Advances in Relationship Marketing Thought and Practice: The Influence of Social Network Theory

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 Blooming

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

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Marketing focuses on the exchange

• 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 relationships

managed were smaller (e.g B2B sales)

– Is is now dominant in the B2C arena via due to technology-laden

concepts such as “CRM and “One-to-One Marketing”

• Marketing researchers and practitioners seek

to understand relational behavior:

– Between firms and customers/consumers (traditional) – Among customers/Among business partners (emerging work in

customer collaboration, customer/professional communities/knowledge networks)

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The fundamental premise of this

talk….

Because marketing is relational,

social network theory (SNT) helps to

advance marketing theory and

practice.

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• What are the three key perspectives of SNT that have influence

marketing theory and practice?

• How have researchers used these perspectives to advance marketing

theory and practice?

3 A Look at the Future

• How do current trends reflect the importance of SNT to marketing

thought and practice?

• How could social network theory enhance my investigation of

relationship marketing in virtual communities?

A Historical Perspective

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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 in a

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 specific

marketing 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 other nodes and controls the flow

of resources

• Degree

– The number of actors with

whom an individual has a direct connection

Marketing Applications

• Word of Mouth

– Actors: opinion leaders,

gatekeepers/market mavens and followers

• Those who are likely to influence others

• Those who know and provide information

but have no influence

• Those who are likely to be influenced via

passive 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 (borrowed

from 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

– Does not assume social

relations

– Assumes structural

equivalence

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How has SNT advanced relationship marketing thought and practice?

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The Most Popular SNT perspectives used in Marketing

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The Structural Perspective:

“ The structure of relations drives marketing outcomes.”

• Typical Research Questions:

brands, referral sources and information-seeking strategies?

outcomes in an industrial marketing context

• Typical Methods

qualitative methods

Typical Variables Examined within The

•Brand Congruency for Multiple Brands

•Flow of Communication across subgroups

•Diffusion of Innovation

•Likelihood of Activation as a referral source

•Influence

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Findings based on the Structural Perspective

• Brand congruence exists within social cliques

• Strong ties and Weak ties affect marketing

outcomes

– 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 Reingen 1987)

• 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”

• Typical Research Questions:

likelihood of a transaction?

of social structure on relationship outcomes?

• Typical Methods

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Typical Variables Examined within the Socio-Economic Perspective:

Social Structure

•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

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Findings based on the Socio-Economic

Perspective

and Davis 1990)

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)

• Typical Research Questions:

cognitive structure?

social identity, social ties and beliefs?

• Typical Methods

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The Socio-Cognitive Perspective:

Typical Variables Examined

•Group Cognitive Structure

•Subgroup Cognitive Structure

•Individual Cognitive Structure

•Expertise (sender and receiver)

•Business Unit Identity

•Inertia of Social Structure

The socio-cognitive perspective inserts cognition into the structural perspective, to better explain outcomes.

A Look at the Future…

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Consumers and marketers are

engaged by social media.

2006 beating Yahoo and Google (cnn.com)…

• (Mark Chassman (Facebook), Carol Phillips (Brand Amplitude)—Jan 2006

Young consumers dominate the

use of social media

(Forrester 2006)

• Younger consumers lead in cross channel use

purchased a product online

• Younger consumers are:

Marketing researchers are

re-engaged with the sociological aspects

of consumer behavior.

virtual customer communities

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)

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Questions for future research integrating SNT and marketing

– We know very little about the role of culture in social networks…

any new studies could inform us!

relationships

– Viral marketing via the Internet

– Social Networking Sites

Findings from My Research

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My Questions

VCs in a way that fosters trust? If so, what should they do and what type of outcomes should they

expect?

in marketer-sponsored VCs?

vs consumer-initiated virtual communities?

Study 1: Relational Trust &

Attribution Theory in Virtual

Loyalty

Shared Values Respect Opportunism

• Marketers can form trust-based relationships

in virtual consumer communities that they

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

Embeddedness drive beliefs and trust

positive word-of-mouth, brand preference)

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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

• Gender moderates the trust formation process

of younger consumers.

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

of trust

Study 3: The Value of Virtual Communities:

A Test of Competing Models

• Both member-initiated and firm-sponsored

virtual customer communities can be valuable to

marketers, based on relational trust in the

sponsor. (Devaraj, Porter and Sun 2006)

and value in member-initiated virtual communities

communities

communities

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