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we're here today with Wharton operations
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information and decisions Professor Gad
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Alan Gad thanks for being here hi good
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to be here and you're going to talk to
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us today about some of your most recent
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research so first of all could you tell
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us a little bit about what you studied
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and what was the main questions you were
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looking at yes we're looking at the
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intersection between social networks and
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service providers and ask ourself how
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should service providers think about
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these social networks now social
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networks existed for many years think
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about reading clubs Church and so on but
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the emergence of the new social networks
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such as Facebook Twitter Instagram
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Snapchat allowed firms to not only look
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at what customers do but track it over
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time so firms nowadays for example have
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presence on these social networks but
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more importantly consumers use these
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social networks to communicate among
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each other and tell others about
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experiences they had now why is that
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interesting in the past we had key
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opinion leaders that had maybe access to
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the New York Times or to the wals
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journal and wrote there about food and
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so on but nowadays we have more and more
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people that have access to let's say a
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thousand followers on Twitter so we have
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to think about the idea of influence in
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a more nuanced way so that's from The
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Social Network side from a service
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provider side technology enabled firms
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to microt Target and offer very
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segmented differentiated services to
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customers they can offer upgrades based
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on where you are your history what
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you've done the combination of the two
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the fact that firms can look at
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customers not only in terms of the value
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they bring but also how they influence
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other on social networks bring very
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interesting questions and the main
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question we're trying to answer is how
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should service providers allocate scarce
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resources whether these are priorities
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better service to customers based on
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their value but also their social
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network presence the network and how the
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influence and being influenced by others
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great and so tell me a little bit more
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about what you found when you asked
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these questions and how they could be
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applied in business so first of all what
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we did was we build a model of how
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customers tell others about their
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services how they form beliefs about the
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quality of the service based on their
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own experience but also what other
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people tell them and what we've done is
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identify an index an idea we call
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centrality of the customer the
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economically adjusted centrality of the
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customer looking at essentially not only
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the value they bring but also how they
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influence others and how they're being
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influenced by others and what we say the
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main takeaway is that firms should think
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about ranking their customers according
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to this index essentially a customer
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should get high priority or a better
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service if it fits into one of three
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categories it has many friends it has
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very few friends but these friends bring
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very high economic value or this
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customer himself bring very high
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economic value but is not being
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influenced by others if he being
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influenced by others I'm better off
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giving it to one of their friends but
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one of the main thing that this has
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doesn't have it in it is this idea of
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friends of friends as you notice you
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need to look only at the closest Circle
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and that's what it stands in Star
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contrast to what we know about products
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or political opinions and the reason for
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that comes really from the nature of
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services the nature of service means
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that I'm offering customer service only
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when they there when they are there
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which means that I can provide a very
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differentiated quality of service which
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mean that I when the customer comes I
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don't have to think about really about
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how this entire information is going to
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propagate the moment they bring their C
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their friend I can then decide on the
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right quality of service to provide what
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it means is that it makes it much easier
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for firm to track and to combine this
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information into the decision-making
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process great so how does this kind of
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interface I was curious like how does
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this interface with the concept of
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customer lifetime value because it
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sounds kind of similar but so while many
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firms track the lifetime value of their
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customers very few firm understand how
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their customers interact among them on
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social networks what we ask the question
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that is should firms really go and
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obtain this information and what we say
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for firms to obtain this information
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this information need to be valuable I
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mean the information on their social
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presence and what we say we look at
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basically the correlation between the
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economic value and social value and
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surprisingly we see that some businesses
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there is positive correlation mean the
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more vocal customers are also the one
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that have higher lifetime value in which
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case it's pretty easy I know that I need
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to Target those who Life High lifetime
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value the situation however is that we
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see that in many businesses it's
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negatively correlated negatively
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correlated meaning you have highly vocal
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customers and customers with very high
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lifetime value in this case knowing the
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social network and knowing how it
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interacts with the lifetime value is
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crucial in fact we obtained data from
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Yelp and showed that for restaurants
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that are above average in terms of their
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pricing they're very likely to have
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negative correlation between the two in
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which case knowing not only the life
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time value but also the exact way that
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your customers interact with their
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friends is going to be crucial to be
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able to obtain better value from
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providing better service to the right
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customers great and tell me a little bit
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about what's next for This research
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where are you going to go with it next
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so the main question that we try to
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answer now is how should firms think
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about the difference between pure
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information and opinion on these social
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networks there are many more markets for
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influencers what we call key opinion
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leaders where firms try to ask these
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people to tell their friends tell other
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people maybe celebrities tell Their
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audience about the product but what part
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of that is purely informational and the
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goal is to bring additional volume and
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what part of that is really trying to
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shape customers opinion clearly if you
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hear about a celebrity that got an
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amazing service from United you heard
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about United before the question is can
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this information shape your opinion
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about airm that you know already
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something about is it only for an
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emerging market or is it for Market that
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already exist what we try to do is both
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empirically and theoretically try to
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disentangle these two effects great
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thank you so much for being with us
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today thank you great to be here
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[Music]
