Viral Marketing: Identifying Likely Adopters Via Consumer Networks

Abstract

We investigate the hypothesis: those consumers who have communicated with a customer of a particular service have increased likelihood of adopting the service. We survey the diverse literature on such "viral marketing," providing a categorization of the specific research questions asked, the data analyzed, and the statistical methods used. We highlight a striking gap in the literature: no prior study has had both of the two key types of data necessary to provide direct support for the hypothesis: data on communications between consumers, and data on product adoption. We suggest a type of service for which both types of data are available telecommunications services. Then, for a particular telecommunication service, we show support for the hypothesis. Specifically, we show three main results. 1) there is such a "viral" effect and it is 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 targeted customers by likelihood of adoption, and 3) observing the network allows the firm to target new customers that would have fallen through the cracks, because they would not have been identified based solely on the traditional set of attributes used for marketing by the firm. We close with a discussion of challenges and opportunities for research in this area. For example, can one determine whether the reason for the viral effect is customer advocacy (e.g., via "word of mouth") versus network-identified homophily?