Marketing in a Socially-Driven Economy MKTG 622: Lecture 11 Eric T.

Bradlow

A.K.A Stop the Insanity Social Media is NOT the Wild-Wild-West

Reminders
Complete the Futureview Experience by Tonight at 7pm Period 5 decisions due Tomorrow by 9am Period 6 decisions due by Sunday at 6pm Final SABRE strategy paper due next Tuesday in class Based on results through period 5.

Todays Outline
What we know about optimizing the use of social media as an element of a firms marketing mix; What causes things to take off: the role of social influence in consumer choice Using this knowledge to predict product sales and diffusion over social networks

Important Topics on Social Media

[1] Why Should You Care?

Why is this an important topic?

Firms are placing big bets on it.

Friends and family are the most trusted sources for decision-making

Traditional Consumer Decision Model

Consumer Decision Model with Social Effects

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In the Social Media Driven World.

Consumer tastes are far more transient and harder to forecast than one might hope Driven by social influences (I like what everyone else likes) Awareness is driven by social media, the course of which firms may have limited direct control over

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The modern spin: SM as the great accelerator

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Important Topics on Social Media

[1] Why Should You Care? [2] Dont confuse what you know with what you know

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Important Topics on Social Media

[2] Dont confuse what you know with what you know Does this kind of knowledge translate into a more effective use of Social Media as a Strategic Marketing Tool? WELL, IT DOESNT HURT BECAUSE IT REALLY IS A NEW MARKETING LANGUAGE

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The New Language

SOCIAL MEDIA APPLICATION
Blogs

BRAND AWARENESS
# of unique visits # of return visits # of times bookmarked search ranking

BRAND ENGAGEMENT
# of members # of RSS feed subscribers # of comments # of user-generated content average length of time on site # of responses to polls polls, contests, surveys # of followers # of @replies

WORD OF MOUTH
# of references to blog in other media (online/offline) # of reblogs # of times badge displayed on other sites # of likes

Microblogging (Twitter)

# of tweets about the brand valence of tweets (+/-) # of followers # of visits # of tags

# of retweets

Co-Creation (Nike ID) Social Bookmarking (Delicious , Digg, StumbleUpon)

# of creation attempts # of followers

# of references to project in other media (online/offline) # of additional taggers

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Important Topics on Social Media

[1] Why Should You Care? [2] Dont confuse what you know with what you know [3] Why is Social Media Marketing just plain harder than regular ole Marketing?

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SABRE analogies
Imagine if 1k of investment in a new Social Media channel could create 80% awareness AND shift ideal points toward a new product.but such shocks occur randomly

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What makes the answer hard:

Unlike other media, The depth and reach of messages is not under direct control of the firm; one can seed social media, but spread relies on users The message itself is also not under full control; the message that is seeded may not be the one that is spread among consumers.

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Important Topics on Social Media

[1] Why Should You Care? [2] Dont confuse what you know with what you know [3] Why is Social Media Marketing just plain harder than regular ole Marketing? [4] What makes things popular in the social media space i e space, i.e. go viral?

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What Made this So Popular?

The Dollar Shave Club has raised $1 million in "seed" funding from venture-capital firms including Facebook investor Andreessen Horowitz and Kleiner Perkins Caufield & Byers, which has put money into companies such as Groupon Inc. GRPN -3.43%

Consumer gripes about price are pushing Gillette to prove to customers that they don't need to swap blades as often as imagined. In February, it began running television ads saying its Fusion ProGlide blades only need to be switched every five weeks. Mr. Dubin said the proliferation of fancy blades has only confused men. "Keeping it simple is the name of the game," he said. "This was an easy premise for people to understand, and we don't want to complicate it."

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OR THIS?

Evian
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Maybe it is as simple as setting up a Twitter account and Facebook Marketing 622s Facebook Page page and waiting for followers.

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Possible Reasons
It has nothing to offer that I want or need SABRE is not inherently cool do t anybody o a g g there I dont see a ybody I know hanging out t e e Content is relatively static

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Walmarts Facebook Page has 10.57 Million Followers. How do they do it?

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Give Benefits. Lots of them.

Example: Pampers Facebook page is the go-to site for coupons.

