Quantifying the Importance of Social Communication on Brand Loyalty

16 Feb 2011|Leigh Marinner

Churn may be a social phenomenon.  In all the information coming out of the Mobile World Congress in Barcelona, one of the most interesting items was discussed in a New York Times article on how mobile operators are trying to reduce churn.  Researchers in Israel looked at the impact of switching behavior on a person’s communication circle by analyzing the records of a Middle Eastern phone operator with one million customers to see whether people could influence others to change carriers.  The research published last year showed that defection is a social phenomenon.  Individuals could raise the likelihood of their friends changing carriers by up to 80%.

So in markets where people aren’t locked into a carrier by long-term contracts (and this is true for most of the world outside of North America, France and Germany, where most people buy prepaid SIM cards and pay as they go), social factors may influence churn as much as service dissatisfaction or marketing campaigns.

Marketers have learned that they can no longer control their brand image since online social networks have let customers control what is being said about the brand.  And yet there has been very little data that can measure the importance of investing in social media.  This research is a great example of quantifying the importance of word of mouth.

What can marketers do with this knowledge?  By analyzing subscriber records, they can identify potential defectors and retain them with well-aimed, well-timed incentives.

This finding applies more widely to other services such as gas and electric suppliers or garbage services, where there is competition in the market.  These industries are usually not at the forefront of marketing or customer service, so there is huge upside potential in exploring these findings.

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