Acceleration and Acquisition in Word-of-Mouth Programs

Interviene: Barak Libai, Arison School of Business

Organizzato da: Dipartimento di Marketing, registrazione obbligatoria, stefania.gandolfi@unibocconi.it

Abstract: While firms increasingly attempt to influence penetration of products and services via word-of-mouth programs, the manner in which the social processes generated by such programs create monetary value to firms has yet to be explored. Specifically, customer word of mouth can create value through two main mechanisms:  either helping the firm to acquire new customers who would not otherwise have bought the product (acquisition) or accelerating the purchases of customers who would have purchased anyway (acceleration). In this paper we investigate how acceleration and acquisition combine to create value in a word-of-mouth seeding program for a new product. To do so, we define the social value of a program as the global change in customer equity (i.e., the change over an entire social system) that can be attributed to the word of mouth of program participants. We compute the social value of programs in various scenarios, using empirical connectivity data on 12 social networks in various markets as input for an agent-based model (stochastic cellular automata) that simulates the diffusion of a new product in a competitive scenario. We show how the presence of competition, the choice of program members (randomly selected or selected from among the influentials), temporal factors such as profit decline over time and entry time, and structural network   factors affect the social value and the relative contributions of acceleration and acquisition to this value. Our results have substantial implications for the planning and evaluation of word-of-mouth marketing progra - ms, and they provide general insights regarding the assessment of customer social value.