Porter advances in relationship marketing thought and practice the influence of social network theory

1. Advances in Relationship MarketingAdvances in Relationship Marketing
Thought and Practice: The InfluenceThought and Practice: The Influence
of Social Network Theoryof Social Network Theory
Presented at thePresented at the
Networks and Complex SystemsNetworks and Complex Systems
A talk series at Indiana University BloomingtonA talk series at Indiana University Bloomington
September 18, 2006September 18, 2006
Constance Elise Porter, Ph.D.Constance Elise Porter, Ph.D.
Assistant Professor of MarketingAssistant Professor of Marketing
University of Notre DameUniversity of Notre Dame
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2. Marketing focuses on the exchangeMarketing focuses on the exchange
process, making it relational,process, making it relational, by definition.by definition.
• Relationship marketing is a dominantRelationship marketing is a dominant
paradigm of marketing practice.paradigm of marketing practice. (Dwyer, Schurr and Oh(Dwyer, Schurr and Oh
1987; Morgan and Hunt 1994)1987; Morgan and Hunt 1994)
– It emerged in the B2B arena because the number of relationshipsIt emerged in the B2B arena because the number of relationships
managed were smaller (e.g. B2B sales)managed were smaller (e.g. B2B sales)
– Is is now dominant in the B2C arena via due to technology-ladenIs is now dominant in the B2C arena via due to technology-laden
concepts such as “CRM and “One-to-One Marketing”concepts such as “CRM and “One-to-One Marketing”
• Marketing researchers and practitioners seekMarketing researchers and practitioners seek
to understand relational behavior:to understand relational behavior:
– Between firms and customers/consumers (traditional)Between firms and customers/consumers (traditional)
– Among customers/Among business partners (emerging work inAmong customers/Among business partners (emerging work in
customer collaboration, customer/professionalcustomer collaboration, customer/professional
communities/knowledge networks)communities/knowledge networks)
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3. The fundamental premise of thisThe fundamental premise of this
talk….talk….
Because marketing is relational,Because marketing is relational,
social network theory (SNT) helps tosocial network theory (SNT) helps to
advance marketing theory andadvance marketing theory and
practice.practice.
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4. Discussion TopicsDiscussion Topics
1.1. A Historical PerspectiveA Historical Perspective
• How does the marketing perspective compare to theHow does the marketing perspective compare to the
sociological perspective?sociological perspective?
1.1. How has SNT advanced relationship marketingHow has SNT advanced relationship marketing
thought and practice?thought and practice?
• What are the three key perspectives of SNT that haveWhat are the three key perspectives of SNT that have
influence marketing theory and practice?influence marketing theory and practice?
• How have researchers used these perspectives to advanceHow have researchers used these perspectives to advance
marketing theory and practice?marketing theory and practice?
1.1. A Look at the FutureA Look at the Future
• How do current trends reflect the importance of SNT toHow do current trends reflect the importance of SNT to
marketing thought and practice?marketing thought and practice?
• How could social network theory enhance my investigationHow could social network theory enhance my investigation
of relationship marketing in virtual communities?of relationship marketing in virtual communities?

5. A Historical PerspectiveA Historical Perspective
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6. Marketers use basic SNT concepts, butMarketers use basic SNT concepts, but
questions and methods differ.questions and methods differ.
Points of Alignment:Points of Alignment:
• Networks are socially connected actorsNetworks are socially connected actors (more than 2)(more than 2)
• Resources (e.g. information) are transferred among actors inResources (e.g. information) are transferred among actors in
a networka network
• There is a flow of resources within the networkThere is a flow of resources within the network
Points of Difference:Points of Difference:
• SN theorist (and early marketing researchers) seek toSN theorist (and early marketing researchers) seek to
describe individual actors and their relations/patterns ofdescribe individual actors and their relations/patterns of
connectionsconnections
– Sociometric theory….Whole Network…Software tools (e.g. UCINET and KRACKplot)Sociometric theory….Whole Network…Software tools (e.g. UCINET and KRACKplot)
• Contemporary marketing researchers tend to examine specificContemporary marketing researchers tend to examine specific
marketing outcomes related to influence in social networksmarketing outcomes related to influence in social networks
– Psychometric theory…Sample/Ego-centered…SPSS/SAS for regression techniquesPsychometric theory…Sample/Ego-centered…SPSS/SAS for regression techniques

