Modeling the Connected Customer

14Dec11

Although we do know better, a large body of our knowledge about economics is built on two assumptions which are plainly wrong. The first widespread misaproximation is that people make (economically) rational decisions and the second is that they do so independent of one another. The book “The Connected Costumer” tries to advance marketing theory beyond the second assumption. What do we know about the ways in which costumers influence each other’s decision-making? How can marketing theory benefit from this knowledge?  In this post I will focus on the first section of the book: “Connectivity and the New Reality of Markets”. It proposes two ways to look at connected markets. First you could see the connected market of networks of connected people, and second you could see the connected market as an ecosystem of different types of connections people have. Let me expand these two views and try to say a couple of thinks about their respective strengths and weaknesses.

If you use network theory to look at markets: costumers become “nodes” in a “relationship network”. In his chapter “Connectivity, Control and Constraint in Business Markets”, Stefan Wuyts, discusses the mathematics of this viewpoint. He asks: “if you have three people that are connected in certain ways, what can be said about the influence they have on each other”. Wuyts shows how connectivity between costumers allows companies to reach out and affect costumer behavior, but also, by the same mechanisms, constrains the power they have to make a difference. The chapter “Opportunities and Challenges in Studying Consumer Networks” by Christophe Van den Bulte is much more practical. Van Bulte discusses how researchers can get network data and to what extend this is reliable research aproach. Also he discusses the topic of social contagion. Many modern marketing strategies build on the idea of “opinion leaders”.  Opinion leaders have more influence on their peers than normal people. If you can find opinion leaders for your brand and if you can target those specifically, your marketing campaign can be more effective. This is the main selling point of a service like Klout. However, van Bulte warns us, research about social contagion in markets is still young. We do not know when consumers turn to others for their judgment and when they don’t. There is little evidence that such ‘opinion leaders’ exist. And say you have found an “opinion leader”: how should you persuade him to support your product over the competition? How effective are ‘viral for hire’ services?  There are many open questions, and only a handful of answers.

Conor M. Henderson and Robert W. Palmatier propose a different view on the connected customer. Rather than looking at costumers as anonymous nodes in a relationship network,  they propose to look at the different sources of information costumers turn too when making a decision. In the chapter “Understanding the Relational Ecosystem in a Connected World they explain their view on the market as a ‘relationship ecosystem’.

Customer's Relational Ecosystem

Apart from the costumer, they identify four different players. First there is the brand. Customers can learn about brands through using the products and through carefully crafted advertising messages. Costumers relate to brands by “association”. Customers can identify with the brand values, they can be loyal to the brand, but the brand cannot respond empathically to an individual costumer. To do so, companies make use of “boundary spanners”, these are sales and support people and community managers. Boundary spanners have ‘real relationships with costumers’, but the company has to give up some control about the message. They cannot craft each message of all boundary spanners to fit the brand. Also boundary spanners cannot reach many people at once, so they reach only a limited set of people. With the “marketplace network” Henderson and Palmatier refer to all media, such as television, internet, newspapers and search portals that consumers use to gain “independent” information about the brand.  Costumers consider the network to be knowledgeable about the brand, but, they do not have an intimate relationship with ‘the network’. Companies have only modest control over the way the marketplace network works. The last player is the Social In-Group. The social in group offers both independence and real relationships, but it is the part where the company has least control.

These two ways of looking at markets are complementary; a connected market is both a network and an ecosystem. You can look at connected costumer as “nodes in a relationship network”, but not all nodes are the same and not all connections are the same. So we need models of market ‘ecosystems’, where we identify the important players and analyze their relationships to other players. This is not an easy task. Take the model of markets as being composed of “opinion leaders” and “others”. We need research to show whether this is how markets work and whether market strategies based on this idea work. Despite its intuitive appeal, the Henderson and Pamatier model faces the same two challenges. It seems that looking at the marketed as a conversation between brands, boundary spanners, marketplace networks and social in-groups helps to coordinate marketing efforts. But the model may lack the precision that is needed to have a more profound understanding of how the connected consumer can be ‘reached’. Whatever the conclusion may be, the connected consumer promises an exciting body of new marketing research.

Reading more:

Loosley related to my introduction: in Cognitive Bias in the Global Information Subway, I discuss how ‘instant information’ can team up to amplify some of our irrational tendencies.

The book “The Connected Costumer. Edited by Stefan Wuyts, Marnik G. Dekkimpe, Els Gijsbrechts and Rik Peters” is avalaiable at Amazon and Google Books.

Advertisements


4 Responses to “Modeling the Connected Customer”

  1. Hi there, of course this article is truly pleasant and I have learned lot of things from it about blogging.
    thanks.


  1. 1 The Traveling Influence Problem « @koenvanturnhout MacroBlog
  2. 2 Evaluating the NetGen Argument « @koenvanturnhout MacroBlog
  3. 3 Living Without Money « @koenvanturnhout MacroBlog

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: