Kent Grayson
Executive Summary
Companies sometimes use marketing tactics such as customer referral programs and word-of-mouth campaigns, which seek to capitalize on customers' social networks. Because of new possibilities offered by the Internet (e.g., viral marketing programs), the range of such tactics available to companies is increasing. Companies use these methods because, in general, friends are less resistant to each other's suggestions than they are to traditional marketing messages. A reason for this lower resistance is the expectation that friends provide information that is uninfluenced by self-serving motives. True friends make recommendations because they genuinely think the other person will benefit, not because they personally gain if the friend responds to the recommendation. This is why people can be resistant to the idea of selling products to their friends, and why people sometimes respond negatively when a friend tries to sell us something.
When companies capitalize on social networks, however, they often provide incentives to customers for marketing to their friends. This creates a potential conflict that may undermine the positive effects of using social networks for commercial purposes. The study reported in this article tests whether this conflict has a negative effect on business outcomes.
The context for this study is network marketing, a type of direct selling in which sales agents are rewarded not only for recruiting others to be customers but also for encouraging others to become sales agents. More than 650 agents across four companies were surveyed, and their friendships with supervisors and supervisees were measured. The results strongly suggest that when agents feel a conflict between friendship and commercial goals, they work fewer hours and are less productive.
Importantly, these results do not suggest that friendships are always bad for business. Several positive effects for friendship were identified in this study. However, these positive effects were shown to be dampened or even erased when customers feel a conflict between friendship and commercial goals. Thus, companies that want to capitalize on social networks can benefit by minimizing focus on commercial goals (though this can sometimes introduce ethical and regulatory issues).
Biography
Kent Grayson has been Associate Professor of Marketing at Northwestern University's Kellogg School of Management since 2002. For eight years before that, he was on the marketing faculty at London Business School. Kent researches trust, authenticity, and truth and deception in marketing. This includes the study of sincerity in services, deceptive advertising, consumer trust, and authentic products and tourist sites. He also studies direct selling, which is sometimes known as "pyramid selling" or "network marketing."
Journal of Marketing, Vol. 71, No. 4, October 2007
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