7. Centrality also is important to both, butCentrality also is important to both, but
marketers apply the concept differently.marketers apply the concept differently.
Social Network TheoristsSocial Network Theorists
• ““Between-ness”Between-ness”
– The frequency with which anThe frequency with which an
actor is intermediary to otheractor is intermediary to other
nodes and controls the flownodes and controls the flow
of resourcesof resources
• DegreeDegree
– The number of actors withThe number of actors with
whom an individual has awhom an individual has a
direct connectiondirect connection
Marketing ApplicationsMarketing Applications
• Word of MouthWord of Mouth
– Actors:Actors: opinion leaders,opinion leaders,
gatekeepers/market mavens andgatekeepers/market mavens and
followersfollowers
• Those who are likely toThose who are likely to influenceinfluence othersothers
• Those who know and provide informationThose who know and provide information
but have nobut have no influenceinfluence
• Those who are likely to beThose who are likely to be influencedinfluenced viavia
passive or active solicitation of infopassive or active solicitation of info
– Profile of actorsProfile of actors
• Knowledgeable, involved, confident, activeKnowledgeable, involved, confident, active
– ContentContent
• Valence (positive or negative)Valence (positive or negative)
• Product attributes (new, important,Product attributes (new, important,
distinctive, risky)distinctive, risky)
• Diffusion of Innovations (borrowedDiffusion of Innovations (borrowed
from Rogers) & New product adoptionfrom Rogers) & New product adoption

8. Finally, marketers tend to take aFinally, marketers tend to take a
relational perspective of networks.relational perspective of networks.
(exception: Hopkins, Henderson and Iacobucci 1995)(exception: Hopkins, Henderson and Iacobucci 1995)
Relational PerspectiveRelational Perspective
• focuses on the extent to whichfocuses on the extent to which
all actors are interconnectedall actors are interconnected
– RelationsRelations (strands):(strands):
content, direction and and strengthcontent, direction and and strength
– Ties:Ties:
Weak/Strong based on frequencyWeak/Strong based on frequency
of social contact, importance ofof social contact, importance of
relationrelation
– MultiplexityMultiplexity
the number of relations in a tiethe number of relations in a tie
Positional PerspectivePositional Perspective
• focuses on equivalence offocuses on equivalence of
actors in a subgroupactors in a subgroup
based on social stratabased on social strata
– Does not assume socialDoes not assume social
relationsrelations
– Assumes structuralAssumes structural
equivalenceequivalence

9. How has SNT advancedHow has SNT advanced
relationship marketingrelationship marketing
thought and practice?thought and practice?
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10. The Most Popular SNTThe Most Popular SNT
perspectives used in Marketingperspectives used in Marketing
• The Structural PerspectiveThe Structural Perspective
• The Socio-Economic PerspectiveThe Socio-Economic Perspective
• The Socio-Cognitive PerspectiveThe Socio-Cognitive Perspective

11. The Structural Perspective:The Structural Perspective:
““The structure of relations drives marketing outcomes.”The structure of relations drives marketing outcomes.”
• Typical Research Questions:Typical Research Questions:
– How do relationships influence consumer choice ofHow do relationships influence consumer choice of
brands, referral sources and information-seekingbrands, referral sources and information-seeking
strategies?strategies?
– How do social networks influence behavior andHow do social networks influence behavior and
outcomes in an industrial marketing contextoutcomes in an industrial marketing context
• Typical MethodsTypical Methods
– Interviews and surveys (consumer marketing)Interviews and surveys (consumer marketing)
– Case studies, interviews, document analysis and otherCase studies, interviews, document analysis and other
qualitative methodsqualitative methods

12. Typical Variables Examined within TheTypical Variables Examined within The
Structural PerspectiveStructural Perspective
SocialSocial
StructureStructure
•Interpersonal RelationsInterpersonal Relations
•Strength of TieStrength of Tie
•Membership in a subgroup for one goodMembership in a subgroup for one good
•CentralityCentrality
•Cosmopolitaness (out-network ties)Cosmopolitaness (out-network ties)
OutcomesOutcomes
•Brand CongruenceBrand Congruence
•Brand Congruency for Multiple BrandsBrand Congruency for Multiple Brands
•Flow of Communication across subgroupsFlow of Communication across subgroups
•Diffusion of InnovationDiffusion of Innovation
•Likelihood of Activation as a referral sourceLikelihood of Activation as a referral source
•InfluenceInfluence

