advertising efforts. The implications of this are compelling:

  1. Advertising must be on the mark – right out of the box.
  2. Rigorous consumer testing is needed– before and after. Ethnographic research has informed some of the most wildly successful campaigns in financial services in identifying the right target segements, and understanding how to appeal to them.
  3. Creative strategy must encourage risk – an inherent paradox is that risk needs to be encouraged in creative strategy if a product or service seeks to differentiate itself and really stand out in a crowded field to implant itself in the target consumer’s psycyhe.
  4. There must be meaningful interaction with consumers – A company has to be prepared to identify consumer preferences and perceptions prior to launch and continue to track them in real time so as to respond to them immediately as they arise.

Two Key Agents of Social Influence

Since no one advertises something negative about their product, consumers tend to gauge the truth about products from  social exchanges. The important question for market researchers is how to accurately measure what is going on in social circles and understand the social influences that affect product adoption. Scholars of social influence suggest that social influence is driven by two primary agents:

  1. “Bonding” – Sources we perceive to think like us, and
  2. “The trusted expert” – Sources we perceive know more than us

Social Influencer #1: “Bonding” (People Much Like Us)

We tend to surround ourselves with people who are much like us, ties that are likely have similar beliefs, education and socioeconomic status. We may have attended the same schools, may be fans of the same teams, and dress similarly and have similar hobbies. We share this connection not only with friends, family, coworkers and acquaintances, but with figures  in the media and other avenues of our lives. If we believe in the idea that we share a like mind with someone or something, we have a connection.

The people we surround ourselves with have similar needs. So when someone close to us makes a buying decision, we tend to believe that it would meet our needs as well. Watching a purchasing decision by someone with whom we share a bond programs that product into our choice set. Our preference for that product is subconsciously elevated in our preference ladder, and will influence our own decisions.  As personal acquaintances are not the only sources of the bond exchange, we also tend to take advice from a columnist because the columnist posts on a particular blog that we enjoy or be swayed toward certain products because a store we like carries them.

Social Influencer #2: The Many Faces of the Trusted Expert

The simple version of the expert is the source who we perceive has more knowledge than we do about something that interests us, which could be a sales representative or a subject-matter expert. We admire or even idolize certain sources (ie. Einstein.)  Some sources are individuals who have an extensive knowledge in a specific area of interest, such as a local contractor. Some have no face at all, and may be personas we see online.

When the knowledge is a product of experience, the level of influence expands – specifically, the customer experience. We avoid restaurants with poor recommendations, and consider travel destinations when someone has shared a great experience of it with us. Shopping online, we consider  consumer ratings and comments, even if it is a very limited sample that would ordinarily be too small to support a rigorous business decision. The important influencer is not the expertise so much as our perception of expertise.

Measuring Social Influence

Two key methods are identified in attempting to measure social influence:

  • Modeling with existing or historical data –  We can model product diffusion using existing or historic data of the same or similar products. Product sales data is available in-house or through outside sources. A number of possible products can be used to extract patterns in sales trends to forecast sales for the new product. Try to identify the most important estimators and eliminate the “noise.

Borrowing from a research example, a colleague and I recently studied the adoption patterns of Google Apps for Education at a mid-size public university. When we began our research, we utilized nearly 100 estimators in our projected model of adoption, only to discover that diffusion patterns were best explained by only three to four estimators.

  • Structured analogy forecasting –  Without existing or historical data, researchers must rely on alternative sources that may appear less reliable. Estimates may be derived from judgments of field experts or company executives, prediction markets or simulating adoption patterns of similar products. It can be instructive to work backward from models that share similar elements to the one we are considering. The adoption patterns can fit surprisingly well if matched with analogous products, although we need to control for situational criteria, including .  market conditions, availability of product substitutes, supply chain patterns and variation in marketing strategy.

Returning to the Google Apps for Education example, my colleague and I thought it would be interesting to model a projected adoption pattern before the service was deployed…so, we explored products or ideas that would most likely share similar parameters. Since the administration would place little emphasis on publicizing Google Apps, we determined that social exchange would be the dominant driver of adoption. Students were well aware of the benefits of Google Apps (especially Gmail). Therefore, we shrunk our search criteria for similar products or concepts to two criteria. First, we looked for products with two key criteria: products or concepts that had a similar ratio of social influence to advertising influence (favoring heavily on the social side). Second, we looked for products or concepts that had some previous market presence. Our examples included: Facebook, the eight-bit microprocessor, accelerated education programs and the second-generation cell phone. We added a few other educational innovations and found that, after normalizing time to adopt, our forecast (as well as actual) adoption patterns fit nicely among these analogous products.

Pair Your Forecasts with a Realistic Product Assessment.

To estimate the probable role of social influence on the adoption of our product or service, we need to apply our forecasts about consumer behavior to the relevant features of our specific products and services. To do so, we need to ask key questions regarding what we know about the consumer to our product makeup, for instance:

  1. How likely are consumers to see other consumers using the product?  Highly visible use allows for higher propensity of bond influence and the expert influence of the experienced consumer. This makes for a stronger bond influence, and mere repetition of observation will be a powerful  influence in itself.
  2. How valuable is the experience to the product?  If the experience determines product satisfaction, the first few simulation periods are critical.
  3. How complex is the product?  With less complex products, leveraging the product expert has a stronger influence on those with lesser understanding. With more complex products, you’ll need to better frame the true value of the product expert.
  4. How many online sources are available for product recommendation or criticism?  Online recommendations may be the key influencer when there are a great number of product substitutes. Consumers can gauge the total customer experience, and furthermore, may connect with someone who values the same experience.
  5. Is there a level of social sensitivity to your product? Consumers are most likely to discuss products of social sensitivity (health, financial, etc.) with trusted sources.
  6. Is it a product that most people wouldn’t talk about? If so, discussion will likely be less about experience and more about product attributes and features (Life Insurance is an example.) These are likely to be bond influences since discussion about product features often occurs between consumers who have similar levels of knowledge and interest.
  7. Is the product segment-specific? Segments are most likely aligned by bonding patterns, since segments are often linked by similar behavioral patterns.  In some instances, likely adopters, such as Ally’s “Money in Motion” psychographic, or Schwab’s disgruntled investors, may share key bonds.
  8. Is the product a function of market conditions? If the product thrives only in certain conditions, it will likely create contagion (most likely bond-induced) quickly and grow if it adapts with the market cycles.
  9. Is location a factor? If the product is specific to location (or at least starts there, such as a Regional Market), the bonding element is more often the driving force of product adoption.
  10. Is the product cool? In other words, do consumers make a statement about themselves when they adopt the product? This suggests high-level bond effects and high-level effects from the admired expert.

Snap principle of social influence:

Social influence must be a core element of your overall marketing strategy.