Monday, September 14, 2009

Do friends really influence purchases?

The answer: It depends

Earlier this year the Harvard Business Review published a working paper entitled "Do Friends Influence Purchases in a Social Network?" They set out to examine the questions of :
1. do friends influence purchases of users in an online social network
2. which users are more influenced by this social pressure
3. and can we quantify this social influence in terms of increase in sales and revenue

The findings were that there was a range of revenue increases between three distinct groups of people categorised by status and interaction with others. The lower and middle groups had zero and 5% rise in purchases due to this social influence, but the revenue of the higher group actually declines by almost 14% .This has been explained as follows:

This finding is similar to work on characteristics of opinion leaders or the elite in the fashion industry, who tend to abandon one type of fashion and adopt the next in order to differentiate themselves from the masses
(in other words they seek to make themselves different from others by chosing / buying different things.. perhaps because they can afford to).

However, I'm not convinced. Maybe its because the sample size was quite small (Number of users = 208; Number of observations =2080) or because the figures used were from a Korean Social network (Cyworld), but I personally would like to see some further research done on this subject.

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