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Heinz Ketchup: go-to place for hard-to-get innovations

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Be cool, or promise a network of cool people/ideas

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What Makes Content Viral?

Simple Unexpected Concrete C dibl Credible Emotional Stories

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Important Topics on Social Media

[1] Why Should You Care? [2] Dont confuse what you know with what you know [3] Why is Social Media Marketing just plain harder than regular ole Marketing? [4] What makes things popular in the social media space space, i.e. go viral? [5] Why does the popularity of some objects seem inconsistent with their true value? * Bubbles * Cascades
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Ever wonder why consumers would want to buy rocks?

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Or why this kid is so popular?

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Or why this kid STOPPED being popular?

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What unites all of these examples?

Each is a case where value is difficult to assess with certainty, and individuals differ in their private assessments of value. People draw inferences about value more from what other people and firms in their networks are doing and saying than their own private assessments. The result: cases where aggregate demand is not necessarily reflective of individual private assessments of value.

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Classic Example of Cascades: Product Evaluation

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What makes this social influence so powerful and prevalent? It is rationaland information like this is increasingly available!

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As a related aside. Downstream business impact of cascades

Ever wonder why a restaurants reviews end with a few negative ones? Ever wonder why companies internally hire people to seed forums and blogs with positive postings? Ever wonder why almost all company sites are moderated? Catch it before it tips!

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But the explanation is incomplete

Examples: in the early 2000s LOTS of people were calling housing a bubblebut firms (and people) kept investing.

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And the data were there for all to see

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To create bubbles two other factors must exist

Strong incentives to conform to the behavior of a others within a network Social/Psychological disincentives to look away from information that would reveal fundamental quality, or distort the interpretation of truth-revealing knowledge

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Example : Cards in a Deck

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Think of one of the cards from this deck. When you have it in your mind, be sure to remember it, but do not tell me. I will then show you the deck again with your card removed

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Did I remove the right card?

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The avoidance of knowledge

Once a set of beliefs are in place (e.g., that housing is a good investment), people are inclined to search for evidence that would confirm rather than disconfirm these beliefs

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The Ostrich Effect: People are more likely to look to see how their portfolios are doing when they hear there has been a positive change in the stock market

Source: Karlsson, Loewenstein, and Seppi 2009

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The Recipe for Bubbles and Cascades

Quality is imperfectly observable An incentive to Conform

A cascade starts

An incentive to avoid seeking disconfirming knowledge

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Important Topics on Social Media

[6] Can you predict Social Diffusion?

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Starting point
The fact that demand for social goods may often be decoupled from fundamental value does not mean that demand cannot be predicted or influenced. All cascades require a favorable starting point (there has to be some real value). The social diffusion process is far from random, and can potentially be influenced given sufficient knowledge of the information networkbut it will require a new kind of model!

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Estimate a Model (the Bass Model) that Describes a Blending of the Two Processes

St p ( M CS t 1 ) q(

CS t 1 )( M CS t 1 ) M

S = sales CS = cumulative sales M = maximum cumulative sales p = coefficient of innovation q = coefficient of imitation

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Bass Model Assumptions

Fixed Market Potential Reality is adopters bring new people to the network. Fixed Parameters (no changes over time) Things can cascade and go viral Population that consists of innovators and imitators where innovators drive the diffusion process It is not that clear cut. All past adopters are created equal Not true, network adoption location
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But the real world is more complex diffusion arises over networks

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Social Hubs and Diffusion

George is y centrally located, but not necessarily an innovator or an imitator.

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Social Hubs and Diffusion

Ed is an innovator
Who will likely adopt first?

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Social Hubs speed the rate of adoption

Ed may adopt first, but George is f i far more likely lik l to be the one who triggers widespread adoption

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Example: Ford Fiesta Movement

Traditional media car introduction: We would show the vehicle at an auto show a few months before it went life and we started production. At that point, we would have a huge, massive media buya traditional media buy that would last 3-6 months and then would end. Why? 36 end Because we needed to build awareness very quickly before the vehicles arrived at the dealership. Then wed hope that the awareness field was high enough that it would last. New media car introduction (2009): 100 people received cars to test drive for six months and shared their experiences online.
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Ford Fiesta Movement Impact

