Statistical Science

Network-Based Marketing: Identifying Likely Adopters via Consumer Networks

Shawndra Hill, Foster Provost, and Chris Volinsky

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Abstract

Network-based marketing refers to a collection of marketing techniques that take advantage of links between consumers to increase sales. We concentrate on the consumer networks formed using direct interactions (e.g., communications) between consumers. We survey the diverse literature on such marketing with an emphasis on the statistical methods used and the data to which these methods have been applied. We also provide a discussion of challenges and opportunities for this burgeoning research topic. Our survey highlights a gap in the literature. Because of inadequate data, prior studies have not been able to provide direct, statistical support for the hypothesis that network linkage can directly affect product/service adoption. Using a new data set that represents the adoption of a new telecommunications service, we show very strong support for the hypothesis. Specifically, we show three main results: (1) “Network neighbors”—those consumers linked to a prior customer—adopt the service at a rate 3–5 times greater than baseline groups selected by the best practices of the firm’s marketing team. In addition, analyzing the network allows the firm to acquire new customers who otherwise would have fallen through the cracks, because they would not have been identified based on traditional attributes. (2) Statistical models, built with a very large amount of geographic, demographic and prior purchase data, are significantly and substantially improved by including network information. (3) More detailed network information allows the ranking of the network neighbors so as to permit the selection of small sets of individuals with very high probabilities of adoption.

Article information

Source
Statist. Sci., Volume 21, Number 2 (2006), 256-276.

Dates
First available in Project Euclid: 7 August 2006

Permanent link to this document
https://projecteuclid.org/euclid.ss/1154979826

Digital Object Identifier
doi:10.1214/088342306000000222

Mathematical Reviews number (MathSciNet)
MR2324085

Zentralblatt MATH identifier
05191865

Keywords
Viral marketing word of mouth targeted marketing network analysis classification statistical relational learning

Citation

Hill, Shawndra; Provost, Foster; Volinsky, Chris. Network-Based Marketing: Identifying Likely Adopters via Consumer Networks. Statist. Sci. 21 (2006), no. 2, 256--276. doi:10.1214/088342306000000222. https://projecteuclid.org/euclid.ss/1154979826


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