Articles
0 Comments

Social Influence on Consumer Demand

Consumer demand for hedonic products is driven by others’ choices: social influence boosts demand for popular products while unpopular products become even less popular. Here, Olaf Maecker, Nadja Grabenstroer, Michel Clement, and Mark Heitmann summarize findings of  a macro-experiment comparing independent and social influence settings for music, movies, and scarves (from Empirical Generalizations about Marketing Impact, 2nd ed.).

Also available on:

Social influence on consumer demand

Demand for hedonic products is strongly driven by other consumers’ choices. Compared to conditions without social information, if social influence is displayed, market concentration increases: the Gini coefficient is significantly higher with respect to music choice (.220 > .147), movie interest (.105 >.088), and fashion consideration (.178 > .155). Even small and coincidental agglomerations of demand can attract cascades of customers, which reduces the predictability of market outcomes.

Evidence base

Social macro-experiment (1,143 participants) comparing independent and social influence settings across three product categories (music, movies, and scarves)

Managerial implications

On the aggregate, social influence results in herding effects. This increases demand for popular products whereas unpopular products become even less popular. As sales ranks become increasingly widespread in social networks, low market share positioning becomes less attractive while profitability of market leadership is further increased. This forces the majority of companies to monitor sales ranks closely and update demand predictions accordingly.

Contributors

Olaf Maecker, Nadja S. Grabenströer, Michel Clement, and Mark Heitmann, University of Hamburg

References

Maecker, Olaf, Nadja S. Grabenströer, Michel Clement, and Mark Heitmann (2013), “Charts and Demand: Empirical Generalizations on Social Influence.” International Journal of Research in Marketing 30 (4), 429–31

Salganik, Matthew J., Peter S. Dodds, and Duncan J. Watts (2006). “Experimental Study of Inequality and Unpredictability in an Artificial Cultural Market.” Science 311, 854–6

Related links

Group Marketing
Colleen M. Harmeling, Eric Fang, Robert W. Palmatier, and Dianwen Wang (2016) [Report]

How Expertise and Endorsement Style Impact Word of Mouth Persuasion
Grant Packard and Jonah Berger 2015 [Report]

 

Comments:

You must be logged in to leave comments. Please login.

3 WAYS to GET CONNECTED

Business

Employees of MSI Member Companies enjoy the benefits of complete online access to content, member conferences and networking with the MSI community.

More

Academic

Qualified academics benefit from a relationship with MSI through access to MSI.org, conferences and research opportunities.

More

Public

The public is invited to enjoy partial access to msi.org content, a free e-newsletter, selected reports and more.

More

Featured:

Ten Highlights from 2016

A year at the Marketing Science Institute: we look back on ten events and initiatives through the eyes of our members, academics and staff.

Read More

Stay Informed

The MSI Mailing List

Subscribe to our email list to stay informed about upcoming events, news, etc.

Social Media