6.5M YouTube views 50 000 requests f i f i fi t 6 d 50,000 t for info in first days car was on sale l 10,000 cars sold in the first 6 days

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One implication: adoption rates may not display simple S-shaped curves

Up-take is non-monotonic, as adoption arises in concentrated waves over the network

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Reminder -- Medicines Case: WOM Can Move S -> C -> Double C

Sales Sales

Time

Time

Sales

Time

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An Alternative to Aggregate Diffusion Models: ABMs

Agent based models mimic the aggregate behavior that arises when individual elements (here people) modify their behavior to conform to other individuals in the vicinity While used widely in physics, increasingly used to model behavior in complex human systems

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ABM Models in Practice: the simple case of strong and weak ties
Each agent is assumed to be part of two networks---one described by strong ties and one with weak ties. E h period th Each i d there i a chance th t h or she will b is h that he h ill become informed either through external forces (e.g., advertising) or chance encounters with people who are aware within his or her network

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 Formally,
p (t ) 1 (1 )(1 w) r ( t ) (1 s) j ( t )
prob(t)=Probability of becoming aware at time t =probability of exposure by advertising w=probability of exposure from someone with weak ties s=probability of exposure from someone with strong ties r(t)=# of weak ties, j(t)=# of strong ties

Implication: the stronger the relative influence of s over w the less homogeneous the adoption process will appear (i.e., display spatial clusters)

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Role of Social Networks

p (t ) 1 (1 )(1 w) r ( t ) (1 s) j ( t )
prob(t)=Probability of becoming aware at time t =probability of exposure by advertising w=probability of exposure from someone with weak ties s=probability of exposure from someone with strong ties r(t)=# of weak ties, j(t)=# of strong ties

How would social networks impact , w, s, r(t), j(t)?

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Another implication: one might be able to predict product success from the early spatial p patterns of adoption p

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Heres How
Below are the spatial adoption patterns of 2 products measured 1 month after their release.

Product A

Product B

=adopted

Which is more likely to be successful?

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Long-term product sales and month 1 adoption concentration measures

Supermarket Products
0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 Success Failure Success Failure

Home Furniture Sets

Garber, Goldenberg, Libai, and Muller, Marketing Science, 2004

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Important Topics on Social Media

[6] Can you predict Social Diffusion? [7] Can firms make money over Social Networks?

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Monetization of Social Networks

Play Games with your Friends
Get Targeted Recommendations From your Network

Get Local R G t L l Recommendations d ti

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Will this company ever make any money?

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Pinterest on Wikipedia
In December 2011, the site became one of the top 10 largest social network services, according to Hitwise data, with 11 million total visits per week.[11] The next month, it drove more referral traffic to retailers than LinkedIn, YouTube, and Google+. In January 2012 comScore reported the site had 11.7 million unique users, making it the fastest site in history to break through the 10 million unique visitor mark.[15] mark [ ] Pinterest's wide reach helped it achieve an average of 11 million visits each week in December 2011. Most of the site's users are female, with 97% of the site's Facebook "likes" being made by women.

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Is Too Much Customization/Monetization Possible? Goldfarb and Tuckers (2010) study Tucker s

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Salient Pop-up banner ad

Imbedded ad matched to context

+74%

+54%

Pop-up ad matched to context +48%

Value of Ad Type compared to baseline sales

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Important Topics on Social Media

[6] Can you predict Social Diffusion? [7] Can firms make money over Social Networks? [8] And it only is happening for digital firms, right?

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Social Media - Retail BENTONVILLE, Ark. April 18th 2011

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Wal-Mart signs agreement to acquire Kosmix, developers of a social media technology platform Filters & organizes content to connect real-time information. Integrates shopping experience between bricks-andmortar & e-commerce businesses in nine countries. Newly formed @WalmartLabs, creating technologies and businesses around social & mobile commerce to support global multi-channel strategy.

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Consumers Voting for Product Assortment

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Social Media - Retail

Innovation: internal & external initiatives Twelpforce Ideax - shoppers suggest ideas other shoppers vote up/down Shopper experience: MySears.com and MyKmart.com Launched in March 2009, over 400,000 registered users. 64% online buyers find user reviews important when purchasing. 47% online users - consumers trust consumers > marketers.

