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This research is called neighborhood
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social capital and social learning for
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experience attributes of products so
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right there in the title are some of the
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key ingredients that we want to think
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about the first is neighborhood Social
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Capital meaning the extent to which
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people trust and know each other and
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interact with each other offline uh
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social learning means that information
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is transferred from an existing customer
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to a potential customer and then
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experience attributes of products are
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products for which it's very hard to
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know what they're going to be like until
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you try the product on we're thinking
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about fashion apparel eyewear those
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kinds of things where you'd really like
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to have a visceral experience so what
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this research is really about is about
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how to figure out where those customers
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live who are most likely to talk about
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the product and therefore generate new
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sales particularly for products where
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some explanation is
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required so there are two really
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important takeaways here for anyone
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who's in the online World selling things
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through the internet the first is that
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it's very very critical to understand
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what the offline environment looks like
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why is it that you have some customers
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in one location and no customers in
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another what is it about the physical
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world that's affecting what's going on
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in the virtual world that's the first
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thing the second thing that this
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research really emphasizes is that
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existing customers are often the most
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powerful source of new customers for a
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firm the extent to which they Advocate
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to which the product they're using is
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socially visible and the extent to which
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they talk about it with friends and
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family and local others that they come
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into contact
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with so with any piece of research it's
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always nice to find something that's a
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little bit surprising or
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counterintuitive and there were really
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three things here the first thing was
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that this social and learning effect was
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really quite large up to half of the new
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customers that came into the firm that
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we studied bonobos.com got there because
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information was shared from One customer
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to another in an offline environment
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that was the first thing the second
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thing was that this effect became more
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important over time so people who were
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the first customers into the firm maybe
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they're going off their own information
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or their own feel or they're fairly risk
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um seeking people people who come later
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on tend to require a little bit more
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handholding from others and then the
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third thing that was very very
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interesting is that this notion of
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social capital or the extent to which
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people trust and interact with each
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other in a local neighborhood doesn't
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generate sales per se what it does is it
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makes information transfer more
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efficient so bad information is being
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spread this company's no good it's going
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to slow down sales in this case
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fortunately for bonobos what was being
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transmitted was positive and therefore
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sales sped
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up so the first thing that's really
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important for an e-commerce business to
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understand is that the offline
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environment is going to explain a lot
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about the success of online sales so the
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firm really needs to think about what
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kind of locations are going to be most
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fruitful and why and then go into those
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locations and try and seed customers
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secondly if the firm wants to make the
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product socially visible some products
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are naturally socially visible if I'm
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wearing glasses or I'm wearing a pair of
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pants people might ask me about them or
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I might be able to generate a
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conversation if a product's not socially
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visible then maybe there's a way to make
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it socially visible by having it shipped
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to the home sorry the office rather than
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the home for example so let's give a
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practical example that really ties all
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of this together so the firm that we
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looked at bonobos.com is a men's fashion
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retailer and what we found was and where
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customers were more apt to talk to each
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other and trust each other there was a
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greater sales diffusion online so the
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Target customer in this case is a male
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aged 25 to 45 who's somewhat fashion
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Ford and it just so turns out that a
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good proxy uh for where those males are
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congregating is the number of bars and
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liquor stores per capita in a location
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so we had some sociological theory that
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told us about interaction and then we
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were able to go to public data and find
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a variable that was actually a pretty
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good proxy so it's tying those things
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together thinking about the theory and
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then trying to find a proxy with real
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data so one strategy that an e-commerce
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firm can pursue which is really just an
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outcrop of what they're already doing is
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to append the ZIP code data that they
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collect naturally through the sales
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process with other data about what's
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going on in that zip code this can be
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coming from the US Census or for other
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third-party suppliers so for example if
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I'm bonobos I'd like to know how many
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fashion apparel stores that were in a
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location I'd like to know what the
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population density was what the age
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distribution was the presence or absence
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of a college campus those things will
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tell me quite a lot about why I might
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have high sales in one location and low
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sales in another so it's really just app
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pending to what is already being done
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that's the first thing that an
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e-commerce company should be thinking
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about this is really a very very general
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conclusion that even though there are a
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number of companies out there now
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selling things on online through the
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virtual world if you will um all of
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those companies are selling to customers
