00:00:02
we're here today with Wharton operations information and decisions Professor Gad
00:00:05
Alan Gad thanks for being here hi good to be here and you're going to talk to
00:00:08
us today about some of your most recent research so first of all could you tell us a little bit about what you studied
00:00:13
and what was the main questions you were looking at yes we're looking at the
00:00:16
intersection between social networks and service providers and ask ourself how should service providers think about
00:00:24
these social networks now social networks existed for many years think about reading clubs Church and so on but
00:00:31
the emergence of the new social networks such as Facebook Twitter Instagram Snapchat allowed firms to not only look
00:00:38
at what customers do but track it over time so firms nowadays for example have presence on these social networks but
00:00:46
more importantly consumers use these social networks to communicate among each other and tell others about
00:00:52
experiences they had now why is that interesting in the past we had key opinion leaders that had maybe access to
00:01:00
the New York Times or to the wals journal and wrote there about food and so on but nowadays we have more and more
00:01:07
people that have access to let's say a thousand followers on Twitter so we have
00:01:12
to think about the idea of influence in a more nuanced way so that's from The
00:01:18
Social Network side from a service provider side technology enabled firms to microt Target and offer very
00:01:25
segmented differentiated services to customers they can offer upgrades based on where you are your history what
00:01:31
you've done the combination of the two the fact that firms can look at customers not only in terms of the value
00:01:38
they bring but also how they influence other on social networks bring very interesting questions and the main
00:01:45
question we're trying to answer is how should service providers allocate scarce
00:01:50
resources whether these are priorities better service to customers based on their value but also their social
00:01:58
network presence the network and how the influence and being influenced by others
00:02:03
great and so tell me a little bit more about what you found when you asked these questions and how they could be
00:02:08
applied in business so first of all what we did was we build a model of how customers tell others about their
00:02:16
services how they form beliefs about the quality of the service based on their own experience but also what other
00:02:22
people tell them and what we've done is identify an index an idea we call centrality of the customer the
00:02:31
economically adjusted centrality of the customer looking at essentially not only
00:02:35
the value they bring but also how they influence others and how they're being
00:02:40
influenced by others and what we say the main takeaway is that firms should think
00:02:45
about ranking their customers according to this index essentially a customer should get high priority or a better
00:02:52
service if it fits into one of three categories it has many friends it has very few friends but these friends bring
00:03:01
very high economic value or this customer himself bring very high economic value but is not being
00:03:08
influenced by others if he being influenced by others I'm better off giving it to one of their friends but
00:03:15
one of the main thing that this has doesn't have it in it is this idea of friends of friends as you notice you
00:03:22
need to look only at the closest Circle and that's what it stands in Star contrast to what we know about products
00:03:28
or political opinions and the reason for that comes really from the nature of services the nature of service means
00:03:34
that I'm offering customer service only when they there when they are there which means that I can provide a very
00:03:42
differentiated quality of service which mean that I when the customer comes I don't have to think about really about
00:03:48
how this entire information is going to propagate the moment they bring their C their friend I can then decide on the
00:03:55
right quality of service to provide what it means is that it makes it much easier
00:03:59
for firm to track and to combine this information into the decision-making process great so how does this kind of
00:04:08
interface I was curious like how does this interface with the concept of customer lifetime value because it
00:04:12
sounds kind of similar but so while many firms track the lifetime value of their
00:04:17
customers very few firm understand how their customers interact among them on social networks what we ask the question
00:04:25
that is should firms really go and obtain this information and what we say for firms to obtain this information
00:04:33
this information need to be valuable I mean the information on their social presence and what we say we look at
00:04:39
basically the correlation between the economic value and social value and surprisingly we see that some businesses
00:04:47
there is positive correlation mean the more vocal customers are also the one that have higher lifetime value in which
00:04:54
case it's pretty easy I know that I need to Target those who Life High lifetime
00:04:58
value the situation however is that we see that in many businesses it's negatively correlated negatively
00:05:04
correlated meaning you have highly vocal customers and customers with very high lifetime value in this case knowing the
00:05:12
social network and knowing how it interacts with the lifetime value is crucial in fact we obtained data from
00:05:18
Yelp and showed that for restaurants that are above average in terms of their pricing they're very likely to have
00:05:25
negative correlation between the two in which case knowing not only the life time value but also the exact way that
00:05:32
your customers interact with their friends is going to be crucial to be able to obtain better value from
00:05:38
providing better service to the right customers great and tell me a little bit about what's next for This research
00:05:44
where are you going to go with it next so the main question that we try to answer now is how should firms think
00:05:50
about the difference between pure information and opinion on these social networks there are many more markets for
00:05:58
influencers what we call key opinion leaders where firms try to ask these people to tell their friends tell other
00:06:05
people maybe celebrities tell Their audience about the product but what part of that is purely informational and the
00:06:13
goal is to bring additional volume and what part of that is really trying to shape customers opinion clearly if you
00:06:20
hear about a celebrity that got an amazing service from United you heard about United before the question is can
00:06:27
this information shape your opinion about airm that you know already something about is it only for an
00:06:32
emerging market or is it for Market that already exist what we try to do is both
00:06:36
empirically and theoretically try to disentangle these two effects great thank you so much for being with us
00:06:42
today thank you great to be here [Music]