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When Word-Of Mouth Marketing Works: Simulating Consumers on Complex Networks

Makoto Mizuno ,  Takayuki Iizuka 

University of Tsukuba, Tennodai 1-1-1, Ibaraki 305-8573, Japan

Abstract

Recently, the role of Word-of-Mouth (WOM) in marketing communication has been emphasized among marketing practitioners compared to mass media such as TV commercials, implying that consumers with a wider personal network, namely “Hubs”, should be targeted in the earlier stage of campaigns in order to spread commercial messages more rapidly and efficiently (e.g., Rosen 2000). However, a simulation study by Watts and Dodds (2007) questioned whether this idea really works or not. Their seminal work is brilliant, but the performance measures used there (cascade size, etc.) may be unfamiliar for practitioners. In order to incorporate more managerial performance measures such as exposures, reach/frequency, awareness, etc., we model consumer behaviors as s transition between several stages. For instance, consumers may have awareness and interest as a result of repeated exposure to WOM from others, but often forget with no exposure successively. This sort of simple mechanism generates a various type of consumer behavior on complex networks depending on the values of parameters. The results of our simulation show that so-called WOM marketing targeting “Hubs” is more effective in a limited case, that is, only when consumers are linked along a scale-free network with a high power index and the impact of the message on awareness and interest is relatively low. In other cases, WOM marketing with a strong emphasis on Hubs has no significant effect compared to random spread of the message. This suggests that the claim by Watts and Dodds (2007) is supported even assuming more plausible consumer behavior.

 

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Presentation: Oral at International Conference on Economic Science with Heterogeneous Interacting Agents 2008, by Makoto Mizuno
See On-line Journal of International Conference on Economic Science with Heterogeneous Interacting Agents 2008

Submitted: 2008-03-13 17:35
Revised:   2009-06-07 00:48