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Social Media - Food

Competitive Promotions: has a new social media marketing campaign where any time 2 people individually use the phrase mac & cheese in a tweet, each receives a link pointing out Mac & Jinx. The first one to click the link and give Kraft their address receives 5 free boxes of Krafts mac and cheese and a T-shirt. New Product Launch Promotions: Heinz Ketchup UK opens up a pop-up tryvertising F-store on Facebook (tryvertising = advertising by sampling .designed to create word of mouth, pop-up = temporary), making an initial 3,000 bottles of its latest tomato ketchup (with Balsamic Vinegar) exclusively available to serious ketchup fans only before the new product was launched in traditional stores. Drive traffic to retailers: Offer Groupon subscribers a first-of-a-kind home delivery grocery Sample Pack featuring $40 worth of General Mills products including coupon book, breakfast, lunch and dinner fare for $20. General Mills hoping deal will turn Groupon samplers into grocery-store name brand buyers. Community Culinary Experiences: Blogger-hosted virtual cooking school called Cooking Connections-an 8week series of live blogging classes and conversations that take place on TheMotherhood.com and are crossposted live on Twitter and Facebook. Participants are encouraged to share their culinary experience via Twitter, Flickr and Facebook in an effort to connect others to the Cooking Connections community and experience.

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Social Media - Food

April 21st 2011 General Mills

First deal offer on Groupon. Posted on Internet at midnight in the Twin Cities, sold out at 10:42 a.m. Groupon is not an e-commerce platform for us Groupon We are not looking to make money on this. Rather, by mailing out samples, the company is trying to direct more traffic to grocery retailers for its products - Karl Schmidt, company's director of promotional marketing.

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Social Media - Personal Care

Tailored Segmentation: multiple Facebook pages geared to unique audiences, consumer products and conditions. corporate blog at JNJBTW.com .presence on YouTube (527 Videos) and Twitter. Consumer Intimacy: 28 brands on its Facebook Store that enable them to: reward and build loyalty, learn about brand usage & habits, stimulate WOM and sell products. Last year P&G launched a social media initiative for Prilosec to maintain its leadership. Also P&G ended its 77 years of advertising on soap operas in favor of social media.

Community intimacy: social media campaign for Kotex created a safe place for women and girls to go to talk about personal subject. In less than 6 months it has reached an 8.3% market share in a mature market. At heart of the Kotex Campaign is Listening and real conversation. The big idea was to take a taboo subject and offer support and a safe place where women and girls could help each other with advice and support. Emerging Markets: success with social media marketing of Axe and to generate interest in the Indian market, created a Facebook page. Allowing users to interact with Axe Angels, male oriented marketing designed to get men clicking back for more. In January 2011, 10 months after the page went live, 1+ million Facebook users had liked this page, and numbers growing since, now with over 1,247,800 likes.

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Important Topics on Social Media

[6] Can you predict Social Diffusion? [7] Can firms make money over Social Networks? [8] And it only is happening for digital firms, right? [9] Social Media: Just US-Centric?

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Social Media According to Renren

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Donna Li from Renren

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Integrating social media and traditional advertising

Build a brand page on a major social media platform Traditional advertising should drive users to your brand page ,p , Vehicle for brand stories, promotions, etc. Encourage regular participation and interaction on page Users to become brand advocates

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Relevance for new and mature products

Appropriate for both Mature Brand awareness and product experiences already established Easier to leverage WOM power New Social media platform must be large Maximize awareness through reach and frequency (Go where the consumers are!)

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The Future of Social Media 3 5 year horizon

Not a trend, but a part of our lives Companies should integrate social media with overall strategy it is not confined to PR or marketing Social media must be included in any marketing effort Support marketing team with social media expertise and resources Encourage social media innovation and allow mistakes Mobile is the next big thing. Start thinking now.

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Doesnt Sound Too Different than the US Does It? US,

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Conclusions
Social influences can be a major driver of consumer demand---but care must be taken before assuming that high current demand implies an enduring preference worth investing in (bubbles are everywhere) Emerging trends can be spottedand new families of diffusion models are emerging as tools Social media investments will be a central part of marketing measurement and selling tactics going forwardbut we are just beginning to learn its capabilities and limits
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Next time: the marketing of products to consumers who have yet to be born

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