Marketing Mantra September Edition – Shorlisted Entry #5 – Arathi Mohan

Viral marketing in 2020

“Whatever words we utter should be chosen with care for people will hear them and be influenced by them for good or ill” — Buddha

Is viral marketing just glorified word-of-mouth over the internet?  Or, like the microscopic virus, is there more to it than meets the “eye”?

The term ‘viral marketing’ was coined by Steve Jurvetson and Tim Draper in 1997. The term is used to denote the rapid rate at which information (formal or informal) is disseminated across already existing social networks of friends, relatives and colleagues.  Human nature guides us to avoid risks by following herd behaviour, even when it involves making big purchases with our own money, especially when it comes to purchases of consumer electronics like mobile phones and laptops, white goods like refrigerators and washing machines and automobiles. We tend to feel safety in numbers.  When a lot of people in our circles recommend a particular product/service, one thinks that he/she can be guaranteed of good returns. Marketers utilise this particular aspect of human nature. The key lies in targeting the opinion leaders in a particular community.

Opinion leaders have exceptional influence over others in a community. Their opinion is much sought-after. Marketers are harnessing the power of the internet by using email as the means of connecting to present and future clients. The email is inexpensive, can address a wide audience in a short time, can be selectively targeted and has a relatively high response rate. However, the problem of spam is becoming very pervasive. I am sure we are all familiar with the annoyance of looking at a crowded mailbox. Spam is any message sent by a person unknown to the recipient. Most of us do not think twice before deleting such mail. This is where it is important to get people familiar to the prospective customer to endorse the product to him/her.

Mass media like advertising is effective in marketing communication when it is necessary to inform the market base about an innovation in the field. Interpersonal communication and network effects are important for persuasion. The key to success is to “generate a buzz” in consumer networks.

In his book The tipping point”, Malcolm Gladwell has stated that for any social phenomenon to reach critical mass or to attract sufficient number of followers, three factors are required: a set of exceptional influencers; stickiness factors to make the message memorable; and a environment conducive for the change.

The environment is ideal for viral marketing. The internet penetration rate in India is around 20% while it is around 46% in the U.S. Even though it may seem that India lags behind developed nations when it comes to internet usage, the number of people turning to the internet is increasing every year. In 2013, there was a 31% growth in internet users in India as compared to 2012. According to an Ericsson report released in May 2014, India will have 500 million mobile broadband users by 2020.

However, just as there is a tipping point for effective viral marketing, there is a saturation point as well. In a research paper titled “The Dynamics of Viral Marketing” by Leskovec et al., conclusive evidence has been found that shows that a prospective client may not be ‘converted’ (i.e., the customer connect may not translate into an actual purchase) every time he/she is exposed to the “virus”, i.e., a member of his/her network who has already been converted. Instead, the research found that although the purchase probability does increase initially with the number of recommendations received, this quickly saturates to a constant and low probability. This shows that customers are often immune to recommendations for products that they do not really want or need. Often, the customers respond only to those recommendations for which they have willingly signed up for, after having gone through product and merchant reviews. Often, most people sign up for recommendations related to their hobbies/leisure activities, from something as general as books, music and movies to more exclusive and niche activities such as calligraphy and stamp collection. This shows that more often than not, recommendations are welcome to the extent that they are asked for.

 It is interesting to note that a small fraction of the products accounted for a larger percentage of recommendations in purchases made at e-commerce giants like Amazon. This is a deviation from the well-known Pareto principle or the 80-20 rule, which states that top 20% of the products account for 80% of the sales revenue. The study found that the top 20% of the products contribute to around half the sales. At Amazon.com, around 20-40% of the revenue comes from outside the top ranked 100,000 products. It is impossible to effectively reach out to a niche audience using traditional mass advertising methods. More selective targeting and customisation of the message is required in such cases. This is a void that the clever use of viral marketing can fill.

Recommenders are often given incentives in the form of discounts for the number and quality of their referrals. Depending on the number of their contacts that they successfully “infect” with the “virus”, the incentives they receive also increase. However, the companies should be cautious so as to avoid excessive incentives, which may spur influencers to make undesired recommendations which could undermine their credibility in their network.

So, there are opportunities galore in the market for the relatively new and infectious phenomenon called viral marketing. The key to success lies in understanding the specific needs, interests and opinions of different customer networks, identifying the key influencers and customising recommendations for each individual in the network. Viral marketing can produce different effects from network to network, product to product and time to time. Marketers should identify the potential and harness the power of networking.

References:

  1. Leskovec, J., Adamic, L., & Huberman, B. (n.d.). The Dynamics Of Viral Marketing. ACM Transactions on the Web, 5-Es.
  2. Phelps, J. et al.(n.d.). Viral marketing or electronic word-of-mouth advertising: Examining Consumer responses and motivation to pass along email. Journal of Advertising Research, December 2004.
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