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The Physics of Influence
Building, Nurturing, and Leveraging Your Best Kept Marketing Secret



            Michael Wu Ph.D.
            Principal Scientist of Analytics
            Lithium Technologies Inc.


            SugarCon: April 6th, 2011




                                          ‐1‐   | 16:14               @mich8elwu
Session Agenda
 Influence basics
  – What is influence? Who are the influencers?
  – What does influence mean to your business
 Influence mechanics
  – Do influencers matter? How? How much?
  – How to find influencers?
 Advance topics on influence
  – How to work with influencers without working with them?




                          ‐2‐   | 16:14               @mich8elwu
What is influence?
 Webster definitions:
  – The act or power of producing an effect without apparent 
    exertion of force or direct exercise of command.
  – The power or capacity of causing an effect in indirect or 
    intangible ways : sway




                           ‐3‐   | 16:14                 @mich8elwu
What is influence?
 Webster definitions:
  – The act or power of producing an effect without apparent 
    exertion of force or direct exercise of command.
  – The power or capacity of causing an effect in indirect or 
    intangible ways : sway


 Must have some effects
  – Effect on some target audience (target)
  – Effects don’t always have to have actions




                           ‐4‐   | 16:14                 @mich8elwu
What is influence?
 Webster definitions:
  – The act or power of producing an effect without apparent 
    exertion of force or direct exercise of command.
  – The power or capacity of causing an effect in indirect or 
    intangible ways : sway


 It matters how you produce the effects
  –   No carrot: no money
  –   No stick: no force/coercion
  –   No annoyance: no spam/frustration
  –   No trick: no deception/hidden agenda

                           ‐5‐   | 16:14                 @mich8elwu
What is influence?
 Webster definitions:
  – The act or power of producing an effect without apparent 
    exertion of force or direct exercise of command.
  – The power or capacity of causing an effect in indirect or 
    intangible ways : sway


 Definition for businesses: 
  – The ability to cause a change in thought (sentiment, 
    opinion, etc.) OR behavior (purchase, referral, etc.) 
    through non‐coercive and transparent means where the 
    targets want the changes even with no monetary 
    compensation
                           ‐6‐   | 16:14                 @mich8elwu
Who are the influencers?




Kevin Smith (2010):        Dave Carroll (2009):   Jeff Jarvis (2005):
Too fat to fly Southwest   United Breaks Guitar   Dell Lies, Dell Sucks
Channel=Twitter            Channel=YouTube        Channel=Blog

    They were mistreated by some companies
     – Their influence on social media  cause a major PR crisis
     – Bad PR + significant financial damage (in some cases)
                                ‐7‐   | 16:14                        @mich8elwu
Who are the influencers?
 But influencers ≠ celebrities
  – Because influence ≠ popularity


 Other confounding facts about influencers:
  – Everyone can influence someone, so anyone can be an 
    influencer.
  – Influencers do not fall into any standard demographics 
    and/or technographic segmentations.
  – There are no universal influencers.




                           ‐8‐   | 16:14                 @mich8elwu
Who are the influencers?
 Influencers =
  – Superusers and product experts
  – Advocates who will speak on your behalf
  – Evangelist of your brand


 Influencers for marketers =
  – People with significantly greater ability to influence
    —cause a change in thought OR behavior through non‐
    coercive and transparent means where the targets want 
    the changes even with no monetary compensation


                          ‐9‐   | 16:14                @mich8elwu
What does this mean to your business?

                        engage/ 
                       empower




                                                                               mass public
                                                                               consumers
                                                                   awareness
                                    purchase




                                                        interest
                                               desire
                                                                                                 brand X




             potential (+) influence = promoters                                             potential (−) influence = detractors
                                                                                                                         competitors’ 
 your superusers    your brand        your                                     unawared                competitors’    brand advocates 
(product experts)    advocates     customers                                   consumers                customers        (your brand 
                    (evangelist)                                                                                          detractors)



                                                        ‐ 10 ‐ | 16:14                                                   @mich8elwu
What does this mean to your business?
 Influencers help you:
  – Drive effective WOM marketing/sales
     • Move consumers through your purchase funnel       increase sales
  – Acquire customers from your competitors
  – Cut cost
     • Influence other customers to self‐help + help each other




                              ‐ 11 ‐ | 16:14                      @mich8elwu
Session Agenda
 Influence basics
  – What is influence? Who are the influencers?
  – What does influence mean to your business
 Influence mechanics
  – Do influencers matter? How? How much?
  – How to find influencers?
 Advance topics on influence
  – How to work with influencers without working with them?




