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Marketing networks 2.0

Andrew Stephen, 2009
Faculty Advisor: Don Lehmann


Four research questions are asked and addressed, each considering social interactions between individuals in marketplaces: (1) how can network-based interactions between consumers generate economic value for firms and for other marketplace participants, (2) what drives the formation and evolution of these interactions and network relationships in a marketplace context, (3) what drives the activation of consumers' network relationships with respect to the transmission of information via word-of-mouth (WOM) from one consumer to another, and (4) what affects the reception of information via WOM and how can impact of WOM on consumers' attitudes and behaviors be measured and modeled? Each of these questions is addressed by a separate essay.

Essay 1 examines the economic value implications of social interactions between sellers in online marketplaces where sellers can form links to other sellers and customers can use these links (Internet hyperlinks) to browse between shops in a marketplace. This interesting phenomenon where potential competitors can link and send customers to each other is called "social commerce." Using data from a large social commerce marketplace in France, empirical findings suggest that seller networks can be beneficial, although not all links are value-creating and it depends on whether links improve the network's browsability. Although allowing sellers to connect does increase total marketplace sales, how the structure of the marketplace network evolves can either help or hurt marketplace-level performance. At the individual seller (or shop) level, being part of the network can help make shops more accessible to customers, which in turn increases shops' sales.

Essay 2 examines the same social commerce network and addresses the issue of how this network structure formed and evolved over time. Given that the network does have some economic value, as found in essay 1, it is necessary to understand the evolution dynamics of this network. Although the network studied has a power-law degree distribution, its evolution is not well explained by preferential attachment or triadic and cyclic closure (common link formation mechanisms in extant literature). Instead, the evolution of the network and the emergence of its power-law degree distribution are found to be well explained by a network evolution mechanism that relies on shop attributes that are not directly related to the network: shops prefer to connect to shops with more diverse assortments. Thus, product assortment decisions made by sellers affect their ability to attract links to their shops from other shops, which in turn influences how accessible they are made by their position in the network.

Essay 3 explores the nature of consumers' social interactions with respect to the transmission of information via WOM. In this essay consumers' reasons for transmitting WOM and the drivers of their selections of recipients are studied with three experiments. Across three studies it is found that the main reasons for transmitting WOM are predominantly transmitter-focused and associated with transmitters using social capital embedded in their social relationships, the importance placed on these reasons by transmitters is related to the types of recipients that they actually choose to talk to, characteristics of recipients and the relationships they have with transmitters are strong drivers of transmitters' decisions of who to (and who not to) transmit information to, and the underlying reasons for transmitting WOM, and hence the types of recipients that comprise one's preferred "audience," lie in transmitters wanting to use (but not build) social capital, but the type of use depends on whether people are sharing their own opinions ("initial transmission") or passing on others' opinions ("retransmission").

Essay 4 also concentrates on WOM, but instead on the reception or "listening" side. In this essay, with two experiments, the characteristics of transmitters who are listened to are examined, and the drivers of WOM impact on recipients' attitudes (and subsequent behaviors) are modeled. Importantly, here impact is captured as how much WOM messages from transmitters change two components of recipients' attitudes toward the topic of the message (i.e., a brand or a product): disposition (e.g., perceived quality of the product, liking of the brand), and the certainty with which the disposition is held. Two studies demonstrate that WOM impacts disposition and certainty differently, changes in both disposition and certainty affect consumers' intentions to purchase a talked-about brand, WOM from strangers in some cases can be as impactful as WOM from friends and acquaintances, and the relatively strong influence of strangers under some conditions seems to be the result of perceptions of the credibility of strangers as sources of information. Overall, the results illustrate that WOM reception is multiply-determined and, above all, the outcome of a complex set of processes. (Abstract shortened by UMI.)

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