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who still live in the real world so
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understanding the real world
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circumstance of your customer what other
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offline options they have who they live
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next to how they interact with a local
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environment is a really critical
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ingredient perhaps the most critical
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ingredient for understanding whether or
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not they're going to shop online or
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offline how they're going to search and
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also with whom they're going to interact
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and spread the good news about your
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product
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so one thing that's getting a lot of
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press in the news right now in fact a
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great buzzword and being in marketing we
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love buzzwords uh is this notion of omni
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Channel online offline being integrated
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seamlessly and I think what we've seen
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um is there are firms who came out very
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strongly early on perhaps even bonobos
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who was the subject in this study in
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2007 uh when they first started saying
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why would anyone ever bother to operate
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offline when you can sell through this
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wondrous thing called the internet but I
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think what everybody is realizing now
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whether you Rent the Runway or Birchbox
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or even Amazon in addition to WBY Parker
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bonobos and many others is that you
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really need to operate both online and
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offline there are certain things that an
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online environment does for you makes
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fulfillment easy and makes it easy to
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scale but there are other critical
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things that offline does for you as well
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it makes it much easier to relay
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information to other people it also
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makes it much easier to build
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credibility about your brand if you
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really have a physical world presence so
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I think we're seeing more and more of
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this discussion now of what it means to
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be omn Channel not just present in one
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world but present in
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both so this study really dispels a
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couple of misconceptions uh the first
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misconception that I've talked about
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already a little bit is the fact that
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the online world is somehow disconnected
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from the offline so the first
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misconception is really that the offline
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world uh is explaining a lot of what's
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going on in the online world and also
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the offline world's actually pretty easy
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to understand there's been a whole
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history of very very rich data being
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being collected about who's living where
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what are they doing what's the level of
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commercial activity and so on so that's
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really the first thing that it dispels
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the second thing and we we hear this for
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years and years in Commerce is that
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location is very very important but we
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tend to think about the location of the
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firm where do we put the store where do
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we operate the factory which country
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should we be in but here what we're
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finding is it's still about location but
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this time it's about the location of the
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customer where is that customer and to
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whom does that customer also live that's
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what's really important in the world of
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e-commerce so I think one really novel
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aspect of This research is it's really
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combining ideas from two different
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fields and data in fact from two
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different fields so in this case we're
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talking about some ideas that come from
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sociology why it is that people trust
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each other and interact with each other
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and also some ideas from marketing about
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how information gets communicated and
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how people relay ideas from one person
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to the next uh in addition it's also
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combining data from two disparate
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sources that are not often used uh the
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first source of data is the Social
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Capital Community Benchmark survey I
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know that's a mouthful uh that's coming
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from the Kenedy School uh collected by
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Robert putam who was involved in writing
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the book bowling alone about the
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collapse and Revival of social capital
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in America and then secondly data coming
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from the firm itself bonobos.com founded
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by Andy dun so what we were able to do
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was sort of merge theories from
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sociology and marketing and also merge
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data uh collected for another purpose
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with real data coming from a prominent
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e-commerce
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firm so this is a very very rich area
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this whole online offline Omni Channel
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interaction so the next thing I'd like
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to look at is how customers who are
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exposed to the firm in one world let's
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say the offline world might continue to
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interact with the firm through the
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online world so A lot's being written
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right now about popup stores WBY Parker
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has a bus uh running around the us and
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so on and so uh I want to actually give
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a shout out to Lawrence laham one of our
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alums who runs first Mark capital in New
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York came and spoke in my class and he
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gave a very very interesting analogy he
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said that for example when I interact
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with somebody let's call him Joe and
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it's over email it's a very low um
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energy interaction we don't know each
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other and then Joe and I get on the
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phone and Joe hears my accent I hear his
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Long Island accent our energy level goes
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up and then we go out and we have a
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couple of beers and we have dinner we
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really get to know each other so then
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the next time an email comes out the
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energy level has now been elevated to
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here and so it is in some sense with
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online and offline so we're going to
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look at the customers that were acquired
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by WBY Parker for eyewear bonobos for
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fashion clothing if the first experience
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was offline and it was a good experience
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are we able then to subsequently serve
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these customers online and there's great
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operational advantages from doing so
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because it's much much cheaper to
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fulfill that customer out of a warehouse
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than to always having them come into a
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retail store so that's really where I
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want to go next again uh research being
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inspired by some of our Alum and and
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colleagues from the warten school
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[Music]