                          ‐ 12 ‐ | 16:14              @mich8elwu
Do influencers matter?

                              vs.
 Malcolm Gladwell                                    Duncan Watts
(best‐selling author)                                 (sociologist)
  Influencers matter                        Influencers don’t matter
   – If they say/do something               – Seeding a message from 
     thousands and millions                   any random person 
     will hear and follow                     eventually reaches the 
                                              same number of people 
                                              as seeding from an 
                                              influencer

                           ‐ 13 ‐ | 16:14                        @mich8elwu
Do influencers matter?
 The effect of influencers is not the number of target they can 
 reach. It is the speed at which they can reach those targets.
 Number of targets reached is a very bad way to measure 
 influence. What is a better way?

 Quantifying the value of WOM. Join work with
  – Prof. Barak Libai      MIT Sloan School of Management
                           Recanati B‐School, Tel Aviv Univ
  – Prof. Eitan Muller     NYU Stern School of Business 
                           Recanati B‐School, Tel Aviv Univ
  – Prof. Renana Peres     The Wharton School, U Penn
                           Hebrew University of Jerusalem

                           ‐ 14 ‐ | 16:14                  @mich8elwu
How does WOM turn into value?
    W     O    M




                              ?
 Agent‐based CLV model based on real network structure 
 from 12 social graphs (6 from Lithium)
 CLV model: Takes into account of
  – Network value of referral (V. Kumar)
  – Discount rate of money, b/c lifetime of customers can be very 
    long.

                             ‐ 15 ‐ | 16:14                   @mich8elwu
How does WOM turn into value?
    W    O     M




                             ?
 Agent‐based CLV model based on real network structure 
 from 12 social graphs (6 from Lithium)
 Simulation parameters for investigating the effect of:
  – Influencers: Influencer seeding vs. random seeding
  – Brand equity: Brand monopoly vs. competing brand
  – Seeding program size: 0.5% to 5%

                            ‐ 16 ‐ | 16:14               @mich8elwu
Summary of Lithium‐only data
  Seeding Program
                                                                                    Competing
         Random         10.3%
                                                                                    brands
                                                          Gain via acceleration
       Influencer           17.4%
                                                          Gain via acquisition

                                                                                    Brand
         Random                                       86.8%                         monopoly

       Influencer                                                        113%

                    0               20   40          80            100            120



 Result 1: Two mechanisms combine to create 
 WOM values
             Acquisition of customers
             Acceleration of adoption
                                         ‐ 17 ‐ | 16:14                                         @mich8elwu
Summary of Lithium‐only data
  Seeding Program
                                                                                     Competing
         Random         10.3%
                                                                                     brands
                                                           Gain via acceleration
       Influencer           17.4%
                                                           Gain via acquisition

                                                                                     Brand
         Random                                        86.8%                         monopoly

       Influencer                                                         113%

                    0               20    40          80            100            120



 Result 2: Influencer seeding increases gain


                                         49.4%
                                          ‐ 18 ‐ | 16:14                                         @mich8elwu
Summary of Lithium‐only data
  Seeding Program
                                                                                    Competing
         Random         10.3%
                                                                                    brands
                                                          Gain via acceleration
       Influencer           17.4%
                                                          Gain via acquisition

                                                                                    Brand
         Random                                       86.8%                         monopoly

       Influencer                                                        113%

                    0               20   40          80            100            120



 Result 3: First mover advantage is huge


                                         7.5x
                                         ‐ 19 ‐ | 16:14                                         @mich8elwu
What does this mean to your business?

