Porter - Advances in Relationship Marketing Thought and Practice the Influence of Social Network...

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Advances in Relationship Marketing

Thought and Practice: The Influence

of Social Network Theory

Presented at the

Networks and Complex Systems A talk series at Indiana University Bloomington

September 18, 2006

Constance Elise Porter, Ph.D.Assistant Professor of Marketing

University of Notre Dame

Siêu thị điện máy Việt Long www.vietlongplaza.com.vn

http://www.vietlongplaza.com.vn/





Marketing focuses on the exchange

process, making it relational, by definition.• Relationship marketing is a dominant

paradigm of marketing practice. (Dwyer, Schurr and Oh

1987; Morgan and Hunt 1994)

– It emerged in the B2B arena because the number of relationshipsmanaged were smaller (e.g. B2B sales)

– Is is now dominant in the B2C arena via due to technology-ladenconcepts such as ―CRM and ―One-to-One Marketing‖

• Marketing researchers and practitioners seekto understand relational behavior: – Between firms and customers/consumers (traditional)

– Among customers/Among business partners (emerging work incustomer collaboration, customer/professionalcommunities/knowledge networks)







The fundamental premise of this

talk….

Because marketing is relational,

social network theory (SNT) helps to

advance marketing theory and

practice.







Discussion Topics

1. A Historical Perspective• How does the marketing perspective compare to the

sociological perspective?

2. How has SNT advanced relationship marketingthought and practice?• What are the three key perspectives of SNT that have

influence marketing theory and practice?

• How have researchers used these perspectives to advancemarketing theory and practice?

3. A Look at the Future

• How do current trends reflect the importance of SNT tomarketing thought and practice?

• How could social network theory enhance my investigationof relationship marketing in virtual communities?




A Historical Perspective







Marketers use basic SNT concepts, but

questions and methods differ.Points of Alignment:• Networks are socially connected actors (more than 2)

• Resources (e.g. information) are transferred among actors ina network

• There is a flow of resources within the network

Points of Difference:• SN theorist (and early marketing researchers) seek to describe

individual actors and their relations/patterns of connections

– Sociometric theory….Whole Network…Software tools (e.g. UCINET and KRACKplot)

• Contemporary marketing researchers tend to examine specificmarketing outcomes related to influence in social networks

– Psychometric theory…Sample/Ego-centered…SPSS/SAS for regression techniques



Centrality also is important to both, but

marketers apply the concept differently.Social Network Theorists

• “Between-ness” – The frequency with which an

actor is intermediary to othernodes and controls the flow

of resources

• Degree – The number of actors with

whom an individual has adirect connection

Marketing Applications

• Word of Mouth – Actors: opinion leaders,

gatekeepers/market mavens andfollowers

• Those who are likely to influence others• Those who know and provide information

but have no influence

• Those who are likely to be influenced viapassive or active solicitation of info

– Profile of actors• Knowledgeable, involved, confident, active

– Content • Valence (positive or negative)

• Product attributes (new, important,distinctive, risky)

• Diffusion of Innovations (borrowedfrom Rogers) & New product adoption



Finally, marketers tend to take a

relational perspective of networks.(exception: Hopkins, Henderson and Iacobucci 1995)

Relational Perspective• focuses on the extent to which

all actors are interconnected

– Relations (strands):

content, direction and and strength

– Ties:

Weak/Strong based on frequency

of social contact, importance of

relation

– Multiplexity

the number of relations in a tie

Positional Perspective

• focuses on equivalence of

actors in a subgroup

based on social strata

– Does not assume social

relations

– Assumes structuralequivalence




How has SNT advanced

relationship marketingthought and practice?







The Most Popular SNT

perspectives used in Marketing

• The Structural Perspective

• The Socio-Economic Perspective• The Socio-Cognitive Perspective



The Structural Perspective:

“The structure of relations drives marketing outcomes.”

• Typical Research Questions:

– How do relationships influence consumer choice of brands, referral sources and information-seeking

strategies?

– How do social networks influence behavior andoutcomes in an industrial marketing context

• Typical Methods

– Interviews and surveys (consumer marketing)

– Case studies, interviews, document analysis and otherqualitative methods



Typical Variables Examined within The

Structural Perspective

Social

Structure

•Interpersonal Relations

•Strength of Tie

•Membership in a subgroup for one good

•Centrality•Cosmopolitaness (out-network ties)

Outcomes

•Brand Congruence

•Brand Congruency for Multiple Brands

•Flow of Communication across subgroups

•Diffusion of Innovation

•Likelihood of Activation as a referral source

•Influence



Findings based on the Structural Perspective

• Brand congruence exists within social cliques

– even for privately consumed products (Reingen et al 1984)

• Strong ties and Weak ties affect marketingoutcomes – Strong ties are more likely to be activate as a referral sources…

– …but consumers also actively seek information from weak ties in

situational conversation (Reingen and Kernan 1986; Brown and Reingen1987)

• Individual influence in the buying systems in a

B2B context (Ronchetto, Hutt and Reingen 1989)



The Socio-Economic Perspective

“Utility maximization is enhanced by social ties”


– Do social ties between buyers and sellers improve the

likelihood of a transaction? – How does the value of information moderate the effect

of social structure on relationship outcomes?

