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13 Mar 2014

Peer-to-peer Marketing Overrated?

OZA No 401 (Peer-to-peer Marketing Overrated)Yes, peer-to-peer marketing (P2P) is overrated but still important as long as we understand what what we are buying: just another channel to create product awareness or actual influence of the buying decision. Consider this question:

Did we buy because our friend did or because we liked the product?

The truth lies somewhere in between. The hype around P2P says, “It’s your friend”; however, Sinan Aral (“What Would Ashton Do and Does it Matter?” [Harvard Business Review, May 2013 edition]) “found that traditional models overestimated the power of influence by a factor of seven.” That’s because they don’t account for homophily, emotionally favoring those similar to us by socializing with them. Now, consider this:

If person A is similar to person B but very different from person C, who is more likely to buy more of the same products as A does, B or C?

If you said “B,” you’re feeling homophily’s influence (similar to giddiness). So, a very plausible answer to our first question now becomes:

We bought because our friend made us aware of the product not because she influenced us; it’s just natural because we are friends and like to share similar things.

Now, this isn’t completely true either. Friends do influence us even if we don’t think so, but the point is as Aral states, “half of perceived influence was really just homophily and other confounds.” In other words, people might be buying because they fit the same ideal demographic for our products and services, not because of influencers.

Access is easier to get than influence is; we access many more prospects than we actually influence to buy. So, before paying too much for your P2P campaign, ensure you are paying for influence and not just another channel creating awareness for your products and services.

 

2 Responses

  1. I think that the most important factor is whether or not persons A and B are part of a hungry market. If they are, then the awareness of your product or service (awareness that they help spread) may lead to ROI.

    1. Mike Lehr

      Yes, Steve, the challenge is that Peer-to-peer (P2P) Marketing is often presented as A influencing B as opposed to A making B aware. Thus, B buys because he has similar needs to A not because A has any sway over B. Since influence is considered more actively powerful, and thus adding more value, than awareness is, vendors of P2P Marketing can charge a premium for these campaigns. Thus, the problem is this: Are people paying more for P2P Marketing than they need to because they believe it’s buying influence when in actuality it’s only buying awareness? Thank you always for your insights.

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