                        engage/ 
                       empower




                                                                               mass public
                                                                               consumers
                                                                   awareness
                                    purchase




                                                        interest
                                               desire
                                                                                                 brand X




             potential (+) influence = promoters                                             potential (−) influence = detractors
                                                                                                                         competitors’ 
 your superusers    your brand        your                                     unawared                competitors’    brand advocates 
(product experts)    advocates     customers                                   consumers                customers        (your brand 
                    (evangelist)                                                                                          detractors)



                                                        ‐ 20 ‐ | 16:14                                                   @mich8elwu
Finding influencers involves 2 parties
 Influencer
            Domain Credibility: The influencer's expertise in a specific domain 
              of knowledge.
            High Bandwidth: The influencer's ability to transmit his expert 
               knowledge through a social media channel.
            Content Relevance: How closely the target's information needs 
               coincide with the influencer's expertise.
            Timing: The ability of the influencer to deliver his expert knowledge to 
               the target at the time when the target needed it.
            Channel Alignment: The amount of channel overlap between the 
               target and the influencer.
            Target Confidence: How much the target trusts the influencer with 
                respect to his information needs

   Target
                                ‐ 21 ‐ | 16:14                             @mich8elwu
Finding the potential influencers




          High       Potential        Credible
        Bandwidth   influencer         users
          users


                     ‐ 22 ‐ | 16:14              @mich8elwu
Importance of relevance & timing
                                       Friendship
                                       Relevant
                                       relationship
   FanGirl                             w/in 1 month
                      WizKid
                                       1 month ago
                                       3 month ago
                                       6 month ago


             PopGuy




                      ‐ 23 ‐ | 16:14          @mich8elwu
Finding influencers: intelligent filtering
Domain credibility


High bandwidth


Content relevance


Timing relevance


Channel alignment


Confidence (trust)


                     ‐ 24 ‐ | 16:14      @mich8elwu
Session Agenda
 Influence basics
  – What is influence? Who are the influencers?
  – What does influence mean to your business
 Influence mechanics
  – Do influencers matter? How? How much?
  – How to find influencers?
 Advance topics on influence
  – How to work with influencers without working with them?




                          ‐ 25 ‐ | 16:14              @mich8elwu
Now you have influencers, so what?
 You shouldn’t:
  – Pay them, or blatantly promote them
     • People will find out    Not authentic     They will lose credibility
  – Work them like your employees
     • They will hate you and turn against you
 How to influence the influencers?
  – Remember: No carrot, no stick, no annoyance, no tricks!
 How do we work with them without actually working 
 with them?
  – Do you just leave them be and let WOM propagate?


                               ‐ 26 ‐ | 16:14                          @mich8elwu
Now you have influencers, so what?

                                 What about WOM?




                ‐ 27 ‐ | 16:14                 @mich8elwu
Uncoordinated WOM has low efficacy
 WOM do not propagate vary far. What’s wrong?
  – Passionate influencers are too far apart.
  – WOM decays before reaching another influencer who will 
    pass it on.
  – Over time, even the passionate influencers lose their 
    enthusiasm.


 The problem is distance and time. How can we fix it?
  – Shorten the distance between the passionate influencers.
     • In‐Real‐Life (IRL) meet‐up
     • Community


                              ‐ 28 ‐ | 16:14            @mich8elwu
Community
  WOM
Community WOM is effective
 Community can overcome the decaying effect of 
 distance and time.
  – Key: High concentration of passionate consumers
  – Many of them + close proximity to each other


 Result:
  – Ongoing conversation           heightens enthusiasm
  – Persistent content             prolonged message lifetime
  – Ideation and innovation        increase relevance and adoption



                         ‐ 30 ‐ | 16:14                    @mich8elwu
Community WOM




            ‐ 31 ‐ | 16:14   @mich8elwu
Community WOM




            ‐ 32 ‐ | 16:14   @mich8elwu
A repeatable influencer strategy
 Co‐create value with them using a community