13. Findings based on the Structural PerspectiveFindings based on the Structural Perspective
• Brand congruence exists within social cliquesBrand congruence exists within social cliques
– even for privately consumed productseven for privately consumed products ((Reingen et al 1984)Reingen et al 1984)
• Strong tiesStrong ties andand Weak ties affect marketingWeak ties affect marketing
outcomesoutcomes
– Strong ties are more likely to be activate as a referral sources…Strong ties are more likely to be activate as a referral sources…
– ……but consumers also actively seek information from weak ties inbut consumers also actively seek information from weak ties in
situational conversationsituational conversation (Reingen and Kernan 1986; Brown and Reingen(Reingen and Kernan 1986; Brown and Reingen
1987)1987)
• Individual influence in the buying systems in aIndividual influence in the buying systems in a
B2B contextB2B context (Ronchetto, Hutt and Reingen 1989)(Ronchetto, Hutt and Reingen 1989)

14. The Socio-Economic PerspectiveThe Socio-Economic Perspective
““Utility maximization is enhanced by social ties”Utility maximization is enhanced by social ties”
• Typical Research Questions:Typical Research Questions:
– Do social ties between buyers and sellers improve theDo social ties between buyers and sellers improve the
likelihood of a transaction?likelihood of a transaction?
– How does the value of information moderate the effectHow does the value of information moderate the effect
of social structure on relationship outcomes?of social structure on relationship outcomes?
• Typical MethodsTypical Methods
– Surveys and simulationsSurveys and simulations

15. Typical Variables Examined withinTypical Variables Examined within
the Socio-Economic Perspective:the Socio-Economic Perspective:
SocialSocial
StructureStructure
•Tie StrengthTie Strength
•Relational EmbeddednessRelational Embeddedness
•Knowledge RedundancyKnowledge Redundancy
OutcomesOutcomes
•Likelihood of PurchaseLikelihood of Purchase
•Willingness to communicate w/in networkWillingness to communicate w/in network
•Information & Knowledge acquisitionInformation & Knowledge acquisition
•New Product/Process CreativityNew Product/Process Creativity
•Speed of New Product DevelopmentSpeed of New Product Development
•Degree of Indebtedness to hostessDegree of Indebtedness to hostess
•Moral Hazard/Information ValueMoral Hazard/Information Value
ModeratorsModerators

16. Findings based on the Socio-EconomicFindings based on the Socio-Economic
PerspectivePerspective
• Social tie strength increases likelihood ofSocial tie strength increases likelihood of
transactions between buyer and sellertransactions between buyer and seller (Frenzen(Frenzen
and Davis 1990)and Davis 1990)
– This effect is moderated by perceptions about potentialThis effect is moderated by perceptions about potential
opportunism inopportunism in WOM information exchangesWOM information exchanges (e.g. non-(e.g. non-
reciprocating behavior)reciprocating behavior) (Frenzen and Nakamoto 1990)(Frenzen and Nakamoto 1990)
• Weak ties are not that strong in B2BWeak ties are not that strong in B2B
– The more valuable the info, the less powerful is the weakThe more valuable the info, the less powerful is the weak
tietie (Frenzen and Nakamoto 1990)(Frenzen and Nakamoto 1990)
– Weak ties among horizontal partners are less powerfulWeak ties among horizontal partners are less powerful
than among vertical alliance partners.than among vertical alliance partners. (Reindfleisch and Moorman(Reindfleisch and Moorman
2001)2001)

17. The Socio-Cognitive Perspective:The Socio-Cognitive Perspective:
“Cognition mediates the effects of social relations.”“Cognition mediates the effects of social relations.”
(Bansal and Voyer 2000, Gilly et al 1991, Houston et al. 2001, Ward and Reingen 1996)(Bansal and Voyer 2000, Gilly et al 1991, Houston et al. 2001, Ward and Reingen 1996)
• Typical Research Questions:Typical Research Questions:
– What is the relationship between social structure andWhat is the relationship between social structure and
cognitive structure?cognitive structure?
– How do changes in social structure affect existingHow do changes in social structure affect existing
social identity, social ties and beliefs?social identity, social ties and beliefs?
• Typical MethodsTypical Methods
– Interviews surveys, simulations and case studiesInterviews surveys, simulations and case studies

