Network Neigbours – More Effective Targets?

Direct and relationship marketers (such as my company) make marketing decisions based on what we know about our customers and potential customers. We use demographic, behavioural attitudinal, and geographic data to better target our audience -- age, sex, education level, income, zip code, past purchases etc. According to a recent study by Shawndra Hill, Foster Provost of NYU's Stern School and Chris Volinsky of AT&T Labs Research there's another important variable that we should be considering: Who is connected to whom? Their research found that consumers are 3 to 5 times more likely to buy a company's product if they are "network neighbors" with existing customers.

Following an in-market test for a telecommunications company, the authors of the paper said: "We provide strong evidence that whether and how well a consumer is linked to existing customers is a powerful characteristic on which to base direct marketing decisions. Our results indicate that a firm can benefit from the use of social networks to predict the likelihood of purchasing."
The availability of information concerning links between consumers will allow companies to do "network targeting,". While traditional marketing research and data mining techniques can create detailed profiles (or personas) of potential customers, it doesn't reveal the social connections that exist between those consumers.

Now if we can just clear up the privacy questions….Download the full paper - "Network-Based Marketing: Identifying Likely Adopters via Consumer Networks".