 Community
  – Provide audience for the influencers
  – Amplify their influence
  – Cultivates influencers: Allow ordinary customers to gain 
    status/recognition  build their influence


 Community members + sponsors
  – Benefit from influencers’ domain expertise
  – Effective WOM + cut support cost
                           ‐ 33 ‐ | 16:14                 @mich8elwu
Customers
 Advocates
Evolution of a customer community




                ‐ 35 ‐ | 16:14      @mich8elwu
Evolution of a customer community
  Identify rising 
superusers as their 
 influence grows




Influence ≠ number 
   of connections

                       ‐ 36 ‐ | 16:14   @mich8elwu
Community WOM
                             What about the 
                             greater social web?




            ‐ 37 ‐ | 16:14                  @mich8elwu
Community WOM




            ‐ 38 ‐ | 16:14   @mich8elwu
WOM Beyond
Community
Thank you
 Resources: blog+case study+whitepaper
 http://lithosphere.lithium.com/t5/a/bg-p/MikeW
 http://pages.lithium.com/word-of-mouth-marketing.html




                           ‐ 40 ‐ | 16:14                @mich8elwu

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2011 04-06 sugar con physics of influence-v03p

  • 1. The Physics of Influence Building, Nurturing, and Leveraging Your Best Kept Marketing Secret Michael Wu Ph.D. Principal Scientist of Analytics Lithium Technologies Inc. SugarCon: April 6th, 2011 ‐1‐ | 16:14 @mich8elwu
  • 2. Session Agenda Influence basics – What is influence? Who are the influencers? – What does influence mean to your business Influence mechanics – Do influencers matter? How? How much? – How to find influencers? Advance topics on influence – How to work with influencers without working with them? ‐2‐ | 16:14 @mich8elwu
  • 3. What is influence? Webster definitions: – The act or power of producing an effect without apparent  exertion of force or direct exercise of command. – The power or capacity of causing an effect in indirect or  intangible ways : sway ‐3‐ | 16:14 @mich8elwu
  • 4. What is influence? Webster definitions: – The act or power of producing an effect without apparent  exertion of force or direct exercise of command. – The power or capacity of causing an effect in indirect or  intangible ways : sway Must have some effects – Effect on some target audience (target) – Effects don’t always have to have actions ‐4‐ | 16:14 @mich8elwu
  • 5. What is influence? Webster definitions: – The act or power of producing an effect without apparent  exertion of force or direct exercise of command. – The power or capacity of causing an effect in indirect or  intangible ways : sway It matters how you produce the effects – No carrot: no money – No stick: no force/coercion – No annoyance: no spam/frustration – No trick: no deception/hidden agenda ‐5‐ | 16:14 @mich8elwu
  • 6. What is influence? Webster definitions: – The act or power of producing an effect without apparent  exertion of force or direct exercise of command. – The power or capacity of causing an effect in indirect or  intangible ways : sway Definition for businesses:  – The ability to cause a change in thought (sentiment,  opinion, etc.) OR behavior (purchase, referral, etc.)  through non‐coercive and transparent means where the  targets want the changes even with no monetary  compensation ‐6‐ | 16:14 @mich8elwu
  • 7. Who are the influencers? Kevin Smith (2010): Dave Carroll (2009): Jeff Jarvis (2005): Too fat to fly Southwest United Breaks Guitar Dell Lies, Dell Sucks Channel=Twitter Channel=YouTube Channel=Blog They were mistreated by some companies – Their influence on social media  cause a major PR crisis – Bad PR + significant financial damage (in some cases) ‐7‐ | 16:14 @mich8elwu
  • 8. Who are the influencers? But influencers ≠ celebrities – Because influence ≠ popularity Other confounding facts about influencers: – Everyone can influence someone, so anyone can be an  influencer. – Influencers do not fall into any standard demographics  and/or technographic segmentations. – There are no universal influencers. ‐8‐ | 16:14 @mich8elwu