18. The Socio-Cognitive Perspective:The Socio-Cognitive Perspective:
Typical Variables ExaminedTypical Variables Examined
SocialSocial
StructureStructure
•Tie StrengthTie Strength
•PositionPosition
•Physical DistancePhysical Distance
•Strata (Profession)Strata (Profession)
•Org RestructuringOrg Restructuring
CognitionCognition OutcomesOutcomes
•Group Cognitive StructureGroup Cognitive Structure
•Subgroup Cognitive StructureSubgroup Cognitive Structure
•Individual Cognitive StructureIndividual Cognitive Structure
•Expertise (sender and receiver)Expertise (sender and receiver)
•Business Unit IdentityBusiness Unit Identity
•Manager BeliefsManager Beliefs
•Info SeekingInfo Seeking
•Purchase Decision InfluencePurchase Decision Influence
•Efficient use ofEfficient use of
•network resourcesnetwork resources
•Inertia of Social StructureInertia of Social Structure
The socio-cognitive perspective inserts cognitionThe socio-cognitive perspective inserts cognition
into the structural perspective, to better explain outcomes.into the structural perspective, to better explain outcomes.

19. A Look at the Future…A Look at the Future…

20. Consumers and marketers areConsumers and marketers are
engaged by social media.engaged by social media.
• BlogsBlogs
– Over 50 million people read blogsOver 50 million people read blogs (forbes.com; Lenhart and Fox 2006)(forbes.com; Lenhart and Fox 2006)
– 27% of bloggers want to influence what other people think27% of bloggers want to influence what other people think
– 29% of bloggers want to motivate others to take action29% of bloggers want to motivate others to take action
• Social Networking SitesSocial Networking Sites
– MySpaceMySpace hit #1 on web —29 billion pageviews during two weeks in Julyhit #1 on web —29 billion pageviews during two weeks in July
2006..beating Yahoo and Google (cnn.com)…2006..beating Yahoo and Google (cnn.com)…
– FacebookFacebook …over half of college students use…over half of college students use
• (Mark Chassman (Facebook), Carol Phillips (Brand Amplitude)—Jan 2006(Mark Chassman (Facebook), Carol Phillips (Brand Amplitude)—Jan 2006
• Virtual CommunitiesVirtual Communities
– 84% of Americans visit or obtain info from VCs84% of Americans visit or obtain info from VCs ……more thanmore than
participate in transactions online…participate in transactions online… (Horrigan 2001)(Horrigan 2001)……

21. Young consumers dominate theYoung consumers dominate the
use of social media.use of social media.
(Forrester 2006)(Forrester 2006)
• Younger consumers lead in cross channel useYounger consumers lead in cross channel use
– 54% of Gen Yers research online and buy offline54% of Gen Yers research online and buy offline
– Gen Xers also are more likely to have researched andGen Xers also are more likely to have researched and
purchased a product onlinepurchased a product online
– Gen Xers also dominate online shoppingGen Xers also dominate online shopping
• Younger consumers are:Younger consumers are:
– more likely to be influenced by “what’s hot/what’s not”more likely to be influenced by “what’s hot/what’s not”
– more likely to read a blogmore likely to read a blog
• Older consumers prefer face-to-face interactionsOlder consumers prefer face-to-face interactions
• Older consumers are more brand loyal.Older consumers are more brand loyal.

22. Marketing researchers are re-Marketing researchers are re-
engaged with the sociological aspectsengaged with the sociological aspects
of consumer behavior.of consumer behavior.
• Using brand communities andUsing brand communities and
virtual customer communitiesvirtual customer communities
– Focus on fostering consumer relationships andFocus on fostering consumer relationships and
achieve relationship marketing outcomesachieve relationship marketing outcomes
(Balasubramanian and Mahajan 2001; Devaraj, Porter and Sun 2006; Dholakia et al 2004;(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)Kozinets 2002; Muniz and O’Ginn 2001; Porter and Donthu 2004; Schouten and Koenig 2002)

23. Questions for future researchQuestions for future research
integrating SNT and marketingintegrating SNT and marketing
• Marketing across culturesMarketing across cultures
– We know very little about the role of culture in social networks…We know very little about the role of culture in social networks…
any new studies could inform us!any new studies could inform us!
• Leveraging social media to drive marketingLeveraging social media to drive marketing
relationshipsrelationships
– Viral marketing via the InternetViral marketing via the Internet
– Social Networking SitesSocial Networking Sites
– BloggingBlogging
– PodcastingPodcasting
– Instant MessagingInstant Messaging
Interdisciplinary research opportunities are plentiful!Interdisciplinary research opportunities are plentiful!

