How “Social Contagion” Affects Consumers’ Willingness to Try Online Retailers

Interesting article from K@W [Knowledge @ Wharton]. David Bell, a marketing professor examined nearly 4 years of data from netgrocer.com.

Bell's study found a significant "neighborhood effect," with a 50% increase in the base rate of consumers trying an online retailer's services once they talked about or otherwise observed its use locally. "The unique market context of the Internet retailer raises important and so far unstudied questions, especially the fundamental issue of the role existing customers play in recruiting or influencing potential customers," says Bell. "Our study addresses a new and important phenomenon: the space-time evolution of trial decisions for an online retailer, and we find that it's not the location of the store relative to the customers that's important, it's the location of the existing customer relative to potential customers."

"I plotted over time and space how these customers evolved and grew," Bell says. "What we saw was the thing spreading out like a disease. When we started to look at these patterns in more detail, what we found was that the new customers were not appearing randomly on the map. They were appearing in places that were contiguous to areas that already had customers."

Although geographical proximity is the key factor, it would be interesting to see, considering we're talking about online retail, whether closeness in other networks is a factor.

Social Contagion and Trial on the Internet: Evidence from Online Grocery Retailing: PDF 4MB