  • 9. Who are the influencers? Influencers = – Superusers and product experts – Advocates who will speak on your behalf – Evangelist of your brand Influencers for marketers = – People with significantly greater ability to influence —cause a change in thought OR behavior through non‐ coercive and transparent means where the targets want  the changes even with no monetary compensation ‐9‐ | 16:14 @mich8elwu
  • 10. What does this mean to your business? engage/  empower mass public consumers awareness purchase interest desire brand X potential (+) influence = promoters potential (−) influence = detractors competitors’  your superusers your brand  your  unawared competitors’  brand advocates  (product experts) advocates customers consumers customers (your brand  (evangelist) detractors) ‐ 10 ‐ | 16:14 @mich8elwu
  • 11. What does this mean to your business? Influencers help you: – Drive effective WOM marketing/sales • Move consumers through your purchase funnel  increase sales – Acquire customers from your competitors – Cut cost • Influence other customers to self‐help + help each other ‐ 11 ‐ | 16:14 @mich8elwu
  • 12. Session Agenda Influence basics – What is influence? Who are the influencers? – What does influence mean to your business Influence mechanics – Do influencers matter? How? How much? – How to find influencers? Advance topics on influence – How to work with influencers without working with them? ‐ 12 ‐ | 16:14 @mich8elwu
  • 13. Do influencers matter? vs. Malcolm Gladwell Duncan Watts (best‐selling author) (sociologist) Influencers matter Influencers don’t matter – If they say/do something  – Seeding a message from  thousands and millions  any random person  will hear and follow eventually reaches the  same number of people  as seeding from an  influencer ‐ 13 ‐ | 16:14 @mich8elwu
  • 14. Do influencers matter? The effect of influencers is not the number of target they can  reach. It is the speed at which they can reach those targets. Number of targets reached is a very bad way to measure  influence. What is a better way? Quantifying the value of WOM. Join work with – Prof. Barak Libai MIT Sloan School of Management Recanati B‐School, Tel Aviv Univ – Prof. Eitan Muller  NYU Stern School of Business  Recanati B‐School, Tel Aviv Univ – Prof. Renana Peres The Wharton School, U Penn Hebrew University of Jerusalem ‐ 14 ‐ | 16:14 @mich8elwu
  • 15. How does WOM turn into value? W O M ? Agent‐based CLV model based on real network structure  from 12 social graphs (6 from Lithium) CLV model: Takes into account of – Network value of referral (V. Kumar) – Discount rate of money, b/c lifetime of customers can be very  long. ‐ 15 ‐ | 16:14 @mich8elwu
  • 16. How does WOM turn into value? W O M ? Agent‐based CLV model based on real network structure  from 12 social graphs (6 from Lithium) Simulation parameters for investigating the effect of: – Influencers: Influencer seeding vs. random seeding – Brand equity: Brand monopoly vs. competing brand – Seeding program size: 0.5% to 5% ‐ 16 ‐ | 16:14 @mich8elwu
  • 17. Summary of Lithium‐only data Seeding Program Competing Random 10.3% brands Gain via acceleration Influencer 17.4% Gain via acquisition Brand Random 86.8% monopoly Influencer 113% 0 20 40 80 100 120 Result 1: Two mechanisms combine to create  WOM values Acquisition of customers Acceleration of adoption ‐ 17 ‐ | 16:14 @mich8elwu
  • 18. Summary of Lithium‐only data Seeding Program Competing Random 10.3% brands Gain via acceleration Influencer 17.4% Gain via acquisition Brand Random 86.8% monopoly Influencer 113% 0 20 40 80 100 120 Result 2: Influencer seeding increases gain 49.4% ‐ 18 ‐ | 16:14 @mich8elwu
  • 19. Summary of Lithium‐only data Seeding Program Competing Random 10.3% brands Gain via acceleration Influencer 17.4% Gain via acquisition Brand Random 86.8% monopoly Influencer 113% 0 20 40 80 100 120 Result 3: First mover advantage is huge 7.5x ‐ 19 ‐ | 16:14 @mich8elwu