• Typical Methods

– Surveys and simulations



Typical Variables Examined within

the Socio-Economic Perspective:

Social

Structure

•Tie Strength•Relational Embeddedness

•Knowledge Redundancy

Outcomes

•Likelihood of Purchase•Willingness to communicate w/in network

•Information & Knowledge acquisition

•New Product/Process Creativity

•Speed of New Product Development

•Degree of Indebtedness to hostess

•Moral Hazard/Information Value

Moderators



Findings based on the Socio-Economic

Perspective• Social tie strength increases likelihood of

transactions between buyer and seller (Frenzen

and Davis 1990)

– This effect is moderated by perceptions about potentialopportunism in WOM information exchanges (e.g. non-

reciprocating behavior) (Frenzen and Nakamoto 1990)

• Weak ties are not that strong in B2B – The more valuable the info, the less powerful is the weak

tie (Frenzen and Nakamoto 1990)

– Weak ties among horizontal partners are less powerful

than among vertical alliance partners. (Reindfleisch and Moorman

2001)



The Socio-Cognitive Perspective:“Cognition mediates the effects of social relations.”

(Bansal and Voyer 2000, Gilly et al 1991, Houston et al. 2001, Ward and Reingen 1996)


– What is the relationship between social structure and

cognitive structure?

– How do changes in social structure affect existing

social identity, social ties and beliefs?

• Typical Methods – Interviews surveys, simulations and case studies



The Socio-Cognitive Perspective:

Typical Variables Examined

Social

Structure

•Tie Strength

•Position

•Physical Distance

•Strata (Profession)

•Org Restructuring

Cognition Outcomes

•Group Cognitive Structure

•Subgroup Cognitive Structure

•Individual Cognitive Structure

•Expertise (sender and receiver)

•Business Unit Identity

•Manager Beliefs

•Info Seeking

•Purchase Decision Influence

•Efficient use of

•network resources

•Inertia of Social Structure

The socio-cognitive perspective inserts cognition

into the structural perspective, to better explain outcomes.



A Look at the Future…



Consumers and marketers are

engaged by social media.• Blogs

– Over 50 million people read blogs (forbes.com; Lenhart and Fox 2006)

– 27% of bloggers want to influence what other people think

– 29% of bloggers want to motivate others to take action• Social Networking Sites

– MySpace hit #1 on web — 29 billion pageviews during two weeks in July

2006..beating Yahoo and Google (cnn.com)…

– Facebook …over half of college students use• (Mark Chassman (Facebook), Carol Phillips (Brand Amplitude) — Jan 2006

• Virtual Communities – 84% of Americans visit or obtain info from VCs …more than

participate in transactions online… (Horrigan 2001)…



Young consumers dominate the

use of social media.(Forrester 2006)

• Younger consumers lead in cross channel use

– 54% of Gen Yers research online and buy offline

– Gen Xers also are more likely to have researched andpurchased a product online

– Gen Xers also dominate online shopping

• Younger consumers are:

– more likely to be influenced by ―what’s hot/what’s not‖

– more likely to read a blog

• Older consumers prefer face-to-face interactions

• Older consumers are more brand loyal.



Marketing researchers are re-

engaged with the sociological aspects

of consumer behavior.

•Using brand communities and

virtual customer communities

– Focus on fostering consumer relationships and

achieve relationship marketing outcomes (Balasubramanian and Mahajan 2001; Devaraj, Porter and Sun 2006; Dholakia et al 2004;

Kozinets 2002; Muniz and O’Ginn 2001; Porter and Donthu 2004; Schouten and Koenig 2002)



Questions for future research

integrating SNT and marketing• Marketing across cultures

– We know very little about the role of culture in socialnetworks…any new studies could inform us!

• Leveraging social media to drive marketingrelationships – Viral marketing via the Internet

– Social Networking Sites

– Blogging – Podcasting

– Instant Messaging

Interdisciplinary research opportunities are plentiful!



Findings from My Research



My Questions

• Is it possible for marketers to proactively manage

VCs in a way that fosters trust? If so, what should

they do and what type of outcomes should theyexpect?

• Does gender matter in the trust formation process

in marketer-sponsored VCs?

• What is the relative value of marketer-sponsored

vs. consumer-initiated virtual communities?



Study 1: Relational Trust &

Attribution Theory in Virtual

Communities…

Embeddedness

Content

Interaction

Sociability Framework

Cooperation

with NPD

Info Sharing

Loyalty

Shared

Values

Respect

Opportunism

Attribution Theory

Relationship Marketing Framework

Trust

Perceived Effort

of Marketer Relational OutcomesCognitive Response of the Community Member



Findings

• Marketers can form trust-based relationships

in virtual consumer communities that they

sponsor. (Porter and Donthu 2006; Devaraj, Porter and Sun 2006)

– Sponsor efforts related to Content and

Embeddedness drive beliefs and trust

– Trust leads to valuable outcomes (info, npd, loyalty,

positive word-of-mouth, brand preference) – Opportunism has little influence on trust formation



Perceived Degree

of

Consumer

Embeddedness

Perceived

Quality Of

Community

Content

Perceived Degree

Of Community

Interaction

Trust in

a

Community

Sponsor

Belief

About A Sponsor’s

Sense of

Shared Values

Belief About

Sponsor

Opportunism

Belief About

A Sponsor’s

Sense of

Respect

GENDER

Study 2: Social Role Theory and Uses and

Gratifications Paradigm of Trust Formation

in Virtual Communities



Findings

• Gender moderates the trust formation process

of younger consumers.

– Gender moderates trust influences of content,embeddedness and interaction

• For males, sponsor efforts regarding content and

embeddedness are more salient trust influencers

• For females, sponsor efforts regarding interaction and

embeddedness are more salient

– No moderation by gender with direct determinants

of trust



Study 3: The Value of Virtual Communities:

A Test of Competing Models

• Both member-initiated and firm-sponsoredvirtual customer communities can be valuable tomarketers, based on relational trust in the

sponsor. (Devaraj, Porter and Sun 2006)

– Member perceptions of information quality drive trustand value in member-initiated virtual communities

– Sponsor efforts drive trust and value in firm-sponsored

communities• Higher value is derived from firm-sponsored

communities



Questions??

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