Dr. Eunho Park is Assistant Professor of Marketing. Below is a summary of his research, “Social Dollars in Online Communities: The Effect of Product, User, and Network Characteristics,” published in Journal of Marketing.
Whether you are an ardent gamer or merely consulting TripAdvisor before vacation, most of us are members of at least one online community. Online communities have become a vital part of daily life. It’s where we go to solve problems, get ideas and information, and connect with people who share our interests.
For example, the home design community Houzz.com offers inspirational content --including thousands of design photos the user may save to an Ideabook; connects users to a local community of architects, plumbers and building and design professionals; and is a site of commerce, selling home, garden and lifestyle products.
Likewise, WeChat and KakaoTalk, popular social media platforms in China and Korea, generate revenue by enticing users with free downloadable games and by offering virtual items such as stickers for purchase. The emoticon market for KakaoTalk may be as high as $86 million! And about 10 million KakaoTalk users purchased emoticons for their chats.
These platforms have struck the winning balance of content, community and commerce.
Each of the three pillars must be present for an online social media community to survive and thrive. To enjoy the benefits of content and connections, users must support the community with purchases. And managers must monetize a social media community to keep it viable. A recent study gives managers advice on how to accomplish this, by shedding light on the purchasing dynamics of an online community.
The study found that social interaction in the community increases purchases. Researchers examined aspects of a massively multiplayer online role-playing game (MMORPG) community, in which players who may be thousands of miles apart communicate and team up with one another. Typically in such games, players progress, earn experience points, and advance to higher “levels.” They may purchase “in-game” products with real-world currency. Researchers found evidence of a “social contagion”, in other words, the influence of friends. A gamer will spend more real money on virtual purchases if his or her virtual friends have purchased products recently. Social interaction between gamers in the community increases their in-game product purchases.
However, the influence of friends varies across different types of products. There are two different types of virtual products, functional and hedonic. A functional product helps improve the gamer’s playing performance. Hedonic products are purely for fun, style or image and may help a gamer gain social currency without improving actual performance. The influence of friends is more pronounced on the purchase of hedonic products.
Two more factors were found to affect purchases: the player’s level of experience, and the density of the network – or how well friends know each other.
- Experienced users are less influenced by peers’ functional product purchases while they are more sensitive to friends’ hedonic purchases.
- As virtual friends of a focal gamer have closer relationships with each other, the focal gamer is more likely to follow a friend’s functional product purchases whereas the game user is less influenced by a friend’s hedonic product purchases.
So, how can managers use these social and purchasing dynamics to monetize a social network?
Here are a few responsible “social seeding” strategies:
- Tailor strategies according to product type and customer segment.
- Promote products initially to users who are more likely to adopt them, and who have a wider social network that can allow product information to diffuse rapidly.
- Since social contagion is stronger for hedonic products, leverage the community’s networking capabilities to promote hedonic products.
- Reward experienced users with free points that can be used for virtual hedonic products. Offer novices social connections and products that will help them quickly achieve task-oriented goals in the community.
- Closer relationships among friends of a focal user help strengthen contagion for functional products whereas weaken contagion for hedonic products.
Park, Eunho, Rishika Rishika, Ramkumar Janakiraman, Mark B. Houston, and Byungjoon Yoo (2018). Social Dollars in Online Communities: The Effect of Product, User, and Network Characteristics. Journal of Marketing, 82(1), 93–114.