How Social Networks Influence Product Adoption

How Social Networks Influence Product Adoption

Comprehending product adoption behavior is important for companies because it helps them to understand and be able to influence consumers' decisions.
As a means of influencing buying behavior, advertising has becomes less efficient than in the past. As a result companies try new ways to affect consumer behavior.
An increasingly important way to influence consumer behavior is through social networks. The popularity of such networks has increased tremendously since the last decade.
In what ways is consumer behavior influenced by the social environment?

1. Information: Naturally, the social environment can provide others with information about specific products. Social networks offer TRUST and REDUCE UNCERTAINTY about the validity of information.
   Besides this, sociology and network theory provide two more ways that cause consumers to behave similarly. These are the following:
2. Cohesion: the first is socialization between two people in a social network. The social interaction between those people -say person A and B- often leads to a certain ALIGNMENT of their product evaluations.
3. Structural Equivalence: in this case, there is no need for person A and B to actually socially interact and communicate. Rather, the adoption decision is driven by the competing social positions of those persons in an overlapping social network. For example, if person A needs to adopt a certain product in order to obtain a certain desired social position - instead of losing it to person B in the overlapping social network - the social pressure to adopt the product is high and the probability of person A purchasing the product is high. Compare opinion leaders.

These last two ways - partially overlapping - explain the social influence on new product adoption which can be useful to understanding and influencing consumer decisions using social networks.
Source: Hinz, O., Schulze, C. and C. Takac (2014) "New Product Adoption in Social Networks: Why Direction Matters" Journal of Business Research Vol 67 pp. 2836- 2844

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