24. Findings from My ResearchFindings from My Research

25. My QuestionsMy Questions
• Is it possible for marketers to proactively manageIs it possible for marketers to proactively manage
VCs in a way that fosters trust? If so, what shouldVCs in a way that fosters trust? If so, what should
they do and what type of outcomes should theythey do and what type of outcomes should they
expect?expect?
• Does gender matter in the trust formation processDoes gender matter in the trust formation process
in marketer-sponsored VCs?in marketer-sponsored VCs?
• What is the relative value of marketer-sponsoredWhat is the relative value of marketer-sponsored
vs. consumer-initiated virtual communities?vs. consumer-initiated virtual communities?

26. Study 1:Study 1: Relational Trust &Relational Trust &
Attribution Theory in VirtualAttribution Theory in Virtual
Communities…Communities…
Embeddedness
Content
Interaction
Sociability FrameworkSociability Framework
Cooperation
with NPD
Info Sharing
Loyalty
Shared
Values
Respect
Opportunism
Attribution TheoryAttribution Theory
Relationship Marketing FrameworkRelationship Marketing Framework
Trust
Perceived EffortPerceived Effort
of Marketerof Marketer Relational OutcomesRelational OutcomesCognitive Response of the Community MemberCognitive Response of the Community Member

27. FindingsFindings
• Marketers can form trust-based relationshipsMarketers can form trust-based relationships
in virtual consumer communities that theyin virtual consumer communities that they
sponsor.sponsor. (Porter and Donthu 2006; Devaraj, Porter and Sun 2006)(Porter and Donthu 2006; Devaraj, Porter and Sun 2006)
– Sponsor efforts related to Content andSponsor efforts related to Content and
Embeddedness drive beliefs and trustEmbeddedness drive beliefs and trust
– Trust leads to valuable outcomesTrust leads to valuable outcomes (info, npd, loyalty,(info, npd, loyalty,
positive word-of-mouth, brand preference)positive word-of-mouth, brand preference)
– Opportunism has little influence on trust formationOpportunism has little influence on trust formation

28. 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:Study 2: Social Role Theory and Uses andSocial Role Theory and Uses and
Gratifications Paradigm of Trust FormationGratifications Paradigm of Trust Formation
in Virtual Communitiesin Virtual Communities

29. FindingsFindings
• Gender moderates the trust formation processGender moderates the trust formation process
of younger consumers.of younger consumers.
– Gender moderates trust influences of content,Gender moderates trust influences of content,
embeddedness and interactionembeddedness and interaction
• For males,For males, sponsor efforts regarding content andsponsor efforts regarding content and
embeddedness are more salient trust influencersembeddedness are more salient trust influencers
• For femalesFor females, sponsor efforts regarding interaction and, sponsor efforts regarding interaction and
embeddedness are more salientembeddedness are more salient
– No moderation by gender with direct determinantsNo moderation by gender with direct determinants
of trustof trust

30. Study 3:Study 3: The Value of Virtual Communities:The Value of Virtual Communities:
A Test of Competing ModelsA Test of Competing Models
• Both member-initiated and firm-sponsoredBoth member-initiated and firm-sponsored
virtual customer communities can be valuable tovirtual customer communities can be valuable to
marketers, based on relational trust in themarketers, based on relational trust in the
sponsor.sponsor. (Devaraj, Porter and Sun 2006)(Devaraj, Porter and Sun 2006)
– Member perceptions of information quality drive trustMember perceptions of information quality drive trust
and value in member-initiated virtual communitiesand value in member-initiated virtual communities
– Sponsor efforts drive trust and value in firm-sponsoredSponsor efforts drive trust and value in firm-sponsored
communitiescommunities
• Higher value is derived from firm-sponsoredHigher value is derived from firm-sponsored
communitiescommunities

31. Questions??Questions??