  • 20. What does this mean to your business? engage/  empower mass public consumers awareness purchase interest desire brand X potential (+) influence = promoters potential (−) influence = detractors competitors’  your superusers your brand  your  unawared competitors’  brand advocates  (product experts) advocates customers consumers customers (your brand  (evangelist) detractors) ‐ 20 ‐ | 16:14 @mich8elwu
  • 21. Finding influencers involves 2 parties Influencer Domain Credibility: The influencer's expertise in a specific domain  of knowledge. High Bandwidth: The influencer's ability to transmit his expert  knowledge through a social media channel. Content Relevance: How closely the target's information needs  coincide with the influencer's expertise. Timing: The ability of the influencer to deliver his expert knowledge to  the target at the time when the target needed it. Channel Alignment: The amount of channel overlap between the  target and the influencer. Target Confidence: How much the target trusts the influencer with  respect to his information needs Target ‐ 21 ‐ | 16:14 @mich8elwu
  • 22. Finding the potential influencers High Potential Credible Bandwidth influencer users users ‐ 22 ‐ | 16:14 @mich8elwu
  • 23. Importance of relevance & timing Friendship Relevant relationship FanGirl w/in 1 month WizKid 1 month ago 3 month ago 6 month ago PopGuy ‐ 23 ‐ | 16:14 @mich8elwu
  • 25. Session Agenda Influence basics – What is influence? Who are the influencers? – What does influence mean to your business Influence mechanics – Do influencers matter? How? How much? – How to find influencers? Advance topics on influence – How to work with influencers without working with them? ‐ 25 ‐ | 16:14 @mich8elwu
  • 26. Now you have influencers, so what? You shouldn’t: – Pay them, or blatantly promote them • People will find out  Not authentic  They will lose credibility – Work them like your employees • They will hate you and turn against you How to influence the influencers? – Remember: No carrot, no stick, no annoyance, no tricks! How do we work with them without actually working  with them? – Do you just leave them be and let WOM propagate? ‐ 26 ‐ | 16:14 @mich8elwu
  • 27. Now you have influencers, so what? What about WOM? ‐ 27 ‐ | 16:14 @mich8elwu
  • 28. Uncoordinated WOM has low efficacy WOM do not propagate vary far. What’s wrong? – Passionate influencers are too far apart. – WOM decays before reaching another influencer who will  pass it on. – Over time, even the passionate influencers lose their  enthusiasm. The problem is distance and time. How can we fix it? – Shorten the distance between the passionate influencers. • In‐Real‐Life (IRL) meet‐up • Community ‐ 28 ‐ | 16:14 @mich8elwu
  • 30. Community WOM is effective Community can overcome the decaying effect of  distance and time. – Key: High concentration of passionate consumers – Many of them + close proximity to each other Result: – Ongoing conversation heightens enthusiasm – Persistent content prolonged message lifetime – Ideation and innovation increase relevance and adoption ‐ 30 ‐ | 16:14 @mich8elwu
  • 31. Community WOM ‐ 31 ‐ | 16:14 @mich8elwu
  • 32. Community WOM ‐ 32 ‐ | 16:14 @mich8elwu
  • 33. A repeatable influencer strategy Co‐create value with them using a community Community – Provide audience for the influencers – Amplify their influence – Cultivates influencers: Allow ordinary customers to gain  status/recognition  build their influence Community members + sponsors – Benefit from influencers’ domain expertise – Effective WOM + cut support cost ‐ 33 ‐ | 16:14 @mich8elwu
  • 35. Evolution of a customer community ‐ 35 ‐ | 16:14 @mich8elwu
  • 36. Evolution of a customer community Identify rising  superusers as their  influence grows Influence ≠ number  of connections ‐ 36 ‐ | 16:14 @mich8elwu
  • 37. Community WOM What about the  greater social web? ‐ 37 ‐ | 16:14 @mich8elwu
  • 38. Community WOM ‐ 38 ‐ | 16:14 @mich8elwu
  • 40. Thank you Resources: blog+case study+whitepaper http://lithosphere.lithium.com/t5/a/bg-p/MikeW http://pages.lithium.com/word-of-mouth-marketing.html ‐ 40 ‐ | 16:14 @mich8elwu